When the Return Position Runs Out
S corporation matters reach us at the point where the return position runs out: a compensation figure under examination, a conversion that has to be sequenced around a pending sale, or a shareholder buyout where the attribution rules threaten to turn a clean exit into ordinary income.
Erik Lincoln, JD, CPA, built Lincoln PLLC on a combined accounting and large-firm tax background, with prior experience as a Senior Tax Manager at Ernst & Young and as an equity partner at Moore & Van Allen, and admission to the U.S. Tax Court, for exactly this layer of work. He has been recognized by Super Lawyers, named to Best Lawyers in America, and honored on Business North Carolina’s Legal Elite list for tax.
We support S corporation clients across the full lifecycle of the entity, from the eligibility analysis before an election is filed through the final shareholder exit. Our tax law team also handles the business sale and partnership matters that often intersect with an S corporation engagement.
Areas of S Corporation Tax Counsel
We support S corporations and their shareholders across the full lifecycle of the entity.
S Corporation Eligibility: Shareholders and Trusts
Corporations, partnerships, and nonresident alien individuals cannot hold S corporation stock. Trust ownership requires either a qualified subchapter S trust election or an ESBT election, each with different consequences if the election is missed.
Single Class of Stock and Voting Rights
Differences in voting rights are expressly permitted, so non-voting stock is available for succession and incentive purposes. What breaks the rule is a non-conforming distribution or a side arrangement that alters economics.
Reasonable Compensation Defense and Planning
The analysis turns on the source of the corporation’s gross receipts and the shareholder’s role in generating them. We build documented compensation positions before a return is filed and run the Section 199A interaction.
Built-In Gains and Conversion Sequencing
A C corporation converting to S status carries built-in gains exposure for a five-year recognition period. A contemporaneous valuation at the conversion date is the single most useful protective step.
S Corporation Counsel for Sales, Buyouts, and Corrections
Lincoln Tax & Business Attorneys help S corporations and their shareholders through the moments a return position no longer resolves.
S Corp vs. C Corp vs. LLC, Including QSBS
The standard entity comparison weighs self-employment tax exposure against double taxation on an eventual sale, and the comparison changed materially in 2025.
- Tiered QSBS exclusion for stock acquired after July 4, 2025
- Per-issuer cap and aggregate gross asset ceiling increases
- Why S corporation history can permanently block QSBS status
- Shareholder-level structuring built years before a sale
Shareholder Buyouts and Section 302 Attribution
We navigate Section 318 family attribution, which is the most common failure point in a Section 302 redemption, and the strict conditions required to waive it.
- FIRPTA withholding on U.S. real property interests
- Permanent establishment and treaty-based deal structuring
- Section 1446(f) withholding on foreign partner transfers
- Post-acquisition international reporting
F Reorganizations and Pre-Sale Structuring
The dominant structure in current S corporation M&A restructures the target into a holding company before signing, not layered on at closing.
- Basis step-up to the buyer without breaking S eligibility
- Rollover equity without a second layer of tax
- Protection when the S election is itself a diligence risk
- Alternatives under Section 338(h)(10) or Section 336(e)
Correcting a Defective or Terminated Election
A surprising share of S corporation matters begin with the discovery, usually during diligence, that the election was never valid or was terminated years ago.
- Late election relief under Revenue Procedure 2013-30
- Inadvertent termination relief under Section 1362(f)
- Private letter ruling requests
- Fact-intensive review before a buyer’s counsel raises it
Put Experience on Your Side
Erik Lincoln has been recognized by Super Lawyers across multiple years and Business North Carolina’s Legal Elite, and works with CPAs and attorneys nationwide from Lincoln PLLC’s Charlotte headquarters. If you are structuring or evaluating a business transaction, schedule a consultation to discuss the tax due diligence your deal need’s.