APPENDIX E
Table for Comparison of a Partnership, an LLC, a C Corporation, and an S Corporation.

Factor

Partnership

LLC

C Corporation

S Corporation

1.

Ease of Formation

Few formal restrictions and normally a small amount of expense. Limited partnership will be required to file a certificate of limited partnership. Formation of a limited partnership and syndication costs can be quite expensive.

State law requirements for formation of an LLC must be satisfied. Formation of an LLC may be very expensive, depending on the operating agreement.

State law requirements for incorporation must be satisfied but a Form 8832 may be filed where an election to be taxed as a corporation may be made. Expenses tend to be less than for forming a partnership (but not always true).

Generally, same as C corporation, but a Form 8832 may be filed where an election to be taxed as a corporation may be made. Since these entities are closely held, costs tend to be slightly more than for a regular corporation.

2.

Liability of Owners

A general partnership is usually fully liable as an individual for all debts of the entity. A limited partner's liability is usually limited to the amount of his capital contribution.

A member's liability is limited to the amount of his contribution unless the member has guaranteed a debt of the LLC.

Stockholders are generally not liable for any debts of a corporation. Thus, liability is limited unless loans or notes are guaranteed by the shareholders.

Same as C corporation.

3.

Management

All general partners are eligible to actively participate in management activities. The partners can grant management control to certain partners in accordance with the partnership agreement.

Depends on LLC statute. A member is generally eligible to participate in the management of the LLC business. Managers may also be elected.

In a large corporation control is often in the hands of top management. In a closely-held corporation, management is often exercised by the owners.

The management of an S corporation is fairly flexible. Active participation is usually present since the total number of shareholders cannot exceed 75.

4.

Continuity of Life

Generally for a specific or agreed-upon term. The death, withdrawal, insolvency or legal disability of a general partner may terminate the partnership for state law purposes, but will not necessarily cause a termination for tax purposes.

Generally for a specific or agreed upon term. The death, retirement, resignation, expulsion, bankruptcy or dissolution of a member terminates the LLC for state law purposes. Such a termination, however, will not necessarily cause a termination for tax purposes.

Unlimited or perpetual existence unless limited by state law or terms of the charter.

Same as C corporation. Revocation or termination of S election does not affect continuity of life.

5.

Legal Status

Generally recognized as a separate legal entity, but not for all purposes.

Generally recognized as a separate legal entity, but not for all purposes.

Complete separation from owners and is recognized as separate legal entity.

Same as C corporation.

6.

Transferability of Interests

Normally the transfer of an interest will require approval of all partners and may cause termination of the old partnership and the creation of a new partnership. Limited partners may be allowed to freely assign their interest.

A membership interest consists of two general classes of rights: financial rights and management rights. In order for a transferee of a membership interest to become a full member in the LLC, unanimous consent is required in some states and less than unanimous consent is required in others.

Stock is easily transferable unless the bylaws of the corporation provide a restrictive right. Rights of first refusal, options, and mandatory buy-sell agreements usually exist for a specific company.

Same a C corporation. Charter should provide that a transfer cannot be made to an ineligible shareholder (as this will terminate the S corporation election) unless agreed to by other shareholders.

7.

Availability of Outside Capital or Financing

Normally limited to capital contributions loans from partners, and bank loans. Historically, limited partnerships have encountered little difficulty in raising capital for projects. This has changed, however, with the passive activity loss rules of § 469.

Same as a partnership.

Very flexible in their ability to raise capital, can sell common or preferred stock or bonds to the public.

Limited due to the rule of having only one class of stock outstanding. The S corporation could sell bonds so long as they are not considered a second class of stock.

8.

Liquidation of Entity

Ordinarily, agreement among the partners can cause liquidation of the partnership, unless the partnership agreement provides otherwise.

Ordinarily, agreement among the members can cause the liquidation of the LLC, unless the operating agreement provides otherwise.

Normally shareholders' approval is required.

Same as C corporation.

9.

Reclassification for Tax Purposes

There is no risk of reclassification, unless Form 8832 is filed electing to be treated as a corporation.

Same as a partnership.

Unlikely to be challenged if incorporated under state law.

Same as C corporation.

10.

Ruling Policy on Tax Status

Automatically a partnership unless Form 8832 is filed electing to be a corporation.

Same as Partnership.

Not a problem.

Not a problem.

11.

