Liquidating qsss qsub

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Notwithstanding the above, a Massachusetts S corporation parent's items of income, loss, deduction, and credit, together with those of its QSUB(s), continue to pass through and be taxable to shareholders to the extent such pass through is required under G. Directive 1: Merging a Massachusetts corporate trust parent into its QSUB will not trigger the recognition of any taxable income to either entity or to the shareholders of the corporate trust as long as the merger qualifies as a tax-free "F" reorganization for federal income tax purposes. The formation of the new corporation for tax purposes and the merger of the S corporation parent into it would qualify as a tax-free "F" reorganization under Example 8, if the transaction otherwise satisfies the requirements of that subsection. Will merging a corporate trust into its QSUB accomplish that goal? Restoring the organizational structure and tax treatment that typically applied to taxpayers before LR 99-17 can be accomplished using the above restructuring as long as it qualifies as a tax-free "F" reorganization for federal income tax purposes and the corporation formed as a result is eligible to treat itself as a federal S corporation. Issue 1: Unwinding of LR 99-17 Reorganizations - Downstream Merger of Massachusetts Corporate Trust Parent into QSUB Will the merger of a Massachusetts corporate trust parent into its QSUB trigger the recognition of any taxable income to either entity or to the shareholders of the corporate trust? In Example 8, it is stated that the S corporation parent would merge into the QSUB under state law, causing the QSUB election to terminate, resulting in the formation of a new corporation for tax purposes into which the S corporation parent would merge. 62, § 8(a), wherein it is stated that a corporate trust is treated as a corporation for purposes of I. Typically, prior to LR 99-17, taxpayers were classified as stand-alone S corporations for both federal and Massachusetts tax purposes. Much of the popularity of spin-offs, especially when the alternative is a simple divestiture (selling part of a corporations operations to a third party), can be traced to a companys ability to structure the transaction so it is tax-free.In fact, after the Tax Reform Act of 1986, a spin-off or other divisive reorganization is the only way a company can distribute appreciated property to shareholders without incurring a corporate-level tax. The QSUB must compute its net income subject to tax under G. Accordingly, assuming that the reorganization takes place in a taxable year that includes March 5, 2003, the QSUB must compute its net income based solely on its own items of income, loss, deduction, and credit for the period beginning March 1 or 5, 2003, and ending on the date it ceases to exist for Massachusetts tax purposes. c.62, § 8(a), are generally taxable as resident natural persons under § 8, regardless of their treatment for federal tax purposes. How should the surviving corporate trust file a return and report income, gross receipts, property, payroll, sales and other relevant tax attributes for the taxable year in which the reorganization takes place? Rather, it will be subject to tax as a financial institution under G. subsections G and H of the Discussion section in Directive 3. 63, § 32D (a)(i) and (ii) of the corporate excise for purposes of its final Form 355S as specified in section III of TIR 03-20. Issue 5: Filing Issues as Result of Upstream Merger in Directive 4 Directive 4 involves the unwinding of a LR 99-17 reorganization by merging a QSUB into its corporate trust parent. In completing its Schedule SK-1 and in determining its apportionment factors for purposes of Form 63FI and Schedule SK-1, the financial institution should proceed exactly as the S corporation is directed to proceed in Directive 3, in completing its Schedule SK-1 and in determining its apportionment factors for purposes of Form 355S and Schedule SK-1.Each book covers a category of tax planning topics that easily save a business owner significant amounts of income or self-employment taxes (potentially thousands of dollars a year) and is instantly downloadable.Corporate Excise/Personal Income Tax Introduction: Prior to St. 4, § 18, effective March 5, 2003, a qualified subchapter S subsidiary ("QSUB"), as defined under I.

liquidating qsss qsub-31

Rather, its items of income, loss, deduction, and credit, together with those of its QSUB, attributable to the period before they cease to exist for Massachusetts tax purposes are to be included on the Schedule SK-1 prepared by the Massachusetts S corporation. 63, § 32D(a)(ii) for the taxable year in which the reorganization takes place, their aggregated total receipts for such year are to be computed as stated in section II of TIR 03-20. 63, § 32D(b)(2)(a) and 830 CMR 62.17A.1(2), from the date of the conversion to the end of its taxable year are to be combined with those of the corporate trust (which would include the receipts of the QSUB) from the first day of its taxable year until the date of conversion. In computing the QSUB's total receipts, the annualization rule at 830 CMR 62.17A.1(11)(c) will apply, assuming the QUBS's taxable year is less then twelve months, which depends upon when the reorganization takes place. In completing its final Form 355S, the QSUB must compute any non-income measure of the corporate excise it may owe based entirely on its own assets and liabilities. The QSUB must determine its apportionment factors for purposes of its final Form 355S as specified in section V. For purposes of determining its non-income measure, the S corporation must determine its apportionment factors based not only on its own property, payroll, and sales but on those of the QSUB and corporate trust prior to reorganization, assuming that such items were acquired by the S corporation as a result of the reorganization and continue to be held by it on the last day of its taxable year. 62, § 17A and 830 CMR 62.17A.1(6) in the year of the reorganization for purposes of Schedule SK-1, the S corporation must determine its apportionment factors by including the property, payroll, and sales of the QSUB and corporate trust before they ceased to exist for Massachusetts tax purposes. Directive 4: The answer to the first question is no. Discussion: Although the non-recognition of gain or loss and basis rules set forth in this Directive are identical to those that would have applied had the federal provisions under I. The tax-free nature of the unwinding of the QSUB into the corporate trust arises because there is now no liquidation to be taxed. At the same time, for Massachusetts income tax purposes, the QSUB was deemed liquidated into the corporate trust. Directive 5, which discusses what returns to file and how to report income and other tax attributes as a result of a merger of a QSUB into its corporate trust parent, also will apply to the unwinding of a LR 01-9 type reorganization, as the surviving corporate trust will be taxed under G. For Massachusetts income tax purposes, the parent entity is not treated as a corporation as it is for federal income tax purposes.

