Income Tax

Tax The Rich

Last Thursday, New York State Senator Gustavo Rivera, who represents the 33rd District (basically, the northwestern quadrant of The Bronx), proposed legislation that seeks to collect more taxes from the State’s high-income and high net worth residents.

Specifically, the stated purpose of the legislation is “amend the New York tax law

The Returns

Last Friday, December 30, 2022, during the final hours of the 117th Session of Congress, the House Ways and Means Committee – through which all tax legislation passes[i] – released redacted versions of six years of Mr. Trump’s annual federal income returns.

I told myself months ago that I would not waste my time reviewing the returns if they were ever made public. However, after several acquaintances peppered me with questions regarding the returns over the long holiday weekend, I relented and quickly skimmed the earliest of the returns, for 2015.

Continue Reading Trump’s Returns and Congress – Lessons, Next Steps?

Lately I’ve been thinking about the many ways by which members of the public transfer funds to government and the many reasons for which such transfers are made. After all, we’re still in the “season of giving.”[i]

Continue Reading New York’s “No-Longer-a-Sin” Taxes – Effective? Progressive? Neither?

Related Party Transactions – In General

To avoid the manipulation of tax consequences to which transactions between certain related[i] taxpayers may be susceptible, the IRS and the Courts generally require that such transactions be closely scrutinized to ensure that the form of the transaction reflects its underlying economic reality,[ii] and that the tax consequences arising therefrom are consistent with those arising from transactions between unrelated parties dealing at arm’s length with one another.[iii]

Similarly, the Code and the regulations promulgated thereunder have long recognized that a taxpayer who engages in certain transactions with another party should be denied a particular tax benefit that would otherwise be realized from the transaction if the taxpayer and the other party bear a certain relationship to one another and if the sought-after tax benefit is inconsistent with the economic consequences of the transaction.
Continue Reading Related Party Transactions Converting Gain Into Ordinary Income – Be Careful Out There

Across the Hudson

Last week, Governor Murphy of New Jersey staked out a position on New York City’s congestion pricing proposal, stating that it “can’t be ‘on the backs of New Jersey commuters.’”[i]

“Whether it’s how we’re taxed by our neighbors or this proposal for a congestion-pricing scheme that would be a huge burden on commuters,” the Governor continued, “we can’t have it both ways.”

Of course, the Governor was referring to New York’s taxation of New Jersey residents who are employed in New York and whose earnings are taxed in New York, for which the New Jersey residents claim a credit against their New Jersey income tax liability on such earnings.[ii]
Continue Reading Push-Back On New York’s Mission to Tax Non-New Yorkers?

Where is the Economy Heading?

According to the data released Friday by the Department of Labor, the U.S. economy added approximately 528,000 jobs in July, reducing the unemployment rate to 3.5 percent.[i] Although this figure was certainly better than what was expected by many economists, it seems to belie other signs of economic weakness.

Many states, for example, have reported recently that they are experiencing significant declines in estimated tax payments or that they expect declines in revenue from the withholding of personal income taxes.[ii] These developments are being attributed to the performance of the stock market[iii] and to the fact that wages have not kept in step with inflation.[iv]
Continue Reading New York to Taxpayer: “Forget What the Feds Said, You’re a ‘Responsible Person’”

Summer Break?

After the last couple of weeks, I’m looking forward to Congress’s summer vacation. I’m pretty sure our elected representatives feel the same way, though it is unclear at this point when they will be heading to their respective homes – or wherever else it is they go[i] – to relax, recreate, and rejuvenate.

According to the Congressional Calendar, the Senate is scheduled to begin its break on August 6 and to return on September 6, while the House was supposed to have stopped work on July 30 and will be back in session on September 13.[ii]
Continue Reading The Schumer-Manchin Proposal To “Eliminate” the Profits Interest

Deal Costs, Generally

Every purchase and sale of a business, whether from the perspective of the seller or the buyer, is about economics, and few items will impact the economics of the transaction more certainly or immediately than taxes. The transaction involves the transfer and receipt of value, with each party striving to maximize its economic return. The more taxes that a selling party pays as a result of the deal structure, the lower is that party’s economic return. The more slowly that a purchasing party recovers its investment, the more expensive the deal becomes.[i]
Continue Reading The Transaction That Failed – Tax Treatment of Termination Fees

Escape from New York[i]

According to data released by the IRS earlier this year, the pandemic triggered a “wealth migration” that saw high-tax states like New York lose high-income earners to low-tax jurisdictions such as Florida.[ii]

This weekend, the Wall Street Journal reported that New York’s tax base shrank by $19.5 billion as a result of workers fleeing during a time when lockdown measures allowed employees to work remotely. Other high-tax jurisdictions experienced a similar exodus of workers.

Unfortunately for New York, the migration out of the State began before the pandemic, which does not bode well because, as the Office of the Comptroller recently stated, “the personal income tax is the single largest revenue source for New York, accounting for two of every three tax dollars.”
Continue Reading Statutory Residence in New York: Time to Rethink the “Permanent Place of Abode” Test?

State Finances

Much has been written over the last few weeks about the unprecedented financial cushion that many states have accumulated thanks to federal support prompted by the pandemic and larger-than-expected tax revenue.[i]

However, in the last few days we have started to hear warnings from various sources that state economic forecasts for the remainder of 2022 and for 2023 are likely to be revised downward; for example: “The current global geopolitical crisis, continued uncertainties related to the ongoing pandemic, high inflation, and evolving federal monetary policy could all muddle the revenue outlook for the states.”[ii] Add to that the expiration of federal aid programs, the volatility of the stock markets, and talk of recession.[iii]
Continue Reading Will New York Be Looking At Your Federal Tax Return? Probably