Tax Challenges With Related Party Sales: Navigating Complex IRS Rules for Closely Held Businesses

Defining Related Parties and Applying Rules for Capital Gain Treatment, Installment Reporting, Disallowed Losses

Recording of a 90-minute CLE/CPE webinar with Q&A


Conducted on Thursday, October 23, 2014

Recorded event now available

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Program Materials

This CLE/CPE webinar will provide tax counsel and advisors with the tools necessary to manage tax challenges and maximize tax savings associated with related-party transactions. The panel will review techniques in navigating the complex maze of IRS regulations applicable to the definition of related parties, exceptions, treatment of capital gains, and reporting of installment sales, among other topics.

Description

When closely held businesses decide to sell property to a family member or affiliated business, such transactions are rife with potentially detrimental tax consequence. Unintended—and unwanted—implications include the re-characterization of capital gains to ordinary income and disallowed realized losses or restrictions in the use of like-kind exchange rules. 

Determining whether the IRS will deem the parties involved as “related” or an affiliated business is the first hurdle for tax counsel and advisors; not an easy task because the core definition of “related” found in IRC Sec. 267 is cross-referenced throughout the Code.

Complex and intricate rules apply that render certain transactions as related-party transactions, but extensive exceptions allow structuring of tax-favored deals. However, counsel must plan strategically for proper disposition of assets to realize the optimal tax benefits for the client.

Listen as our experienced panel carefully reviews the tax challenges involved in related-party transactions, such as understanding the definition of related person, applying the myriad IRC sections that expand on the definition and provide exceptions. The panel will also outline and offer perspectives on the key tax planning opportunities.

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Outline

  1. Defining related party
    1. IRC Section 267
    2. IRC Section 1239
  2. Tax consequences of related-party transactions
    1. Capital gain treatment
    2. Installment reporting
    3. Disallowed losses
    4. Re-characterization of income
    5. Like-kind exchange rules
  3. Tax planning opportunities

Benefits

The panel will review these and other key issues:

  • The applicable IRC sections governing related-party transactions
  • IRS definition of a related party for purposes of the restrictions on tax benefits of certain transactions
  • Tax planning opportunities for related-party transactions

Faculty

Donnelly, Matthew
Matthew J. Donnelly, Esq.

Skadden Arps Slate Meagher & Flom

Mr. Donnelly advises public and private companies on a broad range of domestic and international U.S. federal income...  |  Read More

Yoram Keinan
Yoram Keinan

Partner and Chair, Tax Department
Carter Ledyard & Milburn

Mr. Keinan has over fifteen years of experience in tax law both in the United States and Israel. He focuses on U.S. and...  |  Read More

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