Instruction for consolidating corporation returns


11-Feb-2020 22:04

Assume that an S corporation plans to expand its operations into another state.The company's lawyers recommend the use of a separate legal entity.The S corporation transfers assets with a fair market value of

Assume that an S corporation plans to expand its operations into another state.The company's lawyers recommend the use of a separate legal entity.The S corporation transfers assets with a fair market value of $1 million and a tax basis of $100,000 to the new corporation in exchange for all of the subsidiary's stock.Formation of the new subsidiary is a tax-free incorporation. A subsequent sale of the QSub for $1 million would result in a $900,000 gain, which is the same result as if the assets had never been transferred to the subsidiary.

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Assume that an S corporation plans to expand its operations into another state.

The company's lawyers recommend the use of a separate legal entity.

The S corporation transfers assets with a fair market value of $1 million and a tax basis of $100,000 to the new corporation in exchange for all of the subsidiary's stock.

million and a tax basis of 0,000 to the new corporation in exchange for all of the subsidiary's stock.Formation of the new subsidiary is a tax-free incorporation. A subsequent sale of the QSub for

Assume that an S corporation plans to expand its operations into another state.The company's lawyers recommend the use of a separate legal entity.The S corporation transfers assets with a fair market value of $1 million and a tax basis of $100,000 to the new corporation in exchange for all of the subsidiary's stock.Formation of the new subsidiary is a tax-free incorporation. A subsequent sale of the QSub for $1 million would result in a $900,000 gain, which is the same result as if the assets had never been transferred to the subsidiary.

||

Assume that an S corporation plans to expand its operations into another state.

The company's lawyers recommend the use of a separate legal entity.

The S corporation transfers assets with a fair market value of $1 million and a tax basis of $100,000 to the new corporation in exchange for all of the subsidiary's stock.

million would result in a 0,000 gain, which is the same result as if the assets had never been transferred to the subsidiary.

Its operations are reported in the S corporation's federal income tax return, thus providing a de facto consolidated return for the S corporation and its QSub.

Congress believed that, in such situations, shareholders should be allowed to arrange these separate corporate entities under parent-subsidiary arrangements as well as under brother-sister arrangements.



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