The Service Continues its Warm Approach to Taxpayers with S Corporation Inadvertent Terminations (PLR 201340001)
As we know, in accordance with Code Section 1362(f) and the corresponding Treasury Regulations, a corporation will continue to be treated as a Subchapter S corporation during a period of termination, if:
- The election was terminated, either because the corporation was disqualified as an electing small business corporation, or as a result of running afoul of the passive investment income rule;
- The Service determines the termination as inadvertent;
- The corporation promptly takes steps to correct the defect after discovery; and
- The corporation and its shareholders acted as if the election was continuously in effect.
While the IRS is back in business following the recent government shutdown, it may not receive your requests for private letter rulings with open arms. Before requesting a private letter ruling, tax practitioners need to review the Service’s recent no-ruling revenue procedures, namely Revenue Procedure 2013-32 and Revenue Procedure 2013-3.
While the new no-ruling revenue procedures are broad in scope, it is possible the Service may still issue rulings in areas that otherwise appear to be no-ruling topics. So, you should consider a pre-submission meeting or conversation with the IRS to determine whether a ruling may be available and/or to discuss how you should tailor a ruling request in light of these new revenue procedures.
There are rumors circulating in the media that taxpayer filing and payment obligations are currently on hold pending the Federal shutdown. WRONG!
The IRS announced last week, despite its limited resources during the shutdown, taxpayer obligations continue. These obligations must be met in a timely manner. There will be no extensions arising from the shutdown.
Individuals and businesses are required to file returns, pay taxes, make estimate tax payments, and make tax deposits in a timely manner as required by applicable law. The shutdown does not impact these obligations or the time frame in which to fulfill them. It does, however, create a few hiccups for tax advisors and their clients, including:
Larry J. Brant
Larry J. Brant is a Shareholder and the Chair of the Tax & Benefits practice group at Foster Garvey, a law firm based out of the Pacific Northwest, with offices in Seattle, Washington; Portland, Oregon; Washington, D.C.; New York, New York, Spokane, Washington; and Beijing, China. Mr. Brant practices in the Portland office. His practice focuses on tax, tax controversy and transactions. Mr. Brant is a past Chair of the Oregon State Bar Taxation Section. He was the long-term Chair of the Oregon Tax Institute, and is currently a member of the Board of Directors of the Portland Tax Forum. Mr. Brant has served as an adjunct professor, teaching corporate taxation, at Northwestern School of Law, Lewis and Clark College. He is an Expert Contributor to Thomson Reuters Checkpoint Catalyst. Mr. Brant is a Fellow in the American College of Tax Counsel. He publishes articles on numerous income tax issues, including Taxation of S Corporations, Reasonable Compensation, Circular 230, Worker Classification, IRC § 1031 Exchanges, Choice of Entity, Entity Tax Classification, and State and Local Taxation. Mr. Brant is a frequent lecturer at local, regional and national tax and business conferences for CPAs and attorneys. He was the 2015 Recipient of the Oregon State Bar Tax Section Award of Merit.
Upcoming Speaking Engagements
- "The Road Between Subchapter C and Subchapter S – It May Be a Well-Traveled Two-Way Thoroughfare, But It Isn’t Free of Potholes," 2022 Oregon Tax InstitutePortland, OR, 6.2.22
- "Revisiting Choice of Entity in Light of Tax Changes on the Horizon," 2022 OSCPA Farming, Ranching & Agribusiness ConferenceBend, OR, 6.3.22
- "Oregon Real Estate Tax Update – A Review of Recent Income Tax Developments in Oregon Impacting Real Estate Investors," 2022 OSCPA Annual Real Estate Tax ConferencePortland, OR, 6.8.22
- "The Intersection of Code Section 1031 and Opportunity Zones," 2022 OSCPA Northwest Federal Tax Conference10.24.22