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- @028 CHAP 8
-
- ┌─────────────────────────────────────────────┐
- │ CLOSELY-HELD C CORPORATIONS │
- └─────────────────────────────────────────────┘
-
- A "closely-held C corporation" is a regular corporation
- that is owned by only one person or controlled (over 50% of
- its stock) by five or fewer individuals. Elaborate
- "attribution" rules apply so that a person is considered
- to also own shares that are owned by certain related
- persons, such as children, other controlled corporations,
- etc.
-
- Thus, if you have 9 children, you can't give them each 10%
- of the stock of a corporation, keep the other 10% for
- yourself and say that no five persons owns over 50% of the
- company -- The attribution rules will deem you to be the
- owner of 100% of the stock in such case, and the corporation
- will be considered a closely-held C corporation (unless it
- elects to be an S corporation).
-
- The primary disadvantage of having a corporation be treated
- as a closely-held C corporation is that it may not offset
- "passive activity" losses against portfolio income (such as
- dividends and interest income). However, unlike an
- individual, such a corporation IS allowed to offset passive
- losses against its "net active income" (unless it also
- happens to be considered a "personal service corporation").
- C corporations that are neither "closely-held C corporations"
- nor "personal service corporations" are not subject to the
- passive loss restrictions at all, and thus are allowed to
- offset passive losses fully against all kinds of income.
-
- @IF117xx]NOTE: @NAME is a C corporation.
- @IF117xx]
- @IF110xx]It also appears, from the information you have provided,
- @IF110xx]that your company is a "closely-held C corporation," as
- @IF110xx]described above, which may thus be unable to fully utilize
- @IF110xx]any "passive activity" losses.
- @IF112xx]However, it appears that it would not be considered a
- @IF112xx]"closely-held C corporation," based on the fact that no 5 or
- @IF112xx]fewer individuals directly (or indirectly) own more than 50%
- @IF112xx]of the stock of @NAME.
-
-