collapsible corporation
collapsible corporation
A former tax-planning tool allowing conversion of ordinary income to capital gains through the vehicle of a corporation set up and then quickly “collapsed” by a sale or exchange of the stock or a liquidation.Today,the vehicle has been largely penalized out of existence by the IRS.If the corporation is collapsed and the stock sold within 3 years of formation,sale proceeds will be treated as ordinary income although such a holding period would otherwise qualify for capital gains treatment.See also thin corporation.