Reclassified Debt as a Second Class of Stock in Subchapter S Corporations - Invalidation of Treasury Regulation 1,1371-1(9)
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Authors
Fitzgerald, James P.
Issue Date
1973
Volume
6
Issue
Type
Journal Article
Language
Keywords
Alternative Title
Abstract
INTRODUCTION|In order to avoid double taxation in closely held corporations, it is common for the shareholders to partially finance the corporation by lending money instead of purchasing stock. In addition to other tax advantages from the debt financing, the interest paid on the loan is deductible to the corporation (dividends are not), and the repayment of the principal is not considered as a taxable dividend or distribution to the shareholder. In order to prevent such tax avoidance schemes, the Internal Revenue Service (Service) and the courts often reclassify purported debt as equity if certain criteria are met...
Description
Citation
6 Creighton L. Rev. 192 (1972-1973)
Publisher
Creighton University School of Law