CPE: 4 hours
Prerequisites: Understanding of the basics of federal income tax law applicable to corporations and shareholders.
Advanced prep: None
Who should attend: CPAs and attorneys with at least two years of experience advising privately held corporate businesses; owners; and financial advisers of privately held corporate businesses and employees of the IRS and FTB.
For successful privately owned businesses, making corporate resources available to shareholders is challenging without significant tax cost. To lessen tax cost, it is common for privately held corporations to use other relationships to make payments to shareholders. This course considers the tax consequences of making dividend distributions to shareholders and the risks of constructive dividend treatment for unreasonable compensation and debt that is recharacterized as equity. It will also provide an overview of bargain sales, shareholder loans, related-party pricing and expense allocation, unreported income and corporate payment of shareholder personal expenses.
- Identify the meaning of dividend income, including the definition of earnings and profits.
- Recognize tax consequences of dividend income to individual shareholders and dividend income received by corporate shareholders.
- Determine and illustrate tax consequences of nonliquidating distributions for distributing corporations.
- Identify and discuss the law applicable to stock dividends.
- Recall constructive dividend consequences.
- Recognize and evaluate the risk of unreasonable compensation.
- Identify the laws applicable to distinguish debt from equity.
- Recognize long-term consequences and constructive dividend risks of shareholder loans.
- Identify and evaluate the constructive dividend risks associated with related-party pricing and expense allocation, unreported income, shareholder personal expenses paid by corporations and other situations.
- Meaning of earnings and profits
- Tax consequences of dividend income to individual shareholders
- Corporate shareholders and the dividend received deduction
- Tax consequences of nonliquidating distributions for distributing corporations
- Stock dividends
- Constructive dividend consequences
- Unreasonable compensation
- Debt versus equity
- Shareholder loans
- Related-party pricing and expense allocation
- Unreported income
- Shareholder personal expenses paid by corporations