C Corporation

Also found in: Financial, Wikipedia.

A type of business that may be created by a group of professionals wishing to become incorporated
Pros Less troublesome in daily financial management, minimises current net income—as the income is paid to the physicians as compensation—and minimises current tax liability
Cons At time of sale, up to 60% of the proceeds are paid in taxes by the corporation and by the individual shareholder

References in periodicals archive ?

The funds also can be withdrawn from a C corporation as compensation.

Breaking up is hard to do

The C Corporation was a holding company that held over 80% of the stock of five corporations engaged in retail auto sales through six dealerships.

S corporation holding company was not required to recapture share of LIFO reserves

1363(d) mandates recapture of the LIFO reserve on the conversion of a C corporation to an S corporation.

S Corporation holding company had to recapture pro rata share of LIFO reserves

The IRS outlined in Letter Ruling 9822012(32) the tax consequences when a C corporation grants stock options and stock appreciation rights (SARs) to individuals employed by a partnership in which the Corporation and an S corporation are general partners.

Current developments

Specifically, an eligible C corporation could convert to S status and avoid gain recognition if corporate assets were retained for a 10-year period after the conversion date.

Valuing the FMV of minority blocks of stock

A calendar-year C corporation (C) had been on the LIFO inventory method through 1993.

AMT inventory adjustments on change from LIFO to FIFO

Additionally, if a C corporation has an outstanding obligation that satisfies the definition of straight debt, but is considered equity under general principles of tax law, the obligation would not be treated as a second class of stock if the C corporation converts to S status.

Revised proposed regulations clarify the one class of stock rules; IRS response to practitioner complaints still leaves room for improvement

Does the answer depend on whether or not there is previously accumulated C corporation earnings and profits?

Single class of stock regulations raise excess compensation concerns

Without such relief, C corporations sponsoring ESOPs would effectively be prevented from maintaining a SESOP after converting to S status, because they would be required to make in-kind distributions of employer securities and could quickly violate the 75-shareholder requirement.