by Hoon Kang, CPA/PFS, CLU, ChFC, CFP®
|
Abstract: The buy-sell agreement enables businesses to be
transferred by plan, not chance. Few life insurance producers would dispute
the importance of buy-sell planning for business owners. Often, the same
producers are intimidated by the prospect of addressing concerns and
questions raised by CPAs and attorneys over tax consequences of the various
buy-sell planning techniques. This article discusses key income tax aspects
of buy-sell arrangements to equip and enable the readers to constructively
participate in the collaborative planning process with the advisers of their
valued clients. |
The buy-sell agreement enables businesses to
be transferred by plan, not chance. It is a contractual agreement that spells
out what will happen to the owners’ business interests when certain events,
known as triggering events, occur. Although buy-sell agreements come in many
flavors, essentially, there are two types: entity purchase and cross purchase.
All others are, in effect, variations of the two basic types of buy-sell
agreements. Tax consequences1 can differ significantly depending
upon how a buy-sell agreement is arranged, as well as the typesof entity
involved.2
In an entity purchase agreement (also known
as a stock redemption), the business will purchase the owner’s interest when a
triggering event occurs. If the triggering event is death, and the agreement is
funded with life insurance, the death benefit is paid to the business at the
owner’s death. The business uses the death proceeds to purchase the deceased
owner’s business interest from his or her estate; the surviving owner’s
ownership percentage increases proportionately unless, of course, the agreement
states otherwise.
At the most fundamental level, the tax
treatment of the insured entity purchase arrangement is fairly straightforward.
No deduction is allowed for premiums paid on a life insurance policy to fund
the buy-sell agreement.3 Life insurance proceeds are generally
received income tax free.4 Additionally, because the business
entity, not the owners, is the buyer of the deceased owner’s interest, there is
generally no basis step up for the remaining owners. To the decedent’s estate
(or the retired owner), sale of a business interest is generally considered to
be a sale or exchange of property under IRC Sec. 1221 and receives a capital
gain treatment. Since the estate receives a basis step up for the business
interest sold, no capital gain results from the sale.5 There are
several significant exceptions to these general rules as discussed below.
In addition to the so-called regular income
tax liability, the C corporation must generally account for what amounts to two
more sets of tax rules: the alternative minimum tax (AMT) and the adjusted
current earnings (ACE). The AMT, imposed only on “large” C corporations, is
equal to 20% of the alternative minimum taxable income (AMTI) above an
exemption amount.6 To determine the AMTI, tax-preference items are
added to or subtracted from the regular taxable income of the corporation. For
example, depreciation is computed differently under the regular method and the
AMT method (and the ACE method, for that matter; more on the ACE later).7
The difference between the regular and AMT depreciation methods is a positive
or negative adjustment to the regular taxable income. If the AMT liability
exceeds the corporation’s regular income tax liability, then the corporation
must pay the AMT.8
As mentioned, the AMT applies only to large
corporations, and therefore a “small” corporation is exempt from the AMT. A
corporation is treated as a small corporation exempt from the AMT for the
current year if that year is the corporation’s first tax year in existence
(regardless of its gross receipts for the year). Furthermore, for the
corporation in existence for more than a year, it is treated as a small
corporation if 1) it was treated as a small corporation exempt from the AMT for
all prior tax years beginning after 1997, and 2) its average annual gross
receipts for the three-tax-year period (or portion thereof during which the
corporation was in existence) ending before the current tax year did not exceed
$7.5 million ($5 million if the corporation had only one prior tax year).9
One of the preference items added to arrive
at the AMTI is ACE. They are similar to the corporate earnings and profits and
are determined by the corporation’s accounting method. If the ACE exceed the
AMTI (computed without the ACE adjustment), 75% of such excess is added to the
regular taxable income base.
For corporate-owned life insurance, both the
cash-value buildup and death benefits greater than basis must be adjusted for
ACE.10 Stated differently, the current year increase in the cash
surrender value over the current year policy premium paid represents an ACE
adjustment.11 Similarly, the death benefit received in excess of
cash surrender value is an ACE adjustment. These rules are a departure from the
general rule that allows for the tax-deferred cash-value buildup and tax-free
death benefit. In effect, such adjustments increase the AMTI, which then
increases the AMT, thereby increasing the odds of the AMT liability. Thus,
though normally tax free, the life insurance proceeds are potentially subject
to the AMT at an effective rate of 15% (75% of 20%).
