Upon the termination of the QSSS
election, the issue arose whether Newco and T were related parties.
If a QSSS
ceases to meet the above requirements, it will be treated as a new corporation acquiring all assets and liabilities from the parent S corporation in exchange for its stock.
The tax treatment of Series LLCs compared to QSSSs
and imposition of self-employment taxes on a managing member's distributive share of profits could also be disadvantages of the LLC depending on the circumstances.
The sale of an interest in a QSSS
will cause a termination of the election.
A had transferred his [S.sub.2] stock to [S.sub.1] or vice versa (tax-free under Section 351), and made a QSSS
election, only one S corporation would exist for tax purposes with a loss of $1 which would reduce his $3 basis to $2.
The IRS and Treasury Department intend to issue regulations describing the manner in which a QSSS
election must be made and the effective date of the election.
As is often the case with IRC changes that, at first glance, appear simple at the Federal income tax level, the QSSS
provisions create a myriad of complications at the state and local tax level.
608 (the QSSS
bill) contained the "retroactive to tax years beginning on or after January 1, 1997" language.
The 1996 act also includes a provision that allows an S corporation to own a so-called qualified subchapter S subsidiary (QSSS
Y intended to make a timely qualified subchapter S subsidiary (QSSS
) election for X following the contribution.
The IRS recently issued Notice 99-6, soliciting comments from and providing guidance to taxpayers and practitioners regarding issues related to employment tax reporting and payment by qualified subchapter S subsidiaries (QSSS
) and other entities that are disregarded as separate from their owners, i.e., single member limited liability companies (SMLLC).