Dealing With Entity Classification Issues

Date
2013-05-10
Authors
Harl, Neil
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Iowa State University Digital Repository
Abstract

The move by the Department of the Treasury in late 1996,1 effective January 1, 1997,2 to allow the choice of entity to be governed by a check-the-box system was greeted enthusiastically by most tax practitioners, many of whom had labored for years under the long-standing procedure that an unincorporated association would not be taxed as a corporation unless it had more corporate than non-corporate characteristics.3 Under the check-the-box system, a taxpayer could treat domestic unincorporated as partnerships or as associations (which includes corporations) on an elective basis.4 If no election is made, the default status is as a partnership (if the entity has two or more members) or as a disregarded entity separate from its owner if it has a single owner.5

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