Liquidating qsss qsub

Posted by / 06-Mar-2020 22:30

§ 1361, as amended and in effect for the taxable year, was not subject to the entity level taxes imposed on certain S corporations under G. Moreover, it was not subject to the financial institution excise under G. Accordingly, corporations that qualified federally as S corporations that were subject to tax under G. 63, § 32D (unless its parent was a Massachusetts S corporation subject to § 32D). 63, § 2 if its parent was a Massachusetts corporate trust or some other entity that was not a financial institution. Rather, all of its income was treated as though earned by and taxed to its parent. Massachusetts S corporations, in contrast, have for many years been subject to entity level taxation under § 2 as financial institutions or under § 32D as Massachusetts S corporations, if certain threshold requirements specified in that section are met. 63, § 2 or § 32D began to reorganize as QSUBs of federal S corporation parents that, for Massachusetts purposes, were corporate trusts, partnerships, or other entities not subject to taxation under c. Issue 3: Filing Issues as Result of Downstream Merger in Directive 1 How should the Massachusetts S corporation formed as the result of the "F" reorganization described in Directive 1 above (formed as the result of the merger of a corporate trust parent into its QSUB) file a return and report income, gross receipts, property, payroll, sales and other relevant tax attributes for the taxable year in which the reorganization takes place? The Massachusetts S corporation must file Form 355S, S Corporation Excise Return, to report its corporate excise for the taxable year in which the reorganization takes place. For Massachusetts income tax purposes, a QSUB has always been required to file a Form 355S, as an independent taxpayer separate from its parent, to report the non-income measure of the corporate excise imposed under G. Finally, the corporate trust's total receipts are to be combined with those of the QSUB and S corporation in determining whether and at what rate the latter two are subject to taxation under G. Consequently, the corporate trust will not get a step up in basis in the assets transferred to it by the QSUB. Merging a QSUB into its Massachusetts corporate trust parent does not presently qualify as a statutory merger under G. However, effective July 1, 2004, merging a QSUB into its corporate trust parent will be allowed under Massachusetts law. Additionally, are final returns required to be filed by the partnership and QSUB? "Partnership" should be substituted for "corporate trust" every time the latter term appears in Directive 3. Directive 9: No taxable income will be recognized by the partners/shareholders for Massachusetts income tax purposes upon the unwinding of a Letter Ruling 01-1, 02-3, or 02-7 type reorganization by merging the QSUB into its partnership parent, liquidating the QSUB. Issue 10: Filing Issues as Result of Upstream Merger of QSUB into its Partnership Parent as in Directive 9 Directive 9 involves the unwinding of a LR 01-1, 02-3, or 02-7 type reorganization by merging a QSUB into its partnership parent. The QSUB must file a final Form 355S to report any corporate excise it may owe for the taxable year in which the reorganization takes place as specified in Directive 5 above. For a discussion of the Massachusetts tax treatment of post-merger distributions from a Massachusetts S corporation that previously was a QSUB owned by a corporate trust, DOR-D 04-2. 63, § 32(a)(1) or § 39(a)(1), or the minimum corporate excise imposed under G. Additionally, the property, payroll, and sales of the corporate trust, while it still existed for Massachusetts tax purposes, are to be included by the S corporation in determining the latter's apportionment factors for purposes of computing its non-income measure of the corporate excise and completing its Schedule SK-1. 