Conversion Into S Corporation May Be Taxed As Liquidation

The liquidation of a C corporation is a taxable event to both the corporation and its shareholders. Under present law, the conversion of a C corporation to an S corporation is not a taxable event. The Senate Joint Committee on Taxation has released a report containing a provision that would change the present law. Under the proposal, effective January 1, 1998, the conversion of a C corporation having a value of more than $5 million at the time of conversion to an S corporation would be treated as a constructive liquidation subject to full taxation.

Why This Is Important... Many C corporations avoid recognition of corporate-level gain on appreciated assets by converting to S corporation status prior to the recognition of such gains. The proposal would eliminate this option and pose significant costs for businesses organized as C corporations in anticipation of converting at a relatively low tax cost in the future.

Dentist Liable Under ADA For Not Treating Patient With HIV

The Court of Appeals for the First Circuit has ruled that a person with HIV, even without AIDS, is "disabled" under the Americans with Disabilities Act ("ADA"). The Court held that a dentist could be liable under the ADA for refusing to treat a patient who was HIV infected. The Court said it was insignificant that the patient did not have AIDS. It ruled that HIV was a "disability" under ADA because it substantially limited the patient's ability to have children.

Why This Is Important... The decision means that employers and "places of public accommodation" can be liable for discrimination against persons that are HIV positive, regardless of whether they also have AIDS or symptoms of the disease.

Employees Can Bring Parallel Harassment Claims

In a case before the Superior Court, a judge ruled that since an employee satisfied the procedural requirements of Chapter 151B, he may bring separate sexual harassment claims against his employer under both Chapter 151B and Chapter 214. Chapter 151B prohibits sexual harassment against employees. It applies to employers with 6 or more employees and has a 6 month statute of limitations. Chapter 214 gives all citizens the right to be free from sexual harassment and has a three year statute of limitations. Before this decision, Chapter 151B and 214 were thought to be exclusive of one another.

Why This Is Important... If this reasoning is applied in other cases, employees will be able to bring parallel harassment claims making them more difficult and costly to defend.

Workplace Alternative Dispute Resolution Programs

Since the US Supreme Court upheld arbitration of a discrimination case, other courts have approved arbitration. Employers anxious to reduce employment litigation costs have created ADR Programs. Active Nicolai Law Group clients have received a memorandum which describes these developments and their effect.