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
Constructive dividend consequences
Debt versus equity
Related-party pricing and expense allocation
Shareholder personal expenses paid by corporations
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.
Understanding of the basics of federal income tax law applicable to corporations and shareholders.
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.