QUESTION
Can the IRS penalties be avoided if the shareholder pays back what the IRS thinks is a constructive dividend to the company?
Asked on Jul 23rd, 2012 on Business Law - New York
More details to this question:
What happens if the constructive dividend amount impose by the IRS is paid back by the shareholders? does it differ if the shareholder is retire and does not work there any longer or what if it still works for them?
1 ANSWER
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The repayment of the deemed dividend would be, for tax purposes, a contribution to capital in a subsequent tax year and not a reversal of the dividend. I'm not sure how you think being retired would change the result -- generally, being retired would render the construction dividend claim a stronger one. Call my office if you wish tax advice on a professional basis.
Answered on Jul 24th, 2012 at 11:10 AM