Business

C Corp
Imagine a closely held and growing start-up business (“Corp”) that was recently incorporated under state law and, so, is treated as a regular C corporation for purposes of the federal income tax.[i]

Thus, Corp will pay income tax on its taxable income,[ii] and the losses generated in Corp’s first few years of operation – not uncommon with a start-up – will be trapped within Corp and cannot be passed out to Corp’s shareholders for their own use.[iii]Continue Reading Gifting Qualified Small Business Stock – Can You “Stack” the Section 1202 Odds In Your Favor?

Not Long Ago

In the months preceding the general election in 2024, the owners of many closely held businesses who had not yet given much thought to the disposition of their future estates, including their businesses,[i] decided they should meet with their attorneys and other advisers[ii] to see what steps they should consider taking to protect their wealth, which in many, if not most, cases resided primarily in their business.

What prompted many of these owners to act was a sense of urgency arising from the realization that the federal transfer tax[iii] benefits and other tax benefits made available to them by the 2017 Tax Cuts and Jobs Act[iv] were going to expire after 2025 (perhaps sooner);[v] these included the enhanced unified estate and gift tax basic exclusion amount,[vi] the increased generation-skipping transfer tax exemption amount,[vii] the reduced top marginal income tax rate for ordinary income,[viii] and others.Continue Reading The Enactment of OBBBA: It’s Time to Plan, Not Relax – “Winter is Coming”

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