Number of Shareholders/

Partners

Generally, the number of partners is unlimited. However, security laws must be complied with for a large partnership.

Generally, the number of partners is unlimited. However, it is generally not a good idea to have an LLC with more than 15 members.

Unlimited number of shareholders. Security laws must be complied with.

Limited to 75 owners. A husband, wife, and their estates are counted as one shareholder. Certain trusts can be shareholders.

12.

Eligible Investors/

Owners

No problem.

No problem.

No problem. 80% owned subsidiary can file a return with parent. Losses of subsidiary can reduce consolidated taxable income.

Citizens, resident aliens, estates and certain trusts are eligible shareholders. No corporation, non-resident aliens and certain ineligible trusts.

13.

Different Classes of Ownership Interests

Different classes of limited partners and general partners can exist.

Different classes of members can exist. For example, it is relatively simple to create multiple classes of members, all of whom may vote on tax sensitive issues such as the transferability of membership interests or continuation of the LLC upon a dissolution event, while a narrower class may be entitled to elect one or more classes of managers.

No limitation on classes of voting stock. Also, different classification of debt are permitted. Under § 385, debt may be reclassified as stock in a thinly-capitalized corporation.

Only one class of stock is permitted. Although voting differences are acceptable, outstanding stock must have liquidation and dividend rights to all shareholders. Under § 1361(c)(5), straight debt will not be treated as a second class of stock.

14.

Distribution Rights

No problem.

No problem.

No problem.

Distribution rights to shareholders must be equal since only one class of stock can be outstanding.

15.

Voting Rights

Voting rights may be granted by the partnership agreement and may be structured in any manner.

Voting rights are granted by the operating agreement and may be structured in any manner.

May have voting and nonvoting shares.

May have voting and nonvoting shares. A difference in voting rights will not terminate the S election.

16.

Interest Received Tax-Free in Exchange for Property

§ 721 provides for non-recognition treatment of property received in exchange for partnership interest. Exceptions to § 721 include debt in excess of basis, disguised sales and receipt of a capital interest for services.

Same as a partnership.

§ 351 provides for non-recognition treatment if 80% control requirement is satisfied. Liabilities attached to property transferred are treated under § 357. Only a limited amount of stock can be transferred in exchange for services rendered upon incorporation.

Same as C corporation.

17.

Basis of Interest upon Formation

Equal to the amount of money and adjusted basis of property transferred to the partnership. In addition, a partner's prorata share of partnership liabilities will increase basis under § 752.

Same as a partnership.

Equal to money and adjusted basis of property contributed. Share of corporation's liabilities does not increase basis.

Same as C corporation.

18.

Effect of Liabilities on Basis

Partner's share of liabilities increases basis.

Same as a partnership.

Debt does not increase basis, unless § 385 applies. In that case, debt is recharacterized as equity and interest deduction with regard to the recharacterized debt is not allowed.

Indirect borrowings do not increase basis. Only direct loans from shareholder to an S corporation increases basis for purposes of determining the amount of loss deductible.

19.

Consequences of Transferring Mortgaged Property to an Equity

Gain recognized if debt exceeds the sum oft he adjusted basis of the property transferred.

Same as a partnership.

Under § 357, to the extent the liability exceeds the adjusted basis of the property transferred, the excess is considered as boot.

Same as C corporation.

20.

Receipt of an Interest in Exchange for Services

Non income if received in profits interest only. If a partner receives an interest in capital for the performance of services, the rules of § 83 apply.

Same as a partnership.

Subject to the general rules of § 83.

Same as C corporation.

21.

Tax Returns

Required to file Form 1065 by 15th day of the fourth month following the close of the taxable year.

Same as a partnership as long as there are two ore more members. One member LLCs are not partnership.

Required to file Form 1120 by the 15th day of the third month following the close of the taxable year.

Required to file Form 1120S by the 15th day of the third month following the close of the taxable year.

22.

Extensions

Automatic for three months by filing Form 8736. Additional three months extension if file Form 8800 and state reason.

Same as a partnership.

Automatic six-month's extension by filing Form 7004.

Same as C corporation.

23.

Examination of Tax Returns

At the partnership level, but partners have duty of consistency.

At the LLC level, except that members have duty of consistency.

At the corporate level.

At the shareholder level.

24.

Discontinuance of Pass-Through Status

Can be changed only by incorporation.

Same as a partnership.

Not applicable.

