02 Jan As you’ve undoubtedly

Week 5 discussion

Dq1

Corporate Formation and the Tax Agent

As you’ve undoubtedly learned by now, you often have to focus on the details in tax law, and the rules surrounding corporate formation are no exception to this rule. We know that a corporation is generally seen as a separate taxable entity from its shareholders. As a result, corporate formations, which involve transfers of property between the shareholders and the corporation, would generally be taxable to both the corporation and the shareholders. It’s no surprise that this result would often discourage corporate formation. Congress remedied this particular problem by enacting Section 351, and your text details how this provision generally operates. Did Congress craft a provision that allows corporations and their shareholders to avoid taxation on these transactions permanently, or did it have something else in mind? Support your answer!

Dq2

Taxation of Corporate Dividends

Relatively recent revisions to the Code have modified the tax treatment of dividends. Put your Internet research skills to use and tell me about these changes and their consequences. In particular, tell me (1) what dividends are, as defined by the Code; (2) what the recent changes effectively do (and how it was different from the prior approach to the taxation of dividends); and (3) what the changes sought to achieve (in other words, why was the change made?).