On July 23, 2014, the Treasury Department and Internal Revenue Service (“IRS”) issued final regulations providing guidance on the circumstances under which an S corporation shareholder may increase their adjusted basis due to indebtedness of the S corporation. Internal Revenue Code (“Code”) Section 1366(d)(1) generally provides that the aggregate amount of losses and deductions taken by a shareholder in any tax year cannot exceed the sum of the shareholder’s adjusted basis in its stock and the adjusted basis of any indebtedness of the S corporation to the shareholder. To the extent a shareholder does not have sufficient basis in their stock to take losses in a particular year, they may use a loan to the S corporation to increase their basis and avoid having to carry forward losses to a subsequent year. The final regulations describe the circumstances under which such loans will be treated as “bona fide” indebtedness of the S corporation to the shareholder – allowing the shareholder to increase their basis by the amount of the indebtedness and recognize the losses currently.
Sub S Banks
OCC Newsletter Focuses on Public Welfare Investments in Wind Energy Projects
WASHINGTON — The Office of the Comptroller of the Currency (OCC) today published an online newsletter that provides information showing how national banks . . .
OCC and FDIC Propose Rule to Strengthen Liquidity Risk Management
The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) proposed a rule on Wednesday to strengthen the liquidity risk management of large banks and savings associations.
The OCC and FDIC’s proposed liquidity rule is substantively the same as the proposal approved by the Board of Governors of the Federal Reserve System on October 24, 2013. That proposal, which was developed collaboratively by the three agencies, is applicable to banking organizations with $250 billion or more in total consolidated assets; banking organizations with $10 billion or more in on-balance sheet foreign exposure; systemically important, nonbank financial institutions that do not have substantial insurance subsidiaries or substantial insurance operations; and bank and savings association subsidiaries thereof that have total consolidated assets of $10 billion or more (covered institutions). The proposed rule does not apply to community banks.
Patrick J. Kennedy Quoted in ‘Basel III Creating Headaches for S Corp Banks’
Patrick J. Kennedy, President of the Subchapter S Bank Association, was recently quoted in the American Banker Association’s article, “Basel III Creating Headaches for S Corp Banks.”
The Fiscal Cliff: How did Sub S Banks Fare?
By: Patrick J. Kennedy, Jr and William Sutherland With the signing of the American Taxpayer Relief Act of 2012 (H.R. 8) S corp . . .
Subchapter S Bank Association Quoted in Houston Business Journal
Few Houston-area banks classified as subchapter S corporations want into the federal government’s Small Business Lending Fund even though advocates are working to include them.
Congress created the fund in September to provide up to $30 billion in capital to community banks nationwide to aid in the generation of small-business loans. For now, the government is only accepting applications from community banks that are C corporations and can issue a stock class different from common stock to the Treasury as part of the transaction. In this case, it is preferred stock, said Bruce Toppin III, a partner at San Antonio-based law firm Kennedy, Toppin & Sutherland LLP. Subchapter S corporations, which can only offer common stock, are not currently eligible.
There are about 16 subchapter S corporation banks in the Houston area, the largest of which is The Woodlands-based Woodforest National Bank, with total assets of $3.2 billion, according to the San Antonio-based Subchapter S Bank Association.