Elective revocation is provided. In addition if sub-C earnings and profits exist and passive income exceeds 25% of gross receipts for three consecutive years, the S election is terminated.

25.

Inadvertent Termination of Pass-Through Status

A termination of a partnership may occur on the sale or exchange of a 50% or more interest in partnership capital and profits within a twelve month period. However, a new partnership is created. Usually not a problem, however, can affect basis of partnership assets.

Same as a partnership.

Not applicable.

Not a problem unless there are sub-C earnings and profits and substantial passive income. Transfer of shares to a shareholder owning a majority of the stock could cause a problem if majority shareholder wishes to revoke the election. Also, transfers of shares to an ineligible shareholder will terminate the S election.

26.

Accounting Method

Generally, no restrictions as to the use of the method of accounting unless the partnership has a C corporation as a partner.

Might be subject to the provisions of § 448 and may be restricted to the accrual method.

Subject to the provisions of § 448 and may be restricted to the accrual method.

§ 448 not applicable.

27.

Adoption of Taxable Year End

Restrictions on the adoption of a taxable year end are set forth in § 706(b). In addition, § 444 allows a partnership to adopt a taxable year end that results in a three-month deferral or less.

Same as a partnership.

A calendar year or fiscal year end may be adopted. No deferral of income since no pass-through of income or losses. Personal service corporations are restricted to a calendar year.

Generally, a calendar year must be adopted unless a business purpose can be shown. The same exceptions that exist for a partnership also exist for an S corporation.

28.

Who is Taxed On Income or Losses

Partners are taxed on their share of income, regardless of distributions. Losses may be deducted by partners to the extent of basis. Partners are also subject to passive activity loss rules of § 469.

Same as a partnership.

C corporation is taxed on its taxable income, regardless of distributions to shareholders. Certain small closely-held corporations are subject to the passive activity loss rules of § 469.

Shareholders are taxed on their share of income, whether or not distributed. Losses can be deducted by shareholders to the extent of adjusted basis in stock plus money loaned to the corporation. Shareholders are subject to the passive activity loss rules of § 469.

29.

Allocation of Income and Deductions

In accordance with the partnership agreement as long as there is substantial economic effect. If not, amounts are allocated to partners based on their interest in the partnership.

Same as a partnership.

Not applicable since corporation does not pass through items to the shareholders.

Determined by pro rata stock ownership allocated on a daily basis.

30.

Allocation of Income to Family Members

The family partnership rules under § 704(e) restrict allocations to non-service partner (family member), unless capital is a material income-producing factor.

Same as a partnership.

Not applicable.

Provides for re-allocation in much the same manner as the family partnership rules, except capital is not required to be a material income producing factor.

31.

Calculation of Taxable Income

Calculates it taxable income without separately state items such as passive losses, portfolio income, capital gains, charitable contributions, § 1231 gain or loss, investment expense and interest, and numerous other items.

Same as a partnership.

Several rules apply in the calculation of taxable income including dividends received deduction, net operating losses, tax exempt income, capital losses, and limits on charitable contributions.

Same as a partnership. Organization expenses may be amortized over 60 months under § 248.

32.

Character of Income/

Deductions

Flow-through to partners and character determined at entity level.

Same as a partnership.

No flow-through to shareholders.

Flow-through to shareholders and character determined at entity level.

33.

Equity

No limitations.

Same as a partnership.

No limitations.

Only one class of stock.

34.

Debt

No specific limits.

Same as a partnership.

May have a debt versus equity problem under § 385 if excessive loans by shareholders.

Loans by shareholders are not classified as a second class of stock if meet debt safe harbor.

35.

Federal Taxes

There are no federal income taxes which are imposed on a partnership. A penalty under § 6698 may be imposed for failure to file a partnership return.

Same as a partnership.

A C corporation is potentially liable for regular tax, AMT, personal holding company tax, accumulated earnings tax, and penalty for underpayment of estimated tax.

An S corporation is generally not subject to tax. There are no penalties imposed on the S corporation for failure to file a return. An S corporation that previously operated as a C corporation is potentially subject to a tax in the LIFO recapture amount, the business credit recapture, the built-in gains tax, tax on excess net passive income, and penalty for under-payment of estimated tax.

36.

State Income Taxes

No taxes imposed at the partnership level.

Generally the same as a partnership unless state law imposes a tax on LLC income.

Generally, a state income tax is required to be paid.

Income taxes may be imposed by some states

37.