After all is said and done, payment of the
AMT is not the end of the world. Rather than treating it as a separate tax, the
AMT payments should be viewed as a prepayment of tax. This is because payments
of AMT can offset future regular income tax liability of the corporation as
credit up to the AMT in any given year.12
When the C corporation redeems a deceased (or
retired) owner’s shares, any distribution of property or cash made by a
corporation to redeem such shares is generally a dividend.13 If a
transfer of stock in exchange for property qualifies as a sale, the selling
shareholder may report the transaction as the sale of a capital asset instead
of a dividend.14 This is a favorable treatment to the shareholder
for an obvious reason: the gain on the sale of the shares would be a capital
gain rather than ordinary income as with a dividend.15 Since the
deceased shareholder’s estate gets a step up in basis for his or her shares in
the business, there is no gain from the transaction.
To receive the favorable capital gains
treatment, however, one of three tests must be met:
1.
Redemption must not be essentially equivalent to a dividend.16
2.
Redemption is substantially disproportionate.17
3.
Redemption is a complete redemption of all the stockholder’s
interest in the corporation.18
The first test, which requires that
redemption not be “essentially equivalent to a dividend,” is a
facts-and-circumstances test and is perhaps the most difficult for which to
qualify objectively. It is generally understood that this section should be
relied on only if others are not available.19
The two other tests employ objective,
mathematical tests. The second test requires that the redemption is
“substantially disproportionate.” Substantially disproportionate redemption is
accomplished if, immediately after the redemption, all of the following three
mathematical tests are met:
1.
The stockholder owns less than 50% of the total combined voting
power of all classes of stock entitled to vote.20
2.
The stockholder’s percentage of voting stock is less than 80% of
the voting stock, prior to redemption.21
3.
The stockholder’s percentage of common stock (voting and
nonvoting) must be less than 80% of the percentage of voting stock owned prior
to redemption.22
The third test to accomplish a capital gains
treatment instead of a dividend treatment mandates a “complete redemption of
all the stockholder’s interest in the corporation.” That is, if all of the
shares owned are redeemed—hence complete redemption—the transaction results in
a capital gain, not dividend.
In summary, the shareholder (or his or her
estate) can avoid a dividend treatment (ordinary income) of a stock redemption
if substantially all of the shares owned are redeemed, and control is
relinquished.
Even if the C corporation redeems all of the
shareholder’s shares, and, in the mind of the shareholder (or the executor of
his or her estate), he or she no longer owns the company, it may not be enough
to qualify for capital gains treatment under the three exceptions discussed
above. In determining how many shares the stockholder owns, shares actually
owned and those constructively owned under attribution rules must be
added up.23
For the purposes of meeting the substantially
disproportionate redemption and complete redemption discussed above, the rules
of constructive stock ownership apply. A stockholder will be treated as owning
the stock in a corporation that is owned directly or indirectly by:
Assume a corporation with 100 outstanding
shares of stock. The father owns 60 shares and the two daughters own 20 shares
each. Immediately after the father’s death, his actual ownership is 60%, but
the 40% interest owned by the two daughters is attributed to the father. This
makes the father a 100% owner of the corporation. Likewise, after the
corporation redeems the father’s 60 shares, even though the two daughters
become 100% owners with each owning half of the corporation, the father is
still a 100% owner attributed by estate attribution. This transaction will be
treated as a fully taxable dividend, not as a sale of capital asset. Using the
same example, if the mother owned some shares, it would still be attributed to
the father by family attribution.
Attribution rules are highly complex and
warrant a separate discussion.29 Suffice to say that the adviser
should think constructive ownership as well actual ownership when
planning for business continuation for the C corporation.
The attribution rules can be avoided under
the entity purchase agreement by the so-called Section 303 redemption. It is
specifically exempt from the attribution requirements, helping family
corporations to make a stock redemption possible without the threat of dividend
treatment. Without the Section 303 exception, a redemption may be fully taxable
as a dividend; it provides that a portion of the stock can be redeemed without
dividend treatment.30 There are several requirements in order to
qualify for the Section 303 redemption:
There is generally no basis step up for the
surviving owners under the entity purchase. As stated above, this is because
the entity is buying the deceased owner’s business interest. The surviving
owners’ increase in ownership is simply a function of the deceased owner’s
interest vanishing. There is no basis adjustment resulting from the ownership
interest adjustment. This rule applies to the C corporation, as well as for
pass-through entities such as the partnership, limited liability companies
(LLC), and S corporations.35
However, if the buy-sell agreement is funded
with life insurance, to the extent the pass-through entities receive tax-exempt
death proceeds, each owner receives an increase in basis in proportion to his
or her pro-rata share.36 This is the case even though the policy
proceeds are received income tax free. To reiterate, it is not the redemption
of the deceased owner’s interest that inherently increases the surviving
owners’ basis. Rather, it is the tax-exempt life insurance proceeds received by
the business entity that result in the increase in the surviving owner’s basis.