§ 1361, as amended and in effect for the taxable year, was not subject to the entity level taxes imposed on certain S corporations under G. Moreover, it was not subject to the financial institution excise under G. Accordingly, corporations that qualified federally as S corporations that were subject to tax under G.

63, § 32D (unless its parent was a Massachusetts S corporation subject to § 32D). 63, § 2 if its parent was a Massachusetts corporate trust or some other entity that was not a financial institution. Rather, all of its income was treated as though earned by and taxed to its parent. Massachusetts S corporations, in contrast, have for many years been subject to entity level taxation under § 2 as financial institutions or under § 32D as Massachusetts S corporations, if certain threshold requirements specified in that section are met. 63, § 2 or § 32D began to reorganize as QSUBs of federal S corporation parents that, for Massachusetts purposes, were corporate trusts, partnerships, or other entities not subject to taxation under c.

More likely however, the QSUB used its corporate trust parent's taxpayer identification number in filing its Form 355S, in which case a second note should be added to the QSUB's final return stating that "the taxpayer identification number appearing on this return will continue to be used by the S corporation formed as the result of the F reorganization described in Directive 1 of Directive 04-1, when filing its Form 355S with the Commonwealth." C. The Massachusetts corporate trust is not required to file a final return in the taxable year in which the reorganization takes place. In computing the aggregated total receipts, each entity required to aggregate total receipts must first compute its total receipts separately for the taxable year in which the reorganization takes place. Also, an actual accounting of the QSUB's net income for the period must be made. Computing QSUB's Non-Income Measure of Corporate Excise. A short taxable year is the only case in which the General Laws specifically allows for proration of the non-income measure of the corporate excise based on the number of months in the short year. 63 based solely on its own property, payroll, and sales. §§ 332 and 337 allowing for a tax-free liquidation of a subsidiary been allowed, those two sections do not represent the authority for this Directive. § 1.1361-4, the original QSUB election in the earlier LR 99-17 transaction resulted in the deemed liquidation of the QSUB into the S corporation for federal income tax purposes whether the liquidation was governed by IRC §§ 332, 337 or 368. The only factual difference between the two is that in LR 01-9, the stand-alone Massachusetts S corporation turned QSUB is a "financial institution" within the meaning of G. Thus, Directives 1, 2, and 4, will apply to the earlier case. 62, § 8 as a corporate trust, not as a financial institution under G. Pursuant to Example 8, the IRS characterizes the merger of an S corporation parent into its QSUB as a tax free "F" reorganization.

4, § 18, effective March 5, 2003, the QSUB also is required to report on its Form 355S the income measure of the corporate excise under G. Thus, the QSUB must file a final Form 355S (even though, as discussed in Directive 2, the same legal entity survives as a Massachusetts S corporation) to report any corporate excise it may owe for the taxable year in which the reorganization takes place. If the QSUB had obtained a separate federal taxpayer identification number for use in filing its Form 355S such words will serve as notice to the Department that the QSUB's federal taxpayer identification number is no longer applicable. In the event that the reorganization takes place in a subsequent year, the period for which the QSUB must compute its net income will begin on the first day of its taxable year and end on the date it ceases to exist for Massachusetts tax purposes. Computing Massachusetts S Corporation's Net Income Subject to Tax Under G. The Massachusetts S corporation's non-income measure of the excise may not be prorated, because, as discussed in subsection A immediately above, the S corporation's taxable year is not a short taxable year. In completing a Schedule SK-1 for the taxable year in which the reorganization takes place, the Massachusetts S corporation must include thereon not only its own items of income, loss, deduction, and credit for the taxable year, but those of the QSUB and the corporate trust before they ceased to exist for Massachusetts income tax purposes. Determining Massachusetts S Corporation's Apportionment Factors. The Massachusetts S corporation must determine its apportionment factors in the year of the reorganization for purposes of determining its income measure of the corporate excise under c. For purposes of its final Form 355S, the QSUB must compute any net income subject to tax under G. Issue 6: Unwinding of LR 01-9 Reorganizations - Downstream and Upstream Mergers Involving a Financial Institution A LR 01-9 type reorganization, just like a LR 99-17 type reorganization, involves the restructuring of a stand-alone Massachusetts S corporation by converting it into a wholly owned subsidiary, a QSUB, of a corporate trust holding company. Directive 6: Notwithstanding the factual difference, the unwinding of a LR 01-9 type reorganization is generally no different from the unwinding of a LR 99-17 type reorganization. Corporate trusts generally fall outside the definition of financial institution in G. Directive 3, in contrast, which discusses what returns to file and how to report income and other tax attributes as a result of a merger of a corporate trust parent into its QSUB, applies only in part to the unwinding of a LR 01-9 type reorganization, as the Massachusetts S corporation formed as a result of the merger will be taxed as a financial institution under G. Discussion: In unwinding a LR 01-9 reorganization as discussed in Directive 3 (by merging a corporate trust parent into its QSUB), the resulting S corporation which is also a "financial institution" within the meaning of G. Discussion: Federally, the partnership parent is an S corporation and, thus, the merger would be identical to the one set forth in Treas. § 1.1361-5(b)(3), Example 8, discussed in Directive 1 above.

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