Corporate Focus: Spring 2017
Chuhak & Tecson Corporate Focus

Business divorce

What is business divorce?

All owners of businesses will eventually separate from the company. In many instances there are properly drawn documents for an owner to have their interest sold to another shareholder or redeemed by the company. This article, however, addresses what happens when there is a “dispute” on how a business interest will be separated. No matter how sophisticated corporate documents are drawn, the emotions of the individual owners may create business and personal conflicts on how a business should be operated.

To read more about how to successfully navigate a business divorce, click here.
The future of estate planning under a Trump administration

With Republican President Trump in the White House and a Republican majority in Congress, the stars are aligned to fast-track Republican-based agendas. High on the priority list is the repeal of the federal estate tax. According to his October 2016, ‘First 100 Days’ speech, President Trump even puts the estate tax repeal at the top of his congressional docket. However, the new administration has yet to articulate the details of the proposed repeal and, although the circumstances are favorable, Congress is a fickle friend, leaving the future of such repeal impossible to predict. Some Republicans desire an immediate repeal of the estate tax while others opt for a gradual phase-out.

Thinking long-term, the permanency of such repeal during future presidential terms remains unclear. Gift and generation-skipping taxes could be eliminated as well or, more likely, retained to offset loss of federal income. The provision that may have the biggest impact on taxpayers is a possible rescission of the adjustment at death for the decedent’s capital assets (commonly known as a step-up in basis).

To read more about how to prepare for potential changes, click here.

IRS had no basis to disallow losses

After the audit of an S corporation for the 2009 tax year, the IRS disallowed some corporate deductions and further disallowed the $24 million corporate loss allocated to the shareholders asserting that the shareholders lacked adequate basis. The shareholders retained us to dispute the IRS determination.

The shareholders claimed that they had adequate basis in the S corporation because they each loaned funds to the S corporation and that the loans created basis even though they were back-to-back loans. This means that the shareholders were the sole owners of both an S corporation and an LLC. The loan scenario was the following—the LLC received a bank loan and then loaned the funds to the shareholders who loaned the funds to the S corporation. 

To continue reading, click here.

Featured Attorneys
Terrell Isselhard
Terrell J. Isselhard,
Christina Mermigas
Christina M. Mermigas,
David Shiner
David B. Shiner,
Meet the rest of our Corporate team
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Our attorneys are mindful of the knowledge clients need—information directly affecting their lives and businesses. To that end, we invite you to take a peek at what's going on with our Estate Planning & Asset Protection practice group. They have numerous presentations on topics that may be of interest to you, including:
  • Business succession planning
  • Estate planning 101: Everything you need to know about death and taxes
  • How to incorporate charitable giving into your estate plan
  • Personal wealth management strategies
  • Preparing your family financially for your baby and beyond
If any of these interest you, or to suggest a presentation that would be beneficial to your group, please contact practice group leader Lindsey Paige Markus.
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