63, § 32D(a)(ii) for the taxable year in which the reorganization takes place. In computing the S corporation's total receipts, the above-noted annualization rule will not apply, as the reorganization is, for federal income tax purposes, an "F" reorganization and, thus, does not create a short taxable year for the S corporation in the year of the reorganization. For Massachusetts income tax purposes, "taxable year" means "any fiscal or calendar year or period for which the corporation is required to make a return to the federal government." G. Additionally, will the merger qualify as a statutory merger under G. Thus, the QSUB will not recognize gain or loss upon distribution of its appreciated or depreciated property. 156B, § 83, as that section expressly allows only for the merger of a Massachusetts corporate trust into a corporation, not, as is the case at hand, the merger of a corporation into a corporate trust. In computing gross income for Massachusetts income tax purposes, a corporate trust is not permitted to take advantage of the nonrecognition provisions of I. Issue 8: Filing Issues as Result of Downstream Merger of Partnership Parent into its QSUB as in Directive 7 How should the Massachusetts S corporation formed as the result of the merger of a partnership parent into its QSUB file a return and report income, gross receipts, property, payroll, sales and other relevant tax attributes for the taxable year in which the reorganization takes place? The Massachusetts S corporation must file Form 355S to report its corporate excise for the taxable year in which the reorganization takes place as specified in Directive 3 above, with one obvious change. The QSUB must file a final Form 355S to report any corporate excise it may owe for the taxable year in which the reorganization takes place also as specified in Directive 3. Discussion: The Massachusetts S corporation's and QSUB's total receipts, net income subject to tax under G. Issue 9: Unwinding Reorganizations Exemplified by LRs 01-1, 02-3, and 02-7 - Upstream Merger of QSUB into its Partnership Parent Will the unwinding of a Letter Ruling 01-1, 02-3, or 02-7 type reorganization by merging a QSUB into its partnership parent, liquidating the QSUB, trigger the recognition of any taxable income to the partners/shareholders? Consequently, the subsequent merger of a QSUB into its partnership parent for Massachusetts tax purposes will not trigger the recognition of any federal taxable income. 63, § 2 because its parent is not a financial institution, also is subject to taxation under G. The Internal Revenue Service ("IRS") has indicated that it will allow taxpayers to treat the merger of an S corporation parent into its QSUB as a reorganization under I. Discussion: The IRS has indicated that in the event a federal S corporation ("Old Co") merges into its QSUB and the QSUB survives the merger under state law causing the formation of a new corporation for tax purposes ("New Co"), Old Co's S election under I. Discussion: Federally the Massachusetts corporate trust parent is an S corporation. § 368(a)(1)(F), i.e., a tax-free "F" reorganization, if the transaction otherwise satisfies the requirements of that subsection. Massachusetts law generally adopts the federal provisions allowing for tax-free "F" reorganizations when the reorganization involves a corporate trust. Every federal S corporation also may be a Massachusetts S corporation as long as it otherwise satisfies the requirements set forth in the definition of "Massachusetts S corporation" under 830 CMR 62.17A.1(2). § 1362(a) will continue in effect and will be applicable to New Co without the necessity of filing a new election on behalf of New Co, provided that the merger qualifies as an "F" reorganization, and provided further that New Co meets the requirements of an S corporation under I. This change in policy will be applied prospectively from July 1, 2004. Credit and net operating loss carryovers incurred by the QSUB before the reorganization can be used, as applicable, to offset the financial institution's tax liability.

