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Toll the Bells

Since 1995 to the present, the LLC has emerged as the entity of choice for the vast majority of entrepreneurs. This form of business entity owes its success to the flexibility and to the tax benefits that it affords its members.[i]

For example, there are no restrictions on (i) the ownership of equity in an LLC, (ii) the number of members it may have, and (iii) the varying classes of economic interests it may issue its members and its ability to specially allocate items of income, gain, loss and deduction.[ii] In addition, the LLC is treated as a pass-through for federal income tax purposes; it does not pay an entity-level tax on its taxable income – instead, such income is reported by and taxed to its members.[iii]

Continue Reading ESBTs and the Carryover of S Corporation Losses
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Once More Into the Breach[i]

Last week, the IRS announced “the start of a sweeping, historic effort to restore fairness in tax compliance by shifting more attention onto high-income earners, partnerships, large corporations and promoters abusing the nation’s tax laws.”[ii]

The IRS added that its efforts “will be driven with the help of improved technology as well as Artificial Intelligence that will help IRS compliance teams better detect tax cheating.”

Continue Reading Self-Employment Tax and the Limited Partner – Substance Over Form, or Something Else?
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Approaching Year End

Which holiday do you dread the most? For me, it has always been, and likely will always be, Labor Day. Of course, with each passing year, anything that I describe as “always” is less meaningful than it was the year before, at least to the extent it relates to me. That said, there is something about entering the final “stretch” of the year that makes me more anxious than usual.  

After years of trying to determine the root cause of this condition, I recognized that it had nothing to do with the beginning of the school year, as I had initially surmised,[i] nor with the pressure to collect delinquent accounts before the year end,[ii] which I find to be the most unpleasant of responsibilities.[iii]

Continue Reading Withholding Taxes: Deferred Comp and Services Overseas
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NY’s Almost There

Back in June of this year, New York’s legislature passed a bill that, if enacted, would create the first state-level public database with information regarding the ownership of limited liability companies (LLCs).[i]

Beneficial owners are of interest to governments, including taxing authorities, because of their economic status as the persons who own or control a company that operates within the government’s or authority’s jurisdiction. Continue Reading Tax Compliance: Self-Assessment, Transparency, and Enforcement

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What’s Next?

Do you feel as challenged as I do when someone asks you to explain the term “Bidenomics”?[i] I know that it is predicated upon the imposition of higher taxes on businesses and their owners, which have not yet materialized.[ii] However one defines it, the White House tells us that it’s working, which some folks say is a good thing.

Continue Reading Sale of Mortgaged Property – Amount Realized or COD Income
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Death of a Parent

In the context of a family-owned business, it is often the case that the matriarch or patriarch of the family is also the chief executive of the business. They may have founded the business, or they may have been at its helm for longer than most can remember. This individual’s strength of character, knowledge of the business, reputation in the industry, and experience, are resources that are nearly impossible to replace anywhere near as quickly as the family and the business would like. In other words, their passing may turn out to be the most disruptive event in the history of the business.

Continue Reading Transferee Liability for Estate Tax: The Downside of Being a Beneficiary
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Faulty Framework?

The question posed above is not intended to be rhetorical. Rather, it is one that the owners of a closely held business should consider thoroughly before transferring or committing any business assets to a charitable organization.

Continue Reading Should Closely Held Businesses Be Charitable?
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Losses Weren’t Always Bad

Most tax advisers are aware that, prior to the Tax Reform Act of 1986 (the “TRA”),[i] the Code placed few limitations on the ability of an individual taxpayer to use deductions from a particular activity to offset income from other activities.

Continue Reading Partnership Losses But No Outside Basis? Too Bad
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What Was Intended?

Transactions between commonly controlled, closely held businesses are often conducted in an informal manner. This is unfortunate because, in the absence of documentation, it is sometimes difficult to discern the parties’ intent with respect to a transaction. This may be especially troublesome for the businesses and their owners where the transaction purports to create a debtor-creditor relationship.

Continue Reading Debt or Equity? The Never-Ending Question For Closely Held Businesses
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It’s Complicated

The Code includes a number of complex rules that are aimed at those overseas business and investment activities of U.S. taxpayers that Congress has determined may result in the improper deferral or avoidance of U.S. income tax.

Continue Reading Enough Already – Eliminate Downward Attribution and Accidental CFCs