Tax Notes Talk
Top Tax Cases of 2024, Part 3: C Corporations
Mar 7, 2025
Tony Nitti and Damien Martin from EY dive into the top tax cases of 2024, focusing on two pivotal C corporation cases, Ju et al v. United States and Stead v. Commissioner. They unravel the complexities of Qualified Small Business Stock (QSBS), discussing compliance, shareholder exclusions, and the vital role of clear documentation. The duo also explores the doctrine of constructive receipt through a tax court case, illustrating the intricacies taxpayers face with income recognition. Their engaging reflections on tax law dynamics promise to inspire proactive planning.
39:24
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Quick takeaways
- Establishing evidence that shares qualify as qualified small business stock (QSBS) is crucial for tax exclusion eligibility, especially regarding the $50 million asset limit.
- The complexities of income recognition for cash method taxpayers emphasize the importance of legal obligations in determining when income is actually received.
Deep dives
Insights on Section 1202 and QSBS
Section 1202 provides significant tax benefits by allowing non-corporate shareholders to exclude up to 100% of the gain from the sale of qualified small business stock (QSBS) held for more than five years. This provision has gained attention in recent years, with an increasing number of private equity firms taking advantage of its tax exemptions. The importance of proving that stock qualifies as QSBS has been highlighted by a recent court case, emphasizing the need for substantial evidence and proper documentation. Practitioners are urged to ensure that all qualifications are met, including verifying that corporate assets do not exceed $50 million at certain phases, as failure to do so can result in loss of the tax exclusion.
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