Most Recent Posts
Clock is Ticking On Amending Returns of Same Sex Couples
This will generally be more beneficial to the extent that there is a difference in the couple’s income. For example, if Robin and Terry each make $100,000, they will likely be better off single. If Robin makes $200,000 and Terry makes nothing a joint return will produce a lower tax. The way various exemptions, phase-outs, and limitations work, though, makes any general rule like that of limited applicability. If, for example, Robin had disallowed investment interest and Terry had investment income, a joint return might produce savings even if their incomes were equal. They only way to tell for sure is to run the numbers.
You Don’t Need a Matchmaker at the Family Reunion
Seems like since they already were acquainted with one another, they did not really need a qualified intermediary. Just as well they used one, though, since it got them out of that nasty related party resale rule. Well, that’s what they thought. It’s not what the IRS thought, though. And the Tax Court and the Eleventh Circuit agreed with the IRS. Treaty Fields, surprise, surprise, had higher basis in the Barnes and Nobles than Ocmulgee had in the Weslyan property. But that’s not all. Ocmulgee was a C corp and Treaty Fields was a partnership.
Shoemaker’s Children
It is interesting to note that the instructions Form 8082 state “… you generally must report items consistent with the way they were reported to you on Schedule K-1.” It goes on to state, however, that you should report “any inconsistency” between your tax treatment and the way the partnership reported on “its return”. Presumably, Mr. Wallis didn’t see the H&K return, but apparently the 1099-MISC was supposed to be enough of a clue.
Joint Extension Payments
It’s not unusual for family businesses or trusts to make estimated tax payments for beneficiaries or family owners. Controllers or trustees charged with that responsibility would be prudent to make those payments as individual, not joint, estimated tax payments. Whoever was making the payments on behalf of Sarah Crane (Angus MacPhail’s ex-spouse) probably wishes they had followed that course.
Short Note on Purging Earnings and Profits
I recently wrote on a strategy for old C corporations with appreciated properties. The idea is to make an S election and wait out the built-in gains period. Among the provisions of the Jobs Act which just passed the House and is now awaiting signature is a shortening of the period to five years. This is a lot less than 10, but it is still greater than 3. So a corporation that cannot rely on having active income will still want to purge its earnings and profits before the favorable rate on dividends goes away. The shortening of the recognition period makes this strategy much more viable.
OOPS I Should Have Had A LLC
What would have happened if this were an LLC? The entity’s operating losses would have been 100% allocated to Mr. Javorski (loss allocations to Mr. Eberle would not have had substantial economic effect). It is possible that the losses would have been suspended depending on how much time Mr. Javorski spent on the enterprise and whether it would have been permissible to group it with his manufacturer’s rep activity (possibly not). Even if the losses were suspended, they would have been allowed in full since the bankruptcy would have been a total disposition.
Incentive To Innovate
In order to qualify for capital gain treatment, the sale must be of all substantial rights in the patent or an undivided interest in all the substantial rights. This might create a significant business issue since a sale that is restricted to a particular industry or geographic area will not qualify. I think it is possible that 1235 is not thought about a lot, because the end game of a lot of startups is the creation of a public company or being taken over by one. I think this is what accounts for the strange popularity of C corporations. Nonetheless, it can be a great benefit in the right circumstances and should not be neglected.
Blast From The Past
Accountants understand cancellation of indebtedness income because they think in double entry. Some of them think there is a big balance sheet in the sky. If somebody writes something off without somebody picking up income the fabric of space-time will become disturbed. They can be extremely disturbed by asymmetrical results. Personally I put taxing debt discharge income in the same category as the GAAP going concern qualification. It’s kicking somebody when they are down.
Time to Purge C Corporations
To compute a corporation’s earnings and profits is often no simple task, especially if the corporation has gone through a series of reorganizations or other adjustments. It may be necessary to decide how a transaction occurring many years ago should have been treated under a long-interred statute because of its effect on accumulated earnings and profits; and, because there is no statute of limitations governing the effect of prior transactions on accumulated earnings and profits, it is advisable to retain corporate records permanently.
Have Some Free Insurance – Not
Eagle Financial Group, Inc, by some sort of wild coincidence a company owned by the agent who sold the policies, issued them a check in the amount of the first year’s premium. They issued a recourse note in the amount of the premium advance to Eagle. There were, however, never any payments made on the note. The policies were canceled in 2003 and Mr. Smith, the agent, was sued by Ohio National Insurance Co for “rebating”.