Two Camps
Last month, Bloomberg carried an article about a “small but growing trend” of states that are either cutting their individual income taxes or phasing them out entirely.[i]
According to the article, the states adopting these measures have determined that, by reducing income taxes, they will enhance their ability to attract and retain people and businesses.[ii]
Continue Reading State Taxation of a Nonresident’s Gain from the Sale of Stock –The Shot Heard Round the Country?Legal Laissez-Faire?
Few provisions of the Code have a single, clear meaning that leaves no room for interpretation. Even many of those that, on the surface, appear fairly straightforward, are usually open to alternative “understandings.”
In the absence of continuous monitoring, implementation (as in the form of regulations),[i] and enforcement, there are taxpayers that may slant a particular provision of the Code to capture a more favorable result than Congress may have intended, especially when a taxpayer is facing financial pressures, whether attributable to the broader economy, their region or industry, or something else.
Continue Reading Observations on Charities, Taxes, and Cash FlowIntrafamily Transfer
A parent will sometimes transfer money to a child to enable the child to make an investment that the child could not otherwise make on their own.
For example, the child may have identified an attractive business opportunity but does not have sufficient assets or liquidity with which to make an investment therein, is unwilling or unable to sell other assets to raise the funds, and has not been able to borrow the necessary amount on acceptable terms from an unrelated lender because the market rate of interest may be too high, the repayment schedule may be too short, or the collateral requirements may be difficult to satisfy.
Continue Reading “Hey Mom, Can I Have A Few Bucks?” Is It A Loan? A Gift? A Little of Each?Do This But Not That
Charitable organizations are dependent, in no small part, upon the financial support of many successful business owners. The generosity of these individuals and their organizations may be a manifestation of several factors including, for example, their gratitude to the communities in which they have thrived, a willingness to share their good fortune for the benefit of others, and – less altruistically – a desire for public recognition[i] and the “incidental” benefits arising therefrom.[ii]
Continue Reading Transferring the Family Business To A Private Foundation? Are You Sure About That?NYC Transfer Tax
According to the New York City Comptroller, the City collected approximately $1.13 billion in Real Property Transfer Tax (“RPTT”) in the FY 2024. The Comptroller’s Office has forecast that $1.21 billion of RPTT will be collected in FY 2025.[i] Impressive figures by most measures, but just a drop in the proverbial bucket compared to the City’s total tax revenue for FY 2024 of almost $75 billion,[ii] and of its estimated tax revenue of more than $77 billion for FY 2025.[iii]
Still, the RPTT is no laughing matter when one considers that the tax is imposed at a rate of 2.625% of the purchase price for the “transfer” of commercial “real property,” or of an “economic interest” in such property,[iv] located within the City, where the value of the property is more than $500,000.[v]
Continue Reading NYC Transfer Tax, Charities, and Single Purpose LLCs – Are Lenders Beneficiaries?Tax Receipts
Late last year, the Office of the State Comptroller (the “OSC”) estimated that sales and use tax receipts would increase by 2.3% in the SFY 2024-2025.[i]
The OSC also projected that collections from sales and use taxes would increase by 3.5 percent for SFY 2025-2026.[ii]
Part of this increase is undoubtedly attributable to the efforts of the Department of Taxation and Finance to identify taxpayers who failed to collect and/or remit the correct amount of sales tax.[iii]
Continue Reading New York Sales Tax: When a Responsible Person Acts IrresponsiblyGood Intentions
Many successful business owners attribute some part of their success to their community. For some of these owners, it is not enough to simply acknowledge this “debt”; they feel an obligation to share some of their financial success with the community. For example, the owner or business may contribute funds to a local charity. Another may solicit the voluntary assistance of their workforce to support a local charitable organization or event.
Although these endeavors are commendable, they are of an ad hoc nature, meaning they are of limited duration and are dependent, in no small part, upon the business owner, who acts as the catalyst for the charitable activities of the business.
Continue Reading Business Owner Borrows from Their Private Foundation – A Different Form of “For Profit Philanthropy”?My Steadfast Partner, The IRS
If you’ve worked with the owners of closely held businesses for even just a few years, you have realized they are only half joking when they complain about having the government as a partner. Consider how much federal, state, and local tax[i] a business and its owners may pay over to the tax authority of each jurisdiction during the course of a taxable year.
If the business is treated as a partnership for tax purposes,[ii] the IRS is generally authorized to collect from the partnership any income tax deficiency arising out of the partnership’s operations for a taxable year, even if the persons who were partners in the year to which the deficiency relates are no longer partners in the year that the deficiency is assessed.[iii] Stated differently, the partnership’s current-year partners will bear the economic burden of the tax liability even though the tax adjustments relate to a prior year in which the composition of the partnership may have been different, and even though they themselves have satisfied their own tax liabilities.
Continue Reading Not Aware of Your Business Partner’s Tax Situation? Maybe You Should BeBack to the Office
You are probably aware that many employers are discarding the fully flexible, remote work policies that were forced upon them – as “nonessential” businesses – during the COVID-19 pandemic[i] and which they retained as an accommodation to employees after the pandemic ended. Indeed, there is now a steadily increasing percentage of employers that are requiring their employees to return to the office or place of business.
Some employers are mandating that employees work in the office full-time.[ii] Many other businesses expect employees to be physically present at least three days per week.[iii] Often, employers are “taking attendance” to ensure compliance with their in-office policies.
Continue Reading Employer to Nonresident Employee: “You Cannot Work in New York”; New York to Employee: “We Will Tax You Anyway”Expiring Provisions
Just a few weeks ago, many individual taxpayers, driven by what they viewed as the relatively imminent expiration of the enhanced federal transfer tax[i] exemptions, sought advice on how to leverage their remaining exemption and thereby optimize the transfer of value to their beneficiaries while limiting the amount of tax incurred.
Even following the results of the November elections, and regardless of the President-Elect’s recent statements about further curbing the federal transfer taxes, many individuals continue to be concerned about the reduction of the “basic exclusion amount”[ii] that is scheduled to occur at the end of this year.[iii]
Continue Reading Expiring Federal Transfer Tax Benefits – Nothing is Certain or Lasts Forever