We have provided these case studies to illustrate the types of situations where we believe we can offer valuable assistance. These are real client situations that we have worked on in the past, but we have altered the names and removed identifying details to protect our clients’ privacy. Please note that past results are not necessarily indicative of what can be achieved in your case.
The Stalled Business Sale
Dr. Williams owned a small medical practice that focused on a specialized area of medicine. The business was operated as an S corporation, and Dr. Williams had built up a strong reputation and client base over the years.
When a private equity (PE) firm approached Dr. Williams about acquiring several similar practices, including hers, she was interested but hesitant. The PE firm had submitted a letter of intent to buy the assets of the practice rather than the entity itself, as they did not want to assume any past liability and could not own an S corporation. The parties were at odds as Dr. Williams wanted to sell her stock and get capital gains rates, but the PE firm only wanted the assets. The deal was about to fall through.
Dr. Williams retained our tax attorneys to help her navigate the sale process and to provide tax advice. Our tax attorneys proposed a tax-free Subchapter F reorganization, which allows for the transfer of assets between S corporations prior to a sale without incurring a tax liability. By executing the reorganization just prior to the asset sale, our tax attorneys were able to help Dr. Williams negotiate a higher purchase price and successfully close the deal.
Overall, our tax attorneys’ expertise in tax law and knowledge of the specific needs of S corporations helped Dr. Williams maximize the value she was able to receive for the sale of her business as the buyer’s preference for an asset sale enabled our client to negotiate a much higher sales price.
The Unsuccessful Texas Sales Tax Audit
Mr. Rodriguez owned an IT consulting company in Houston, Texas. Despite being in business for several years, the company had never collected or remitted Texas sales tax, as it was unaware that IT consulting services were subject to sales tax in the state.
The Texas Comptroller conducted a sales tax audit of the company and proposed a significant amount of tax due. The proposed tax due was large enough that it would have resulted in the business closing its doors.
Mr. Rodriguez retained the services of our tax attorneys to help him navigate the audit process and defend his company against the proposed tax assessment. Our tax attorneys worked with the auditor to show that some of the services provided by the company were not taxable, as they were provided out of state to out-of-state clients or to non-profits and governmental agencies. As a result, the proposed tax balance was significantly reduced.
Our tax attorneys then pressed forward with the redetermination process, which allows a taxpayer to challenge a proposed tax assessment. Before the administrative law judge for the State Office of Administrative Hearings (SOAH) issued a decision in the case, the state attorney conceded the rest of the case, resulting in little to no tax due for Mr. Rodriguez’s company.
Our tax attorneys’ expertise in tax law and ability to negotiate with the state helped Mr. Rodriguez’s company resolve the issue and avoid a significant tax burden.
The Investment Banker With Back Taxes
Mr. Smith is a successful investment banker who has always been diligent about paying his taxes. However, due to a series of unexpected events, he found himself temporarily out of work for a period of several months. During this time, Mr. Smith’s expenses increased significantly, including the cost of maintaining his expensive home and supporting his family.
Despite his temporary financial setbacks, Mr. Smith’s investment portfolio and side projects continued to generate substantial income. In fact, his side projects alone brought in seven figures of income per year. However, with his increased expenses and temporary lack of employment, Mr. Smith found himself unable to pay his taxes in full.
As a result, Mr. Smith retained the services of a tax attorney to help resolve his tax debt. The attorney reviewed Mr. Smith’s financial situation and determined that, while Mr. Smith did have significant assets and income, he also had a large amount of debt and expenses. Based on this information, our attorneys suggested that Mr. Smith submit an Offer in Compromise (OIC) to the IRS.
An OIC is a legal agreement between a taxpayer and the IRS that allows the taxpayer to settle their tax debt for less than the full amount owed. In order to qualify for an OIC, the taxpayer must demonstrate that they are unable to pay their tax debt in full and that the amount offered represents the most they can realistically pay.
After reviewing Mr. Smith’s financial information and negotiating with the IRS, our tax attorneys were able to successfully secure an OIC for Mr. Smith for less than $100,000. This allowed Mr. Smith to resolve his tax debt and move forward with his financial plans, despite his temporary setbacks.
You can read more case studies for IRS collection cases here.
The Busy Doctor With Payroll Problems
Dr. Johnson owned a small medical practice in the Houston area. Despite being busy with patient care, she struggled to keep up with the administrative tasks of running a business, including timely filing her payroll tax returns. As a result, the returns were consistently filed late.
To try and resolve the issue, Dr. Johnson hired a new CPA to go back and file corrected returns. However, the CPA made an error in the returns and reported significantly more payroll taxes than were actually due. As a result, an IRS revenue officer showed up at Dr. Johnson’s office to collect the higher balance.
Feeling overwhelmed and unsure of what to do, Dr. Johnson hired us to figure out what to do. Our tax attorneys reviewed the case and determined that the CPA’s error had resulted in an incorrect tax assessment. To try and resolve the issue, the attorney filed a Collection Due Process (CDP) hearing request with the IRS.
Unfortunately, the IRS Appeals officer assigned to the case refused to correct the tax assessments, leading the attorney to seek recourse through the U.S. Tax Court. After presenting the case to the court, we were able to secure an order to remand the case back to IRS Appeals with express instructions to correct the tax assessments. This allowed Dr. Johnson to pay no more tax than what was due and to move forward with her practice.
The Real Estate Professional & Investor Partnership
John, a medical doctor, and Jane, a real estate professional, had pooled their resources and talents to acquire a sizeable real estate portfolio. John was interested in finding a way to allow Jane to take advantage of the depreciation deductions, as John was not able to benefit from the deductions given the passive activity loss rules and the excess business loss rules.
Our tax attorneys analyzed the partnership agreements and advised John and Jane on the best course of action. Through careful planning and negotiation, we were able to amend the agreements to allow for the special allocation of depreciation, resulting in significant tax savings for Jane.
The special allocation of depreciation is a powerful tool that can be used to balance out the tax burden between partners in a partnership. In this case, bonus depreciation was allocated to Jane. By allocating a portion of the depreciation expense to Jane, Jane was able to use her real estate professional status to offset her other income and reduce her overall tax liability. John was able to get a higher percentage payout in exchange.
At Mitchell Tax Law, we pride ourselves on finding innovative solutions for our clients’ unique tax needs. By helping John and Jane amend their partnership agreements, we were able to provide them with significant tax savings, and peace of mind. If you are a business partner and have concerns about your tax liability, contact our team of experienced tax attorneys to learn more about how we can help you.
Please call us at (713) 909-4906 or schedule an appointment to talk to our tax attorneys.
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