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Play or Pay

Question: My client owns 100% of an S corporation that contains two restaurants. The S corporation has 51 employees on its payroll. If my client sets up another S corporation, which he will own 100%, and contributes one of the restaurants to it, will this avoid the requirement to offer health insurance in 2015?

Answer: No. When the Affordable Care Act was passed, it was anticipated that this type of transaction would occur. Through a series of code sections, business entities that are under common control are considered one employer for purposes of the penalty for failure to offer health insurance, also known as the “play or pay” penalty. Business owners cannot use this strategy to avoid offering health insurance to their employees.

Featured in TAXPRO Weekly - October 3, 2013

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