January 2024

The Long-Term View

Among its core functions, federal tax policy seeks to encourage those behaviors among businesses that, in the long run, will have a lasting positive effect upon the nation’s economy as a whole.[i]

Implicit in this approach toward tax legislation is the enactment of a set of relatively constant and long-lasting rules on which businesses[ii] may rely when planning for the future.

Under this long-term view of tax policy, a provision that is drafted to be short-lived probably should not be adopted unless Congress reasonably determines the provision will generate benefits that endure well beyond its expiration.  Continue Reading Nothing Lasts Forever –Expiring Tax Provisions

Related Party Transactions

Few individual owners of a closely held business would be surprised if you explained to them that the IRS and the Federal courts generally will subject many transactions between certain “related” persons to heightened scrutiny (a) to ensure that the related persons have not structured a transaction to gain a tax advantage without also having a bona fide business purpose, or (b) to ascertain whether the intended economic consequences of the transaction are consistent with its form and with how it is reported by the parties for tax purposes.   

However, those same individuals may be taken aback if you described to them some of the measures that Congress has enacted over the years to prevent related persons from realizing certain tax benefits that Congress has determined would be inappropriate in the context of a transaction between related parties.  Continue Reading Partnership Losses on Related Party Sales – The IRS Provides Some Clarification

Hide and Seek

A national study released in 2015 reported that “nearly half the residential purchases of over $5 million were made by shell companies rather than named people.”[ii] Because shell companies could often be formed without disclosing the individuals that ultimately owned or controlled them (i.e., their beneficial owners), and could be used to conduct financial transactions without disclosing their true beneficial owners’ involvement, there was a concern that criminals were using such vehicles to launder money through the purchase of real estate and thereby hide, or at least obscure, the illicit origin of their funds. The report explained that many of these purchases were made in all-cash transactions; thus, no lender was involved and, so, the usual due diligence that accompanies a loan application was avoided.[iii]  Continue Reading NY’s LLC Transparency Act and NYC Real Estate – Albany Wants to Know the Secrets that You Keep[i]