Inadvertent Termination
Much to my surprise, the IRS has ruled this to be an inadvertent termination. I suppose if you drove blind folded that any crashes you had would be inadvertent too, but I don’t recommend it. The shareholders have to amend their individual returns to pick up a deemed dividend for the amount of the earnings and profits. Also they have agreed that on receipt of the ruling they will make payments to bring distributions to shareholders into proportion with ownership. Why the stiffed shareholders are waiting till then is beyond me, but that’s the deal.
Courts and Value Billing
The disdain for professional imprimaturs unsupported by work has moved beyond the Son of Boss unbalanced entries to a deal that tax professionals felt deserved a bit more respect. Canal Corporation and Subsidiaries was a deferral deal. Instead of selling a subsidiary the taxpayer contributed it to a partnership and took a large distribution. The debt that funded the distribution was allocated to the contributing partner, which avoids the disguised sale rules. Of course, they didn’t really want a liability, so the guarantee that supported the allocation was pretty tenuous.
Follow Me
Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.