Discussion:Reclassification to Constructive Dividends
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| Revision as of 12:55, 25 May 2006 Frank stewart (Talk | contribs) (Foxttron: Thank) ← Previous diff |
Revision as of 15:15, 25 May 2006 Foxttron (Talk | contribs) (The 1500 series) Next diff → |
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| Also, if there is a clear business purpose to the investment, would that help?}} | Also, if there is a clear business purpose to the investment, would that help?}} | ||
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| + | {{ForumReplyPost|UserID=Foxttron|Date=25 May 2006|Text=The 1500 series (about 15 code sections)deals about consolidation rules and filing for a controlled group. Again, not knowing the specifics, I do not know if this applies to you. I believe that a clear business purpose would help, but, again, it sounds strange that the IRS would deny this investment a priori. I think they may have different motivations for reclassifying this investment. I would look carefully in the conclusion before answering them. I hope it helps.}} | ||
Revision as of 15:15, 25 May 2006
Discussion Forum Index --> Tax Questions --> Reclassification to Constructive Dividends
Frank stewart (talk|edits) said: | 24 May 2006 |
| What can be done to reverse the IRS reclassification to dividends. My client (a corporation) invested $40,000 in another corporation (that he is a 50% shareholder). The IRS reclassified the $40k as a constructive dividend to my client personally. | |
| 24 May 2006 | |
| To whom the shares where issued? If the corporation has legal title to the shares, that is not a dividend, not an investment in sub (see the consolidation rules about control.) However, if the shares (of the second corporation)are in the name of the shareholder, the IRS is correct. | |
Frank stewart (talk|edits) said: | 25 May 2006 |
| Foxttron: Thanks for your input. The corporation has legal title to the shares, but the corporation that was invested in is also owned (50%) by the client/shareholder of the investing corporation. I will read the consolidation rules on control, what code section is that please?
Also, if there is a clear business purpose to the investment, would that help? | |
| 25 May 2006 | |
| The 1500 series (about 15 code sections)deals about consolidation rules and filing for a controlled group. Again, not knowing the specifics, I do not know if this applies to you. I believe that a clear business purpose would help, but, again, it sounds strange that the IRS would deny this investment a priori. I think they may have different motivations for reclassifying this investment. I would look carefully in the conclusion before answering them. I hope it helps. | |