If cash value insurance policies are used, technically, basis increase equals the
net death proceeds minus the net premiums paid. Net premium in this case is the
premium expenditures less the corresponding increase in cash value, but not
below zero. This is because each premium payment lowers each owner’s basis
while cash-value increase adds to the owner’s basis (again, no more than zero).37
Such basis step up is a positive result for
the surviving owners because it effectively reduces future gains from a
disposition of their interests. For the deceased owner’s estate, however, any
basis allocated to such decedent is “wasted.” This is because the decedent’s
interest in the business will be stepped up to its fair market value anyway;38
therefore, the basis step up received from the allocation of death proceeds
results in no additional benefit. Hence the wasted basis. The partnership and
the LLC may be able to draft its agreement so that the death benefit is
allocated only to the surviving owners, thus eliminating any such wasted basis.
One caveat to the allocation of death proceeds to only the surviving partners:
the IRS requires that a special allocation such as allocation of death proceeds
have “substantial economic effect.” In other words, the allocation must be
substantial and consistent with the underlying economic arrangement of the
partnership—any economic burden or benefit that corresponds to an allocation
must be borne or received by the partner to whom the allocation is made.39
Contrary to partnerships, which are
contractual in nature among the partners and can be extremely flexible, the S
corporation cannot be so accommodating in allocations of death benefit to
shareholders’ bases. The allocation of basis for the S corporation is based on
a “per share/per day” formula.40 For example, if a 50% shareholder
dies on June 30, and the death proceeds were $200,000, the death proceeds
allocated to the deceased shareholder’s basis is $41,370 ($200,000 × 50% share
× 151/365 days). Again, this increase is wasted because the decedent receives a
step up in basis regardless of the death proceeds. Under the entity purchase
agreement for an S corporation funded with life insurance, the amount of the
deceased shareholder’s basis increase becomes, in effect, a function of his or
her ownership percentage and, to a larger extent, the timing of his or her
death.
However, if the S corporation is a cash basis
taxpayer, it is possible to eliminate the wasted basis. An S corporation may
terminate a tax year, which has the effect of dividing the normal tax year into
two shorter tax years.41 Assume, again, a 50% shareholder of a cash
basis corporation dies on June 30, and the corporation receives death proceeds
of $200,000 on July 20. The corporation can write a promissory note immediately
after the death to the estate of the deceased shareholder and subsequently
elect to terminate the tax year as of the same date. When the death proceeds
are received on July 20, the only shareholder for that tax year is the
surviving shareholder. Therefore, the entire $200,000 of income-tax-free death
proceeds increase the remaining shareholder’s basis.
Under the entity purchase arrangement, a
partnership’s payments for the retiring or deceased partner’s interest in
partnership property are generally treated as distribution in liquidation of
such interest.42 Liquidating payments are taxable to the extent they
exceed the partner’s basis in the partnership interest. If the liquidation is
from a deceased partner’s estate, there is usually no gain or loss since the
decedent’s basis is stepped up to the fair market value.
However, several categories of assets are
excluded from the favorable liquidation treatment including unrealized
receivables,43 goodwill, except to the extent that the partnership
agreement provides for a payment with respect to goodwill,44 and
substantially appreciated inventory.45
Payments received for these assets (called
“hot assets”) are considered either distributive share of partnership income or
guaranteed payment, which means that they are treated as ordinary income as
such assets receive no basis step up.46 For the decedent, such
payments are, in effect, income in respect of a decedent (IRD). IRD refers to
income a decedent is entitled to at the time of death but which is not properly
includible as gross income in any federal income tax return.47
Commonly, this involves a cash-basis taxpayer with the right to receive income
who had not received it at the time of death.
In practical terms, if the partnership is an
accrual basis taxpayer, income for the unrealized receivables has been
accounted for already and included in income. Thus, there is presumably no
ordinary income attributable to unrealized receivables for an accrual basis
entity. For a cash-basis partnership with a large unrealized receivable—a group
of physicians for example—ordinary income required to be recognized can be
significant.