Additionally, are final returns required to be filed by the corporate trust and QSUB? In addition, the Massachusetts S corporation must file a Schedule Assuming that the IRS allows the S corporation formed as the result of the "F" reorganization described in Directive 1 above to retain the previously existing S corporation's taxpayer identification number when reporting its income to the federal government, it also may use such number (i.e., the previously existing corporate trust's taxpayer identification number) when filing its Form 355S with the Commonwealth. Discussion: Federally, a QSUB is deemed liquidated upon the making of a valid QSUB election. How should the surviving partnership file a return and report income, gross receipts, property, payroll, sales and other relevant tax attributes for the taxable year in which the reorganization takes place? The surviving partnership must file Form 3, to report its income for the taxable year in which the reorganization takes place. "Final return" should be clearly noted on the return. 63, § 32D(a)(ii) for the taxable year in which the reorganization takes place, its total receipts are to be computed as specified in subsection B of the Discussion section in Directive 5 above. 63, § 32D (a)(i) and (ii) of the corporate excise it may owe, any non-income measure of the corporate excise it may owe, and its apportionment factors as specified in subsection B.

As a result, many tax practitioners have sought Department of Revenue ("Department") guidance because their clients are contemplating reverting to their pre-LR 99-17 organizational structures, or reorganizing in some other way.

4, § 18, the Massachusetts tax incentive to reorganize an S corporation as a QSUB of a corporate trust, partnership, or other entity parent has been largely eliminated. Additionally, in determining the partnership's apportionment factors, the partnership must take into account the property, payroll, and sales of the QSUB before it ceased to exist for Massachusetts tax purposes. Discussion: In reallocating estimated payments to the proper accounts, the procedures set out in TIR 01-3 should be followed.

This Directive discusses the income tax ramifications of various reorganizational options. Issue 2: Restoring the Pre-LR 99-17 Structure and Tax Treatment as Result of Downstream Merger The purpose of merging the corporate trust into its QSUB generally would be to re-establish the Massachusetts organizational structure and tax treatment that typically applied to taxpayers before LR 99-17.

Additionally, a QSUB's income also continues to be taxed to its parent, if its parent is a non-S corporation parent such as a Massachusetts corporate trust or financial institution, or to its partners if it is a partnership. Before the issuance of that ruling, most of these clients operated simply as stand-alone Massachusetts S corporations. Accordingly, merging a Massachusetts corporate trust parent into its QSUB will not trigger the recognition of any taxable income to either entity or to the shareholders of the corporate trust as long as the merger qualifies as a tax-free "F" reorganization for federal income tax purposes.

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63, § 32(a)(2), § 39(a)(2), and § 32D(i) and (ii), as applicable. The exception is applicable only to a QSUB's taxable year that includes March 5, 2003. Additionally, any unused amount of credit or loss may be carried over to the S corporation's succeeding taxable years. The Massachusetts S corporation must compute any non-income measure of the corporate excise it may owe in the year of the reorganization based not only on its own assets and liabilities but on those of the QSUB and corporate trust prior to the reorganization, assuming that such items were acquired by the S corporation as a result of the reorganization and continue to be held by it on the last day of its taxable year. First, the credit must be claimed by striking out one of the S corporation's unused credits on Form 355S, line 7 through 17, and adding on the dotted line next to the struck language the words "QSUB credit allowed under Directive 3 of Directive 04-1." Second, a copy of the QSUB's Form 355S must be attached to the Form 355S filed by the Massachusetts S corporation. Completing Massachusetts S Corporation's Schedule SK-1 in the Year of the Reorganization. Additionally, in determining the corporate trust's apportionment factors for purposes of its Form 3F, the corporate trust must take into account the property, payroll, and sales of the QSUB up until it ceases to exist for Massachusetts tax purposes. The aggregated total receipts may be adjusted to avoid double counting but must include income taxable at the entity level under G. If the taxable year in which the reorganization takes place includes March 5, 2003, the QSUB must include in its calculation all of its receipts for such taxable year, without regard to the March 5, 2003 date. 63, § 32D (a)(i) and (ii) of the corporate excise, any non-income measure of the corporate excise, and its apportionment factors as specified in subsections B, C, and D of the Discussion section in Directive 3 above. Is this factual difference significant, or, will Directives 1, 2, 3, 4, and 5 above, applicable to LR 99-17 type reorganizations, apply to the unwinding of a LR 01-9 type reorganization? Thus, both the surviving Massachusetts corporate trust and the QSUB will file returns and report income and other tax attributes for the taxable year in which the reorganization takes place as specified in Directive 5. The QSUB, however, will file returns and report income and other tax attributes for the taxable year in which the reorganization takes place exactly as specified in Directive 3. 63, § 1, will not be subject to the non-income measure of the corporate excise imposed under G. Directive 7: No taxable income will be recognized by the partners/shareholders for Massachusetts income tax purposes upon the distribution of property in complete dissolution of the partnership parent, , in unwinding a LR 01-1, 02-3, or 02-7 type reorganization by merging a partnership parent into its QSUB.

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