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PATH Act Permanently Changes Tax Impact of Conversion of C Corporations to S Corporations

S corporations are a creature of the Internal Revenue Code. They are corporations which have timely filed an S election with the IRS to be treated as a "pass through" entity; meaning that they generally pay no corporate-level federal income tax. The federal income tax attributes flow through to the shareholders of the corporation. Most small business entities are "pass through" entities-either S corporations or limited liability companies, taxed as partnerships or sole proprietorships.


For plaintiffs and defendants alike, the fees and expenses associated with litigation are usually a factor, if not the primary factor, that determines how and whether a case is asserted, defended, or settled. Consequently, one of the first questions that clients will ask when the issue of litigation comes up is whether they can recover their attorney fees from the other party. The answer will in many cases depend on whether recovery of attorney fees is authorized pursuant to Texas Civil Practice and Remedies Code Section 38.001. Under that particular law, a person may recover attorney fees from an individual or corporation if the claim is based upon one of the several incidents referenced in the law, such as a breach of an oral or written contract.

Don't Gloss Over Indemnity Provisions

Even we attorneys have to admit that reading a contract can be drudgery at times, and we human beings have a tendency to gloss over the "boilerplate" at the end of a contract. The indemnity provision found in many, if not most, contracts today is oftentimes tucked way in the boilerplate, so readers should be wary of what may be contained in an indemnity provision.

The IRS and Caller Identification

When calling the IRS about a personal tax account, be prepared to validate your identity. Having the right information handy will be helpful in avoiding repeat calls to the IRS, and help make the process shorter. When calling, be prepared to provide Social Security numbers and birthdates for all persons listed on your tax return. If you, or someone listed on your tax return, does not have a Social Security number, you will be asked to provide an Individual Taxpayer Identification Number (ITIN). Further, you will need to provide your filing status (single, head of household, married filing jointly or married filing separate), a copy of the tax return in question, and any letters or notices you have received from the IRS.

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