As to the payment received with respect to
goodwill, to the extent the partnership agreement provides for payment for
goodwill, this amount will receive a capital gain tax treatment.48
On the other hand, if the partnership agreement does not provide for payment
for goodwill, payment received will be treated as ordinary income. Moreover,
the term “appreciated inventory” is not limited to actual inventory items.
Inventory, for this purpose, is defined to include all partnership assets
except cash, capital assets, and Section 1231 assets, such as business
equipment and furniture.49
In a cross-purchase agreement, each surviving
owner agrees to buy the deceased owner’s business interest. If the triggering
event is death, and it is funded with life insurance, at death of an owner each
surviving owner/beneficiary will receive the policy proceeds. Then each
surviving owner has the funds to buy the deceased owner’s interest. In return,
the estate transfers a pro rata portion of the deceased owner’s business
interest. The surviving owners end up with 100% of the deceased owner’s
business interest.
Basic tax treatment of the cross-purchase
arrangement is similar to that of the entity purchase arrangement: no deduction
is allowed for premiums paid on a life insurance policy,50 and life
insurance proceeds are generally received income tax free.51 To the
decedent’s estate, the sale of his or her business interest receives a capital
gain treatment.52 The most notable difference is the basis step up
for the remaining owners since the surviving owners, not the business entity,
are buying the interest from the deceased owner.53 Since the estate
receives a basis step up for the business interest sold, generally there is no
gain that results from the sale. Again, some exceptions to these general rules
are discussed below.
Unlike the entity purchase arrangement where
the partnership’s payments for the partner’s interest in partnership property
are generally treated as distribution in liquidation of such interest, such
transaction under the cross-purchase arrangement is generally treated as sale
or exchange of capital asset.54 The result is the same as the entity
purchase in that the payments are taxable as capital gain to the extent they
exceed the partner’s basis in the partnership interest. If the liquidation is
from a deceased partner’s estate, there is usually no gain or loss since the
decedent’s basis is stepped up to the fair market value.
As is the case with the entity purchase, the
hot assets—that is, unrealized receivables and substantially appreciated
inventory (but not goodwill)55—are once again the caveat. Payments
received for hot assets are considered an amount realized from the sale or
exchange of property other than a capital asset and treated as ordinary income.
Cash basis partnership with large unrealized receivables are once again
vulnerable to a potentially significant ordinary income exposure.
Under the cross-purchase arrangement,
purchase of the deceased owner’s interest results in an “outside basis” step
up. That is, the amount the surviving owners paid for the deceased owner’s
interest is not reflected on the balance sheet of the entity.
One practical consequence of the outside
basis is that future collection of unrealized receivables by a partnership is
taxable even though a part of it was taxed at the decedent’s level. This is
because the payments made by the surviving partners with respect to unrealized
receivables do not increase the partnership’s basis in the receivables. Thus,
double taxation could eventually occur with respect to these unrealized
receivables. Furthermore, since depreciable assets on the partnership’s books
do not reflect partners’ step up in basis, no additional depreciation can be
taken.
To mitigate such problems, the partnership
can make an election under IRC Sec. 754. This election allows an adjustment in
the basis in partnership assets for payments made by the surviving partners for
the deceased partner’s interest, properly reflecting their investment.56
Though life insurance is an effective way to
fund a buy-sell agreement at death, it is crucial to set up ownership and the
beneficiary properly to avoid adverse tax consequences. The cardinal rule is
that the one with the legal obligation to buy the deceased owner’s interest
should be the applicant, owner, beneficiary and premium payer for policies
insuring the lives of each business owner. Thus, for the entity purchase, the
owner, beneficiary and premium payer should be the entity; for the cross
purchase, it should be the business owner.
A departure from this cardinal rule may
result in grave financial consequences. For example, in State Farm Life
Insurance Co. v. Fort Wayne Nat’l Bank, 474 N.E. 2d 524 (1985), a son
agreed to purchase his father’s business in return for his father’s life
insurance policy proceeds. The father was listed as owner of the contract, and
the son purchased the business from the father’s estate with the proceeds. At
the father’s death, the death benefit and business interest were includible in
the father’s estate because the father was the owner of the policy.
One of the drawbacks of the cross-purchase
arrangement is the large number of policies required to fund the plan. A
trusteed arrangement eliminates the need for multiple policies under the
traditional cross-purchase plan by employing a third-party trustee (or escrow).
