Form 8869 ND 2020-2025

Form 8869 ND: What You Should Know

This allows the Sub to keep all income and the tax on it is no longer subject to the tax limits on taxable income.  Example: You own two S corporation C corporations with different owners, one of which will become a Section 857S Sub, and the other of which will only be taxed as a C corporation. The parent must make both S corporation Sub elections during the year, as long as the Subs do not change owners. The use of Subs in tax planning is an important, if not essential, method to help avoid double taxation and ensure your business isn't subject to the increased tax it would incur if it became  a C corporation. You should think about the advantages of making a Sub election and how you can use each Sub in your tax plan to benefit your business and the benefits of the increased tax it would have if it were a C Corporation. When to make Sub election? The Sub election has to be made by February 28th of the tax year for which the Sub election was made. The date the Sub election was made is also  the date both shareholder and Sub election are made. The date of the Sub election is not required to be made  before the end of the tax year in which the Sub election was made. However, if the Sub election is to be made during the year-end, the Sub election cannot be made until after the end of the following tax year. The Sub election must be made in the year of formation of the Sub. You can change the tax year on which the Sub election will be made any time before the Sub election is made, but for an S corporation with which you don't agree to tax, you should think about not doing so. If you make the Sub election before April 15th of the tax year for which it will be made, the Sub will not be  taxed as a C corporation and will not be subject to the reduced tax limits that it would have incurred if it weren't  a C corporation. You can't make the Sub election in the year of the deemed liquidation or change of control. What is the basis of the Subs? The basis of a Sub is determined by subtracting the stockholders' equity from its purchase price. The stockholders' equity is determined by  applying the amount of the stockholders' equity at the time the Sub was created.

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