Two federal income tax developments occurred last year which have a profound effect on classic "choice-of-entity" decisions. August 20, 1996 saw the enactment of the Small Business Jobs Protection Act of 1996, which included new rules permitting S corporations to own subsidiary corporations that, for federal income tax purposes, will not be considered to be separate corporations. Then, on December 17, 1996, the Treasury Department finalized "check-the-box" regulations that (among other things) passed a similar cloak of invisibility over certain single-member LLC's.
From the perspective of tax planning, the introduction of these "see-through" entities is revolutionary, providing myriad opportunities, and great flexibility, for federal tax planning. But while the federal tax law now ignores the separate existence of these see-through entities, they are nonetheless very much alive under local law. It is therefore an oversimplification -- and sometime a dangerous one -- to assume that