It is simply a cross-purchase plan but with a trustee as owner and beneficiary
of the policies. Upon death of an owner, the trustee collects the policy
proceeds and purchases business interest from the deceased owner’s estate. The trustee
then credits each surviving owner per the pro rata increase in the ownership.
The deceased owner’s interest in the policies insuring the surviving owners is
reallocated to the surviving owners.
While effective in reducing the number of
policies, the trusteed agreement may trigger income tax under the
transfer-for-value rule when there are three or more owners. This rule is a
departure from the general rule that life insurance proceeds are received
income tax free. The transfer-for-value rule provides that the death benefit
from a policy transferred for consideration is taxable as ordinary income to
the extent that the proceeds exceed the consideration paid by the transferee
plus any net premiums paid by the transferee subsequent to the transferor.57
When the trustee reallocates surviving
owners’ policy interests from the deceased owner to the surviving owners, it
could be construed as purchasing the decedent’s beneficial interest in the life
insurance policies on the other owners’ lives; hence, the policies are
transferred for value to surviving owners. Death benefit of policies that are
transferred for value is taxable as ordinary income to the extent the death
benefit exceeds basis.58
Some suggest that a partnership (existing or
newly formed specifically to effect the buy-sell plan) should be used as a
buy-sell agreement vehicle to avoid the transfer-for-value problem because the
partnership and partners are exceptions to the transfer-for-value rule. There
are four exceptions to the transfer-for-value rule: 1) the insured, 2) the
partner of the insured, 3) a partnership in which the insured is also a
partner, and 4) a corporation in which the insured is a shareholder or officer.59
Whether creating a partnership for the sole
purpose of effecting a buy-sell agreement with little or no business assets
other than life insurance policies constitutes a legitimate business purpose is
subject to much discussion among tax professionals and is beyond the scope of
this article. Regardless, the IRS seems to have become increasingly aggressive
recently in challenging the viability of partnerships that do not appear to
have a purpose other than tax avoidance.60 Generally, a partnership
needs to have a legitimate business purpose in order for the entity to be
recognized as a partnership under state law. Additionally, for federal tax
purposes, Treasury regulations require that a partnership “must be bona fide
and each partnership transaction or series of related transactions must be
entered into for a substantial business purpose” to be consistent with the
intent of Subchapter K.61
The corporation wishing to make an S election
must meet the definition of a “small business corporation”62 which
requires that the corporation not, among others
There is a risk of losing the S status if the
settlement with the deceased owner’s estate results in not meeting one of the
requirements. For example, the number of shareholders may increase beyond 75,
or the shares may end up in the hands of an ineligible shareholder.
By many accounts, this decade will witness
the biggest intergenerational transfer of wealth in
This
issue of the Journal went to press in April 2005. Copyright © 2005, Society of
Financial Service Professionals.
Hoon Kang, CPA/PFS, CLU, ChFC, CFP®, is Vice President of
Executive Benefits and Case Design for MCM, A Meisenbach Company in Seattle,
Washington, a member firm of M Financial Group. He is also Managing Director
for Private Insurance Advisors, LLC, and an adjunct in the MBA in Personal
Financial Planning Program of
(1) Discussions in this article will be
limited to federal income taxes; state income taxes are not addressed.
(2) It is important to point out that a great
deal has been written on the topic of buy-sell agreements by competent
practitioners and scholars alike, including many excellent articles in the Journal
of Financial Service Professionals. Readers are advised to refer to
previous articles in the Journal as they provide much useful information on
various aspects of buy-sell planning.
(3) IRC Sec. 264(a)(1).
(4) IRC Sec. 101(a).
(5) Discussions throughout this article will
assume death in years other than year 2010.
(6) IRC Sec. 55(d)(3). AMT exemption for 2004
is $40,000 subject to phaseout, completely phased out at $310,000 of AMTI.
(7) Alas, it is entirely possible for a
closely held corporation to be required to assume a burden of keeping track of
at least four sets of books for depreciation: for regular income tax, AMT, ACE,
and state income tax purposes.
(8) Pass-through entities such as S
corporations, partnerships, or LLCs are not subject to AMT at the entity level.
Rather, tax-preference items are computed and passed to the owners, which are
then used to compute the respective owner’s individual AMT liability. There is
no AMT impact on life insurance owned by the pass-through entities at either
entity level or owner level since ACE adjustment applies only to C corporations.
