12 May C-Corp Stock Sale by “Middleman” Is Illegal
There exists a tax reduction technique called “Stock-buying Middleman.” We have previously cautioned against the transaction but have since learned that this type of transaction is “listed” by the IRS. To quote from IRS Notice 2001-16:
“The Service may challenge certain transactions in which the assets of a corporation are sold following the purported sale of the corporation’s stock to an intermediary. Such transactions are designated as ‘listed transactions’ for purposes of sections 1.6011-4T(b)(2) and 301.6111-2T of the regulations.”
In short, the IRS warns taxpayers that this type of transaction does not conform to tax law, and parties involved in it may be subject to penalties or other disciplinary action.
For more information, see IRS Notice 2001-16 or call us to supply you with a copy.