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GRBJ Highlight: The rescission doctrine is a real-life do-over

Have you ever made a business decision and later wished you hadn’t? Do you wish you could go back and change it? Similar to a mulligan in golf, the IRS has a do-over option for you.

Under a rescission doctrine, both the company and the IRS are able to undo transactions as though they never occurred.

There are a variety of different instances that might make you want to rescind your legal documents. Termination of an S-corporation, conversion of an LLC into a corporation, sale of property, approval of stock transfers, or sale of a business are all examples of appropriate circumstances where rescission doctrines could be used. If any of these situations apply to you and you are considering the rescission doctrine, these requirements must be met:

  • The rescission must be between the original parties involved.
  • The rescission must return both parties to their original positions prior to the arrangement.
  • The rescission must be made the same year the original transaction occurred.

Why should you take advantage of this rule?

Interested to learn more? Read the rest on the Grand Rapids Business Journal

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