(9) IRC Sec. 55(e).
(10) IRC Sec. 56(g)(4)(B)(ii).
(11) It is interesting to note that if the
policy premium exceeds the annual increase in cash surrender value, no negative
adjustment is allowed.
(12) IRC Sec. 53.
(13) IRC Sec. 301, et seq.
(14) IRC Sec. 302, et seq.
(15) With the new, lower rate on qualified
dividends (due to expire after 2008) that are the same as that for a capital
gain, the difference in characterization of the income may not be a factor in
some cases. That said, although the rate is the same between dividend and
capital gain, the taxable amount may be different. Under sale, only the gain is
taxed. In contrast, the entire amount of dividend is taxable (assuming the
relevant E&P is sufficient).
(16) IRC Sec. 302(b)(1).
(17) IRC Sec. 302(b)(2).
(18) IRC Sec. 302(b)(3).
(19) See US v. Davis, 397 US 301
(1970), a Supreme Court case.
(20) IRC Sec. 302(b)(2)(B).
(21) IRC Sec. 302(b)(2)(C).
(22) Ibid.
(23) IRC Sec. 318, et seq.
(24) IRC Sec. 318(a)(1). Family attribution
rules apply only to the C corporation, not to other entity types.
(25) IRC Sec. 318(a)(3)(C).
(26) IRC Sec. 318(a)(3)(A).
(27) Ibid.
(28) IRC Sec. 318(a)(3)(B).
(29) Many additional rules need to be taken
into account to compute constructive ownership under the attribution rules. For
example, IRC Sec. 302(c)(2) provides for an important exception to the family
attribution rule, known as the “ten-year rule.” Three requirements must be met
that essentially mandate that the exiting shareholder not reacquire an interest
(except by bequest or inheritance) or become involved in the corporation as an
employee, officer or otherwise (except as creditor) for 10 years following the
redemption. Under IRC Sec 302(c)(2)(C), the ten-year rule does not, but can,
apply to a distribution to an entity if certain additional exceptions are met.
“Entity” is defined as partnership trust, estate or corporation. Thus,
redemption resulting from the shareholder’s death can qualify for the ten-year
rule. See Richard etux. v. Commissioner; 124 T.C. No. 2; 15792-02 (Feb.
3, 2005) for a great discussion of the creditor exception.
(30) Though, again, such discussion may be no
longer necessary for now due to the new rates on qualified dividends. See note
15.
(31) IRC Sec. 303(a).
(32) IRC Sec. 303(b)(2).
(33) IRC Secs. 303(a) and 303(b)(3).
(34) IRC Sec. 303(b)(1).
(35) For the article, the terms “partnership”
and “partner” will be used throughout to include “limited liability company”
and “member.”
(36) IRC Secs. 1366(a)(1)(A), 1367(a)(1)(A),
and 705(a)(1)(B).
(37) IRC Secs. 1368(e)(1)(A) and
705(a)(2)(B).
(38) IRC Sec. 1014.
(39) Treas. Reg. Sec. 1.704-1(b)(2)(ii).
(40) IRC Sec. 1377(a)(1).
(41) IRC Sec. 1377(a)(2).
(42) IRC Sec. 736(b).
(43) IRC Sec. 736(b)(2)(A).
(44) IRC Sec. 736(b)(2)(B).
(45) IRC Sec. 751(b)(1)(A)(ii).
(46) IRC Sec. 736(a).
(47) IRC Sec. 691.
(48) IRC Sec. 736(b)(2)(B).
(49) IRC Sec. 751(d).
(50) IRC Sec. 264(a)(1).
(51) IRC Sec. 101(a).
(52) IRC Sec. 1221.
(53) IRC Sec. 1012.
(54) IRC Sec. 741.
(55) IRC Secs. 741 and 751.
(56) IRC Sec. 754.
(57) IRC Sec. 101(a)(2).
(58) Ibid.
(59) IRC Sec. 101(a)(2)(B).
(60) See, for example,
(61) Treas. Reg. Sec. 1.701-2(a).
(62) IRC Sec 1361(b).
(63) IRC Sec. 1361(b)(1)(A).
(64) IRC Sec. 1361(c)(1).
(65) IRC Sec. 1361(b)(1)(B).
(66) IRC Sec. 1361(c)(6).
(67) IRC Sec. 1361 (b)(1)(C).
(68) IRC Sec. 1361(b)(1)(D).