Report Card:
A couple of weeks ago, the Treasury Inspector General for Tax Administration (“TIGTA”) released a report that presented the results of its review to determine whether the IRS’s “policies, procedures and, practices” adequately ensured that its examiners were considering the compensation paid by closely held S corporations to those shareholders who rendered service to the corporations.[i]

Let’s just say the IRS did not receive a stellar grade.[ii] Continue Reading Are the Feds Getting Ready to Kick Your “S”?

The Calm Before?

I’m confused.[i] For better or worse, I’m pretty sure that I am not alone.

Last week, in a letter addressed to the American people, forty-six of the fifty Republicans in the U.S. Senate indicated they would not vote in favor of increasing the federal debt ceiling to accommodate the additional spending that is called for under the $3.5 trillion Budget Resolution recently passed by Senate Democrats.[ii] If the Democrats require such an increase in the deficit to fund their programs – as described in the Administration’s American Jobs and American Families Plans[iii] – the letter explained, they will have to do so without Republican support, using the reconciliation process, in much the same way the Democrats will be increasing taxes[iv] to help cover the cost of those programs.

Continue Reading Tax Distributions as Fraudulent Conveyances?

Compare and Contrast

Have you spoken to anybody about the infrastructure bill on which the Senate is about to vote? I know I haven’t, except to explain that Speaker Pelosi has stated the House will not consider the bill unless and until the Senate also adopts a budget resolution for the President’s tax and spending plans.

Continue Reading Increased Capital Gain Rate, Nonresident Aliens, and ESBTs

7-3-20

The Dog Days[i]

I’ve never much cared for the month of August. In New York, at least for me, the eighth month of the year – named by the Roman Emperor, Augustus, to honor himself[ii] – evokes memories of very warm, very humid days, and anxious thoughts about the upcoming school year.[iii]

Although I no longer stress over returning to class, August has continued to be my least favorite month and, by the look of things, this year will be no different.

We begin the month with the Senate having finally agreed to take up debate of the $1.2 trillion bipartisan infrastructure package backed by the White House.[iv]

Continue Reading Step Transaction or Substance Over Form? Loss Disallowance in Any Case

Capital Loss

If the amount realized by a taxpayer upon the sale of a partnership interest to a third party is insufficient to restore to the taxpayer their adjusted basis for the interest – i.e., their unrecovered investment in the partnership – a loss is sustained equal to the difference between such adjusted basis and the amount realized. In general, this loss will be treated as a capital loss.[i]

Continue Reading Capital vs Ordinary Loss When An Investment Goes South

8-5-20

Movement Toward Tax Increases

You may have read last week that Democrats on the Senate Budget Committee announced they had reached a deal on a budget resolution that will enable them to bypass Senate Republicans on the way to enacting most of the “social infrastructure” programs called for under the President’s American Families Plan.[i] Significantly, after the announcement, Senator Manchin, who is not a member of the Committee, indicated he would not stand in the way of the budget resolution, thereby practically assuring its passage and the start of the reconciliation budget process.

Continue Reading Employee-Shareholders, Reasonable Compensation And Employment Taxes

Head-Scratchers

The Code is chock-full of provisions that will challenge the intellectual capacity, not to mention the patience, of most tax professionals. The complexity of these rules does not arise out of some sadistic intent on the part of Congress, the Treasury, or the IRS to torment taxpayers and their advisers;[i] rather, it is often a reaction to, and a direct function of, the complicated, multifaceted schemes that many of those very same taxpayers and advisers devise with the intent of reducing the taxpayer’s income tax liability.

Continue Reading Bona Fide Intercompany Loan – Are you Sure?

NH vs MA

Last week, the U.S. Supreme Court denied New Hampshire’s request that the Court exercise its original jurisdiction under the Constitution[i] to hear and resolve a conflict involving the taxation by Massachusetts of income earned by certain residents of the Granite State.[ii]

Continue Reading Like a Good Neighbor, New York is Still Free to Tax You – Sorry for the Inconvenience

Not Good

As Mr. Biden settled into the White House, and as the Democrats began planning how to best utilize their slim Congressional majority to enact and pay for their sweeping legislative agenda, the principal concern among most owners of successful closely held businesses was Mr. Biden’s proposal to almost double the federal income tax rate applicable to the long-term capital gains recognized by an individual taxpayer.[i]

Continue Reading Tax Increases in Sight? Time to Sell the Business? Focus on Economics