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?
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 Irresponsibly
Good 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 Be
Another “Departure”
During the weeks leading up to the Presidential election, the media carried stories about wealthy supporters from each Party who had announced their intention to leave the country if the other Party’s candidate became President.
Of course, none of these individuals stated they would be giving up their U.S. citizenship or green card,[i] probably because they were aware that such a move (pun intended) would trigger an onerous exit tax.[ii]Continue Reading Abandoning N.Y. Domicile – Must the Business Owner Abandon Their N.Y. Business?
Decisions, Decisions
The owners of a closely held U.S. business will have to make many difficult decisions during the life of the business. Among the earliest of these is the so-called choice of business entity, the economic (including tax) consequences of which will be felt by the business and its owners for years to come.Continue Reading Choice of Entity for a U.S. Business- Passthrough Status Matters Beyond the U.S. Border
Enforcement
Earlier this year the IRS announced that, as part of its larger compliance efforts begun last fall under the Inflation Reduction Act,[i] the agency’s stepped-up enforcement activity with respect to high wealth, high income individuals had generated more than $1 billion in collections of past-due taxes.
One would be hard-pressed to seriously dispute that every taxpayer must pay the correct amount of income tax; no more, no less. That means a taxpayer has the right to pay only the amount of tax that is legally due and the right to have the IRS apply all tax payments properly.[ii]Continue Reading Challenge to Collection Due Process? Will Supreme Court Affirm IRS’s Offset of Valid Refund With Disputed Tax Liability?
As we will see shortly, it is often “better to give than to receive,”[i] though this statement begs the obvious question[ii] of whether it is better to do so during one’s lifetime or upon one’s death.
Many well-to-do individuals are seriously deliberating this question[iii] as they contemplate the impending federal elections and consider how the outcome of these contests may influence their plans for the disposition of various assets, including the transfer of such assets, or the value they represent, among members of such individuals’ families.Continue Reading Thinking About Making Taxable Gifts Before the 2026 Sunset?
