36 Va. Tax Rev. 323 (2017)
The Tax Lifecycle of a Single-Member LLC

handle is hein.journals/vrgtr36 and id is 335 raw text is: 












THE TAX LIFECYCLE OF A SINGLE-MEMBER LLC

    F. Philip Manns, Jr. & Timothy M. Todd*

    The single-member LLC (SMLLC) is ubiquitous. Despite its ubiquity,
the Internal Revenue Code (Code) does not squarely address its tax
consequences nor even contemplate its existence. This article examines the
tax lifecycle of an SMLLC through its formation, operation, and exit event
(e.g., sale, gift, or deathtime transfer).
    This article identifies and isolates a tax asymmetry that arises from the
U.S. Tax Court's decision in Pierre v. Commissioner. Despite the check-
the-box regulations, which disregard the SMLLC, Pierre regards the
SMLLC for federal gift tax purposes. This asymmetry has several tax
consequences, including a potential prophylactic immunization of transfers
to SMLLCs against application of section 2036 - which claws back into
the federal gross estate transfers when the transferor retains an interest -
in the family partnership context.
    Consequently, this article demonstrates that the SMLLC can be used to
blunt the negative effects of section 2512 (a gift tax provision), section 1015
(an income tax provision), and section 2036 (an estate tax provision). In
effect, due to the Pierre asymmetry, the SMLLC is the ideal initial entity in a
gifting strategy.


                      TABLE OF CONTENTS

I.    INTRO DUCTION  ................................................................................. 325

II.   B ACKGROUND   .................................................................................. 325
      A .  Pre-Check-the-Box .................................................................. 326
      B.   The Check-the-Box Regulations .............................................. 329


  Philip Manns is Professor of Law at Liberty University School of Law. Timothy Todd is
Associate Dean for Academic Affairs and Associate Professor of Law at Liberty University
School of Law.

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