Accumulation of Earnings

No limitation since all income is taxed to partners.

Same as a partnership.

§ 531 may impose a penalty tax if the corporation unreasonable accumulates earnings.

No limitation since all income is taxed to shareholders.

38.

Passive Investment Income

No limitations.

No limitations.

Personal holding company rules may apply to certain corporations. The PHC tax is 39.6% of the undistributed personal holding company income.

The personal holding company tax does not apply to an S corporation.

39.

AMT

A partnership is not subject to the AMT. Preferences and adjustments are allocated to the partners in determining each partner's AMTI.

Same as a partnership.

A C corporation is potentially subject to the AMT. Form 4626 is required to be filed which converts the corporation's taxable income before special deductions into AMTI and is the basis for the calculation of the ACE adjustment.

Same as a partnership.

40.

Estimated Tax Payments

Not required to make estimated tax payments.

Same as a partnership.

Required to make estimated tax payments. There are different ways in which a C corporation may avoid the penalty for underpayment.

Required to make estimated tax payments on business credit recapture, the built-in-gains tax and the tax on excess net passive income.

41.

Tax Preferences

Tax preferences pass through to partners and are included in computation of each partner's AMTI.

Same as a partnership.

Applies at corporate level only.

Except for the built-in gains tax, tax preferences flow through to the shareholders and are included in the computation of each shareholder's AMTI.

42.

Tax Exempt Income

Separately stated items of income. Retains its status as tax exempt income when allocated to each partner.

Same as a partnership.

Is not taxable for regular tax purposes, but might be taxable for AMT purposes because of the ACE adjustment. Is taxable as a dividend if distributed to shareholders.

Same as a partnership. Is included as passive income if the S corporation has Subchapter C E&P.

43.

Dividend Income

Separately stated item of income. Retains its status as dividend income when allocated to each partner.

Same as a partnership.

A C corporation is entitled to a dividends received deduction of generally 70%, 80%, or 100% depending on its ownership interest in corporation making dividend distribution.

Same as a partnership. Is included as passive income if the S corporation has Subchapter C E&P.

44.

Charitable Contributions

Under § 702, charitable contributions are not deductible by the partnership, but are deductible by each individual partner.

Same as a partnership.

Deductible by the corporation. Limited to 10% of taxable income. Excess may be carried over five years.

Same rules as those which apply to a partnership.

45.

Capital Gains and Losses

§ 702 requires capital gains and losses to flow through to the partners.

Same as a partnership.

Capital gains are taxed to the corporation. Capital losses are not currently deductible but may be carried back or carried over.

Capital gains and losses flow through to shareholders. If S corporation was previously a C corporation, gain may be taxable to S corporation under § 1374.

46.

Net Capital Losses

Flow through to partners.

Same as a partnership.

No flow through. May carry capital losses back three years and forward five. Carried back and forward as a short-term capital loss.

Flow through to S corporation shareholders.

47.

Net Operating Loss

Flow through to partners.

Same as a partnership.

No flow through. May carry back three years and forward fifteen years. May also elect to forgo carryback and carry forward only for 15 years. Also has § 382 problems if an ownership change occurs.

Flow through to S corporation shareholders.

48.

§ 179 Additional Depreciation

Limitation applicable to partnership and to each partner.

Same as a partnership.

Applies only at corporate level.

Limitations applicable to S corporation and to each shareholder

49.

Investment Interest

Calculated at the partner level.

Same as a partnership.

§ 163(d) not applicable.

Calculated at the shareholder level.

50.

Passive Loss Rules

Applicable at the partner level.

Same as a partnership.

Applies only to certain small closely-held corporations.

Same as a partnership.

51.

Expenses Owed by Entity to Owner

For guaranteed payments, such amounts are deductible by the partnership as determined by the method of accounting. For § 707(a) payments, such amounts are not deductible until included within the payee partner's gross income.

Same as a partnership.

§ 267 applies with respect to expenses owed to shareholder who owns more than a 50% interest in the corporation

§ 267(e) allows the S corporation a deduction only when such amount is included within the income.

52.

Gains on Transactions Between Entity and Owner

§ 707(b)(2) denies capital gain treatment on sale of certain property between partner and partnership. In addition, § 1239 may also apply to convert capital gain or § 1231 gain into ordinary income.

Same as a partnership.

§ 1239 requires ordinary income recognition on sale of depreciable property between shareholder and controlled entity.

