Tax payments by passthrough entities for nonresident owners revisited.

• Author: Laffie, Lesli S.

In the October 2003 Tax Clinic, the item on p. 602, "Tax Payments by Passthrough Entities for Nonresident Owners," under "Statutory Issues," stated:

... if an estimated/withholding tax payment is made on behalf of a nonresident shareholder and treated as a distribution, proportionate distributions must be made to the remaining shareholders. Is timing an issue? According to the item's author, David Schneyman, Regs. Sec. 1.1361-1(I)(2)(i) provides:

Although a corporation is not treated as having more than one class of stock so long as the governing provisions provide for identical distribution and liquidation rights, any distributions (including actual, constructive, or deemed distributions) that differ in timing or amount are to he given appropriate tax effect in accordance with the facts and circumstances. Regs. Sec. 1.1361-1(I)(2)(ii) states:

State laws may require a corporation to pay or withhold state income taxes on behalf of some or all of the corporation's shareholders. Such laws are disregarded in determining whether all outstanding shares of stock of the corporation confer identical rights to distribution and...