S Corporations as Shareholders, LLC Members, and Partners

Abstract

This two-part article focuses on numerous transactional scenarios involving S corporations that have sole or partial ownership interests in other entities, including C corporations, qualified S corporation subsidiaries, single- and multiple-member limited liability companies and partnerships. Part 1 outlines the fundamentals of how subchapter S operates and examines the tax treatment of transactions through which the S corporation comes into existence, other entities become affiliated with the S corporation group, and cash or other property is transferred from an affiliate to the S corporation or to another affiliate. Part 2 examines the tax consequences of transactions in which a complete or partial interest in an affiliate is sold or otherwise disposed of by the S corporation, including through a taxable stock or assets acquisition, a tax-free reorganization under section 368 or a tax-free corporate separation under section 355.

Keywords: S corporation, Q-Sub, disregarded entity, pass-through entity

JEL Classification: k10, k19, k20, k29