Now C This IRS rules limit the tax benefits of C corporations.

Thinking about restructuring your C corporation? IRS rulesenable C corps, or companies whose profits are taxed separatelyfrom those of their owners, to carry any losses back two years andforward for a generous 20 years. "But there's acatch," says Steve Hopfenmuller, CPA and founder of www.smbiz.com, a websitededicated to tax guidance for SMBs. "A significant ownershipshift in the corporation limits those losses."

For tax purposes, a significant ownership shift is defined as achange of more than 50 percentage points of ownership by a majorstakeholder within a three-year period. If such a shift occurs,"Annual net operating loss carry-overs would be limited to anamount equal to the federal long-term tax-exempt interest rate [anumber published monthly by the IRS] times the fair market value ofthe stock at the time of the ownership shift," explainsHopfenmuller. "For example, if the stock were worth $1 millionat the time of transfer and the interest rate [at that time] was 4percent, the company could use only $40,000 of carry-forward netoperating losses every year."

These rules are meant to discourage the purchase of C corpspurely for tax-loss purposes, says Hopfenmuller. "Keep in mindthat any significant sale of stock in a C corporation requires acheck with your [tax] advisor."