Content by Jim Duffy

Generally, the tax consequences to a debtor of debt cancellation depend in large part upon whether the debt is recourse or non-recourse debt. Non-recourse debt is debt where the lender has no recourse against the borrower, but its remedy for nonpayment is limited to property that has been pledged or mortgaged to secure the debt. By contrast, a lender making a recourse loan may have a security interest in property of the debtor, but will also…

In a prior installment of Did You Know, I described the benefits of Section 1202 stock. That section of the Internal Revenue Code allows taxpayers to exclude gain on the sale of qualifying stock from their taxable income in an amount equal to the greater of $10 million or 10 times their tax basis in the stock sold. A strategy known as “stacking“ may allow you to multiply the benefits of the $10 million gain exclusion.

Stacking refers to the…

Content by Jim Duffy

As you may be aware, when a corporation files an election to be taxed as an S corporation, all of the shareholders must consent to that election. If you live in a community property state, your spouse may be an owner in the corporation, even if he or she does not actually own any stock by name. The income tax regulations provide that when a stock of corporation is owned by a husband and wife as…

You can if it’s qualified small business stock (a.k.a. “1202 stock“) that you have held for at least six months. Section 1202 stock is stock in a qualified small business corporation (“QSBC”) that is acquired at original issuance. A QSBC is a C corporation that conducts a “qualified business” (e.g., no legal or medical services businesses, no finance, etc.), the gross assets of which are $50 million or less. For stock acquired after September 27, 2010, that is held for…

The sale of a C corporation business that is structured as an asset sale is subject to two levels of tax. There is a tax on the corporation (21% federal) and a tax on the shareholders when the sales proceeds are distributed (20% federal). By comparison, on a sale of stock, a shareholder is only subject to a tax of 20% (federal).

In some cases (admittedly not common), the goodwill of a business may be more appropriately treated as owned…

Content by Ivan H. Golden (Chicago)

Many businesses operate as S corporations because of the tax benefits they offer – namely, the ability to avoid corporate tax on the business’ earnings.

Unlike C corporations, S corporations do not pay income tax; instead, profits (and losses) are passed through to owners, who pay tax on the corporation’s earnings on their individual income tax returns. The ability to lawfully avoid corporate income tax often results in a lower overall tax burden for…

Content by Dimitrios Lalos (Minneapolis) and Nathan Hagerman (Indianapolis)

Effective July 1st, Minnesota instituted new Retail Delivery Fee obligations for sellers of product delivered into Minnesota to raise revenue for infrastructure and road improvements. Sellers with $1 million or more in retail sales must collect and remit to the Minnesota Department of Revenue, or pay themselves, a new Retail Delivery Fee of fifty cents per transaction that equals or exceeds $100 (before application of sales and use taxes) of taxable…

When a company sees its stock value drop, this can result in employees holding options that are “underwater“ or “out of the money“. This can significantly undermine the intended incentive effect desired by the employer in issuing the option.  For these reasons, employers might consider whether to reduce the exercise price on outstanding awards to equal the current market value of the stock, a.k.a. option repricing.

While there are various business impacts of repricing that will need to be considered…