Business

Match Made in Heaven

There is no denying that many parts of the Code are complex and, in some cases, too obscure for many “laypersons” to comprehend.[ii] Over time, this reality spawned the need for advisers who are both knowledgeable and experienced in the ways of the Code.[iii]

Yet, even within this group of learned individuals,[iv] there are many for whom certain chapters and subchapters of the Code recall the opening of Dante’s Inferno: “I found myself within a forest dark, For the straightforward pathway had been lost.”[v]Continue Reading Taxing A Foreigner’s Sale of a Partnership Interest – Déjà Vu All Over Again[i]

Anticipation

You may have heard or even read about the U.S. Supreme Court’s recent decision regarding the date of death value[i] of a deceased shareholder’s shares in a closely held corporation that owned a life insurance policy on the decedent’s life, the proceeds of which the corporation used to redeem the decedent’s shares from their estate.[ii]   

The significance of the decision for the shareholders of many closely held corporations is belied by the brevity of the Court’s opinion and the relative absence of any “technical” analysis.[iii]Continue Reading Funding the Buyout of a Deceased Shareholder With Corporate-Owned Life Insurance – Did the Court Decide Connelly Correctly?

Sale, or Contribution-Distribution?

Assume that X and Y agree to the following: X will transfer ownership of Prop to Y, and Y will transfer cash to X.

What just happened? Obviously, X has sold Prop to Y. If the amount of cash that X receives is greater than his adjusted basis in Prop (generally, his unrecovered investment in the property), then X will realize a taxable gain.Continue Reading Partnership Transactions Lacking Economic Substance or Business Purpose: Investor Beware

It’s Still Pretty Bad

Depending upon what you read or, perhaps more accurately, depending upon how much you believe of what you read, you may be aware that many closely held businesses are concerned about their future.

Most of these survived the disruption caused by the pandemic lockdown only to be confronted with rising inflation, higher borrowing costs, a scarcity of available workers, the phaseout of COVID-era public support programs, and the potential for increased federal and state tax burdens.Continue Reading Trust Fund Recovery Penalty & The Closely Held Business

Last week, Sen. Warren reintroduced her “Ultra-Millionaires” wealth tax proposal to the Senate.[i] Query her timing. The measure has the proverbial snowball’s chance in Hell of being enacted by this Congress.[ii] Perhaps the Senator was inspired by the Administration’s Fiscal Year 2025 Budget, which includes its own equally ill-fated – at least for now – version of a wealth tax.[iii]   

The more likely explanation for the revival of the Senator’s tax plan is the upcoming contest for the White House, which has begun in earnest,[iv] and the Administration’s focus on what it has described as tax avoidance[v] by the “wealthy”[vi] and especially by the very wealthy.Continue Reading “C’mon Man! Tax the Rich!” Business Owners Face Tax Increases*

Crossing the Streams[i]

It is not uncommon, in the context of a business entity in which a family owns a controlling or substantial interest, for an adviser to encounter intersecting gift and income tax issues.

This week’s post will consider one such instance in which the IRS was asked to determine the tax consequences of certain transfers of stock by an individual shareholder of the issuing corporation and by the trusts created for the benefit of the shareholder’s family.[ii]  

Before describing these transactions, it may be helpful to briefly review some of the applicable tax principles.Continue Reading Transfers Within the Family Business: Gifts or “Ordinary Course” Transactions?

What Corporate Shield?

Would you be surprised to learn that most shareholders of closely held corporations, and especially those with minority or merely passive interests, believe they cannot be held responsible for the tax obligations of their corporations?

I, for one, would not. Over the years, I have both experienced and read about many situations in which shareholders realized too late that the “limited liability” protection the corporate shield affords them under a state’s business corporation law goes only so far, even in cases where the corporation is respected as a separate legal entity.[i]Continue Reading Shareholder-Transferee Liability for a Corporation’s Income Tax

Passing the Torch

Many of us have encountered variations of the following scenario:  a parent owns and operates a business; one or more of their children are employed in the business; as the children mature and become more experienced and established in the business, some of them may want to assume greater managerial responsibility and to have a greater voice in strategic planning; inevitably, the children become eager to realize a greater share of the economic success enjoyed by the business which they may insist is attributable to their efforts; they want to become owners.[i]Continue Reading The Family-Owned Business, Stock Options, And Personal Goodwill – a Smorgasbord of Tax Issues

Heads I Win, . . .

When closely held corporations that are under common control engage in any intercompany transaction, it is prudent for the corporations and their shareholders to ensure that the transaction is being undertaken for a bona fide business reason. It is also important that the form of the transaction, and the parties’ intent for engaging in such transaction, as manifested by its form or structure,  be consistent with the income tax consequences arising therefrom as reported by each of the parties.   Continue Reading Intercompany Loan Treated As Constructive Distribution and Contribution

Mixing Holidays With Business

Hope you had a good Thanksgiving Holiday. Some of us probably feel we ate or drank either too much or not enough, watched too much or not enough football, or spent too much time discussing politics and the state of the Dis-Union with family or friends. Then there were some who, having overheard in the midst of the merrymaking how someone else had implemented what sounded like a wonderful tax-saving strategy, resolved to do the same themselves for 2024.[i]Continue Reading The Family Business – Compensating Family-Employees