Same as C corporation.

53.

Losses on Transactions Between Entity and Owner

§ 707(b)(1) disallows loss if partner owns more than 50% interest.

Same as a partnership.

§ 267 disallows loss if shareholder owns more than 50% in value of stock.

Same as C corporation.

54.

Subsequent Basis Adjustment

Under § 705, gains and losses increase and decrease basis. Distributions of cash, property and relief of liabilities decrease basis.

Same as a partnership.

Only distributions in excess of earnings and profits decrease basis.

Under § 1367, income and loss increase and decrease basis. Like a partnership, distributions of money or property decrease basis (but basis decrease is difference than that of a partnership).

55.

Limitation on Deductibility of Losses

Losses are deductible by the partners to the extent of basis in partnership interest. Such loss is subject to the at-risk rules of § 465 and the passive activity loss rules of § 469.

Same as a partnership.

No limitation on losses deducted by the entity. Losses may be carried back or over in accordance with the general NOL rules of § 172.

Losses are limited to the shareholder's basis plus the amount of money loaned by the shareholder to the corporation. In addition, such loss is subject to the at-risk rules of § 465 and the PAL rules of § 469.

56.

Application of § 465

Applicable at the partner level. No increase in partner's basis for non-recourse loans or share of recourse loans made by other partners.

Same as a partnership.

Under § 465(a), not applicable to corporation, unless the stock ownership requirements of § 542(a)(2) apply.

Applicable at shareholder level. Amount at risk is generally equal to the shareholder's basis in stock and loans from the shareholder to the corporation.

57.

Application of § 469

The passive loss rules of § 469 are applied to each partner. The activity may be trade or business to one partner and a passive activity to another partner depending upon the individual partner's level of participation.

Same as a partnership.

Generally do not apply to a C corporation, except for a personal service corporation and a closely-held corporation.

Same as a partnership.

58.

Fringe Benefits

Generally not available. Limited exceptions, however, are available.

Same as a partnership.

Available to all shareholders-employees. Cannot discriminate in favor of highly-compensated employees.

Available only to shareholders owning 2% or less of stock. Otherwise, partnership fringe benefit rules apply.

59.

Retirement Plan

Partners may participate in self-employed qualified plans. Limitations are generally on a par with corporate plans.

Same as a partnership.

Shareholder-employees can be included in corporation's regular qualified plan.

Same as C corporation.

60.

Salaries Paid to Owners

Qualify as guaranteed payments and such amounts are considered as self-employment income.

Same as a partnership, if the members are managers.

Salaries are taxable to shareholder-employees and deductible by the corporation. FICA and FUTA taxes are applicable to compensation for services rendered.

Same as C corporation.

61.

Reasonable Compensation Limits

Generally, no reasonable compensation problems.

Same as a partnership.

Applicable to shareholder-officers.

Same as C corporation, but must pay compensation for services. May not avoid compensation by making distributions in lieu of compensation.

62.

Regular Distributions

Under § 731, a distribution is tax-free to the extent of adjusted basis in partnership interest. § 751 may apply to a disproportionate distribution.

Same as a partnership.

Taxable as a dividend distribution to the extent of earnings and profits. Distributions in excess of E&P and stock basis result in capital gain if § 341 does not apply.

Similar to partnership i.e., tax-free to the extent of stock basis.

63.

Distributions of Appreciated Property

§ 731 provides that no gain or loss shall be recognized to either the partnership or the partner unless § 751 applies. Partner's basis in property is usually equal to the partnership's basis.

Same as a partnership.

§ 311(b) requires the corporation to recognize gain if the fair market value of the property distributed exceeds its adjusted basis.

Same as C corporation and gain is allocated to shareholders.

64.

Distributions of Cash

No effect unless cash (which includes marketable securities) distributed exceeds partner's basis in partnership interest. An advance or withdrawal is not required to be taken into account until last day of the partnership's taxable year.

Same as a partnership.

Dividend to extent of current earnings and profits and/or accumulated earnings and profits. Required to be taken into account at the time of receipt.

No effect unless cash distributed exceeds shareholder's basis in shares of stock, unless the S corporation has Sub C earnings and profits. Required to be taken into account at time of receipt.

65.

Distribution of Earnings Subsequent to Year End

No tax consequences unless money distributed exceeds partner's adjusted basis in his partnership interest.

Same as a partnership.

