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Date: October 22, 2014

Law360, October 22, 2014

Larry J. Brant, a shareholder in the tax and benefits group of law firm Garvey Schubert Barer, recently delivered a White Paper at the NYU 73rd Institute on Federal Taxation on Developments of Subchapter S, including a review of recent cases, rulings and legislative proposals impacting Subchapter S.

A Law360 reporter covering the institute held October 21 -24 in New York quoted Brant regarding the possibility of lawmakers passing tax reform legislation which will include changes to Subchapter S. “I’m not so optimistic that tax reform will occur next year. But if and when it does happen, we will likely see changes to Subchapter S” said attorney Brant.

Brant commented that S corporations are currently affected by at least four “harsh” rules, including: (i) a rule that prevents nonresident aliens from owning stock; (ii) a rule that prohibits S corporations from having more than one class of stock; (iii) a rule that whereby passive investment income can trigger an additional tax and even terminate a corporation’s S election; and (iv) a rule whereby some S corporations may be subject to a double tax on the sale of certain assets (commonly referred to as the built in gains tax).

Brant also pointed out that, given our annual tax gap in this country has grown to around 450 billion dollars, the government is carefully studying taxpayer compliance in order to pinpoint where noncompliance exists. As a consequence of these studies, closely held corporations and their shareholders, including S corporations, are getting attention from the IRS these days.

The full article is available at

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