The use of stock redemptions to change the ownership of a corporation is common to buy out existing owners, shift ownership to key employees and shift ownership to the younger generation of a family owned corporation. This course reviews relevant federal income tax law and planning strategies to minimize tax cost; focuses on how redemptions of the stock of an S corporation produce unique and potentially desirable tax results; and describes the complex rules that apply to sales of stock to related corporations, which can be treated as redemption (IRC 304). The consequences of redemption for the redeeming corporation are explained and illustrated in this course.
Identify tax planning opportunities related to redemption of stock of corporation.
Determine the tax law related to shareholder tax consequences of stock redemptions.
Recognize and illustrate the application the special rules applicable to redemptions of the stock of an S corporation.
Identify how to use stock redemptions to shift ownership to key employees and to younger family members in a family owned corporation.
Determine how to use redemptions to buy out a shareholder or shareholder group.
Recognize tax law related to using stock redemptions to fund the payment of estate tax.
Identify and illustrate the tax consequences of the redeeming corporation.
General approach to the tax treatment of the shareholder whose stock is redeemed
Substantially disproportionate redemptions
Redemptions: terminating the shareholders interest in the corporation; not essentially equivalent to a dividend; to pay estate tax; of the stock of an S corporation; to buy out existing owner or owner group; to shift ownership to key employees
Constructive ownership and redemptions
Sales of stock to a related corporation treated as a redemption (IRC 304)
Shifting ownership of family-owned corporation using redemption
Tax consequences of redemption for the redeeming corporation
CPAs and attorneys with at least two years of experience advising owners of privately held businesses; financial management and owners of privately held corporate businesses; IRS and FTB employees.
Basic understanding the federal income tax law applicable to corporations and S corporations.
Advanced Prep: None
Speaker: John G. McWilliams, CPA, JD
Field of Study: Tax
CPE Credit: 4 Hours
Meet the Speaker:
John McWilliams, CPA, JD is Professor of Accounting at Golden Gate University. Previously he was a Professor of Accounting at San Francisco State University. He began his career as a tax adviser with a Big Four CPA firm. For more than 30 years, while teaching, he has been a tax adviser to lawyers and CPAs regarding the tax matters of their clients. Areas of expertise include tax issues related to buying and selling privately held businesses, financially troubled businesses, business restructuring and reorganization and ownership succession to employees or family members. Mr. McWilliams is active in CalCPA, having served as president of the San Francisco Chapter, chair of the Financial Literacy Initiative, a member of the CalCPA Board of Directors serving as Vice Chair. He is currently a member of the Taxation Committee, the Financial Literacy Committe, and the Accounting Education Committee. He has served as a California representative to the AICPA Council and is currently a member of the AICPA Financial Literacy Commission. Mr McWilliams is author of two chapters of the CCH Expert Treatise Library : Federal Taxation of Corporations & Shareholders.