Taxable as a dividend to the shareholder if current and/or accumulated earnings and profits exist.

No tax effect, unless distribution exceeds shareholder's balance in accumulated adjustments account and tax basis in stock. A distribution in excess of AAA will constitute a dividend to the extent of Sub C earnings and profits.

66.

Stock Dividends & § 306 Stock

Not applicable.

Not applicable.

May have a nontaxable distribution of additional shares of stock. If preferred stock is distributed as a nontaxable dividend, the preferred stock is § 306 stock if the C corporation has E&P.

Same as C corporation, except distribution of preferred stock will terminate S election.

67.

Distributions in Redemption of Interest

Taxability of withdrawing partner is governed by § 736. Payments received in exchange for property, including stated goodwill, are treated as a sale or exchange. All other payments are taxed as guaranteed payments or as a distributive share of income.

Same as a partnership.

If requirements of § 302(b) are met, capital gain results. If § 302(b) is not met, the dividend distribution rules apply.

Tax-free distribution to the extent of stock basis. Any excess distribution results in capital gain.

68.

Gain on Sale of Interest

§ 741 provides for capital gain, unless § 751 applies. Does not qualify for capital gain exclusion of § 1202.

Same as a partnership.

Capital gain treatment. Qualified for capital gain exclusion of § 1202.

Same as C corporation. Does not qualify for capital gain exclusion of § 1202.

69.

Step-up of Basis Upon Transfer by Owner

§ 754 provides that if the partnership elects, underlying assets of the partnership can be adjusted with respect to the purchaser of an interest or transferee by reason of death.

Same as a partnership.

The corporation's basis in the assets is not adjusted by transfers of stock by sale or death. § 338 election is available to a corporation acquiring 80% of the stock of another corporation.

Same as C corporation, except no step-up in basis fir IRD items.

70.

Collapsible Rules

§ 751 requires ordinary gain treatment to the extent of unrealized receivables and substantially appreciated inventory. If § 751 applies, gain is recognized as ordinary income to the extent of partner's share.

Same as a partnership.

Substantially appreciated inventory and unrealized receivables may be used by the IRS as evidence of collapsibility. If collapsibility applies all gain is ordinary income.

Same as C corporation.

71.

Character of Loss on Sale or Worthlessness

Loss on sale usually capital under § 741.

Same as a partnership.

Generally a capital loss, unless § 1244 applies.

Same as C corporation.

72.

Complete Liquidation

Distribution is tax-free, as long as money does not exceed partner's adjusted basis in his interest. § 751 may also apply.

Same as a partnership.

Gain, as well as loss, is recognized by a corporation on distributions of property. Under § 331, shareholders treated as having sold stock for distribution received in liquidation; therefore gain is usually capital gain. In complete liquidation, gain is taxed at both corporate and shareholder level.

Similar to a C corporation. Gain at S corporation level increases basis of S corporation shareholder's stock. Basically, only one tax is paid, unless the built-in gains tax of § 1374 applies.

73.

Tax-Free Reorganization

May not enter into a tax-free reorganization with corporation.

Same as a partnership.

All tax-free reorganization provisions are applicable.

Same as C corporation.

74.

Carryover of Tax Attributes

Not applicable.

Same as a partnership.

Carryover of tax attributes to successor entity if tax-free reorganization. If an ownership change occurs, § 382 will limit the deductibility of the NOL.

Same as C corporation.

75.

Income in Year of Death

Generally, the death of a partner does not terminate the partnership's taxable year with respect to that partner. Partner's distributive share of the income for the portion of the year that he is alive must be included on his final return.

Same as a partnership.

Not applicable. Dividends are subject to the general rules under § 691.

Shareholder's distributive share included on the shareholder's last return.

76.

Basis Adjustment on Death of an Owner

Decedent's successor in interest receives a basis equal to fair market value. § 754 election must be in effect to adjust the basis of the assets within the partnership.

Same as a partnership.

Step-up in basis under § 1014. No elective adjustment to basis of assets within the corporation is available.

Same as C corporation, except no basis step-up for IRD items.

77.

Valuation Discounts at Death

Discounts available for illiquidity and lack of control.

No precedent available.

Minority and marketability discounts are available (25% to 45%) based on degree of management and liquidation control.

Same as C corporation.

78.

Availability of Gift Transfers

Partner interests may be expressed in units to facilitate transfer.

Same as a partnership.

Shares may be easily transferred.

Same as C corporation.