Income Tax

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

An often-explored theme of this blog is the frequency with which similarly situated owners of similarly situated closely held business, facing a similar set of economic circumstances, and presented with a similar set of choices, will repeat the mistakes made by countless taxpayers before them.[i]

Rational behavior? Does the answer depend upon the taxpayer’s appetite for risk-taking? Being an entrepreneur necessarily involves some exposure to risk. However, there is a difference between the calculated risk that an intelligent business owner knowingly takes, on the one hand, and the risk that comes with negligently disregarding well-established tax principles, on the other.
Continue Reading Unreasonable Compensation As Constructive Dividend, Redux

The 2023 Budget

Last week, the New York Legislature passed the State’s 2022-2023 Budget. The $220 billion Budget reflects an $8 billion increase over last year’s budget (a more than 3 percent jump). It is also $4 billion more than what the Governor had initially proposed. In fact, it is the largest spending bill ever to have been enacted by Albany.

I suppose the explanation is obvious: bolstered by still unspent Federal stimulus money[i] and better than expected tax revenues, the Governor and the Legislature decided to be especially generous to their constituents during this election year.[ii]…
Continue Reading The Deduction of Cannabis Business Expenses Following New York’s 2023 Budget

“Déjà vu All Over Again”[i]

The White House last week released the President’s Budget for the Fiscal Year 2023.[ii] The Budget is ambitious, but its “investments,” we are told, “are more than paid for with tax reforms focused on making sure the rich and the largest corporations pay their fair share.” Sounds familiar, doesn’t it?…

Continue Reading Attention Congress: Focus On the Estate Tax Regime; Leave the Income Tax Alone

Taxes and Snowy Weather?

How many of you awoke Saturday to find that the winter storm about which we had heard so much during the preceding days had lived up to its hype?

What was your first thought? “Fudge,” right? Time to shovel the driveway and clean off the car. Slippery sidewalks and roads. Ultimately, slush.

A few of you may have mused aloud about moving to Florida, perhaps oblivious to the cold that visited that state over the weekend.[i]

I’ll admit that I immediately wondered whether some enterprising individuals would show up, armed with the latest in snow removal technology, to offer their services.

Which brings me to another confession: I tried to recall whether snow removal services were subject to New York sales tax. A quick check and, “sugar” – turns out they are.[ii]…
Continue Reading The Liquidation of a Partner’s Interest Under NYC’s Unincorporated Business Tax

1-12-22

Last Week

What a week it was.

It began relatively well, with the Cowboys losing the NFC wild card game, albeit to a California team.[i]

It ended disturbingly, with the Arizona Democratic Party censuring Senator Sinema for having opposed the changes to the Senate’s filibuster rule proposed by Senate Majority Leader Schumer.[ii]

What occurred in the interim was anything but reassuring.
Continue Reading Revised Nonresident Audit Guidelines For New York Statutory Residence

Goodbye New York

Late last year, the U.S. Census Bureau released data showing population shifts across the country during 2021.[i] According to this information, New York lost 1.8 percent of its population.[ii]

It appears New York’s experience was not an isolated case. In a report issued earlier this month, the Tax Foundation – relying not only upon the Census Bureau’s data but also upon the data sets of some major moving companies – concluded that “[t]he picture painted by this population shift is a clear one of people leaving high-tax, high-cost states for lower-tax, lower-cost alternatives.”[iii]…
Continue Reading Leaving New York – But What About One’s New York Business?