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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.

liquidating qsss qsub-47

The QSUB must compute its net income subject to tax under G. Accordingly, assuming that the reorganization takes place in a taxable year that includes March 5, 2003, the QSUB must compute its net income based solely on its own items of income, loss, deduction, and credit for the period beginning March 1 or 5, 2003, and ending on the date it ceases to exist for Massachusetts tax purposes. c.62, § 8(a), are generally taxable as resident natural persons under § 8, regardless of their treatment for federal tax purposes. How should the surviving corporate trust 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? Rather, it will be subject to tax as a financial institution under G. subsections G and H of the Discussion section in Directive 3. 63, § 32D (a)(i) and (ii) of the corporate excise for purposes of its final Form 355S as specified in section III of TIR 03-20. Issue 5: Filing Issues as Result of Upstream Merger in Directive 4 Directive 4 involves the unwinding of a LR 99-17 reorganization by merging a QSUB into its corporate trust parent. In completing its Schedule SK-1 and in determining its apportionment factors for purposes of Form 63FI and Schedule SK-1, the financial institution should proceed exactly as the S corporation is directed to proceed in Directive 3, in completing its Schedule SK-1 and in determining its apportionment factors for purposes of Form 355S and Schedule SK-1. 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.However, if you truly do search through the questions and answers below and find that you can't find an answer to your general question, you can send your question to us using our contact form.

If your question is of general interest, I'll add it to the list: If you want additional information about how to maximize the tax savings related to running a business or investment venture, you may also be interested in one of our downloadable e-books (see descriptions below).Tweet The list of questions below leads to pages that answer the most common questions I get from CPA firm clients and from website visitors.Therefore, if you have a question about forming, operating or ending an S corporation, the answer probably appears below.Much of the popularity of spin-offs, especially when the alternative is a simple divestiture (selling part of a corporations operations to a third party), can be traced to a companys ability to structure the transaction so it is tax-free.In fact, after the Tax Reform Act of 1986, a spin-off or other divisive reorganization is the only way a company can distribute appreciated property to shareholders without incurring a corporate-level tax. 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.