Real estate can offer significant tax benefits. This is largely due to depreciation deductions which allow taxpayers to deduct their cost of investment in the property. Given the tax benefits, Congress has put in place some nuanced rules that allow some real estate owners to get immediate benefits and that deny or defer benefits to…
Category: Tax
Tax
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Settling Debts in an Asset Purchase: Immediate Deduction or Capitalized Cost?
You own two businesses. They work in similar spaces, but are distinct businesses. One of them has financial troubles and gets behind on its bills. You decide to have the other business acquire the assets of the failing business. You start thinking about taxes. You think ahead when you go to do the tax returns…
When Does a Promissory Note Create Basis in Controlled Company Stock?
Business owners have choices in how to fund their corporations. Should they contribute cash? Property? Perhaps a promissory note? There may be some benefit of using a promissory note. You get stock in your company without immediately parting with cash or other assets. The promissory note sits on the company’s books as a receivable, and…
Tax Planning for Net Operating Loss Carryback Elections
Congress has used Section 172 for net operating losses to stimulate the U.S. economy. It has done this by allowing certain losses to be carried back, thereby generating cash refunds to the taxpayer. This puts cash into the hands of taxpayers who are suffering losses. One only has to look at the history of changes…
Who Qualifies as a “Designer” for Section 179D Energy Tax Deductions?
Contractors regularly upgrade HVAC systems and lighting in commercial buildings to improve energy efficiency. These projects can be expensive. When the building owner is a government entity, the tax code allows contractors to claim an immediate tax deduction for the cost of energy-efficient improvements under Section 179D. But not every contractor who touches the building…
Convert Interest Income to Capital Gains on Sales by Omitting Interest?
Business transactions can be structured in any number of ways. Those who are tax savvy can structure their transactions to minimize and even avoid paying taxes. There are tax provisions that specifically allow for tax savings. To achieve the tax savings, one only has to structure the transaction to meet the requirements of the statute.…
Churches, Families, and Private Inurement
When you earn a dollar, you pay income tax and probably paid payroll or self-employment tax on it. When you spend what is left of the dollar after these taxes, you often pay a sales tax, property tax, or excise tax on the item purchased with the dollar. You may also pay an inflated price…
The Difference Between a Bad Business Investment and a Theft Loss
Business ventures fail for countless reasons. Partners mismanage funds. Projects never materialize. Promises about how capital will be deployed go unfulfilled. When an investment goes south, the parties have to figure out how to minimize the damage. This often shifts the focus to how to benefit from the loss, which can warrant closer examination of…
Using Ranching Tax Loss to Offset Other Income
Ranch operations often start with genuine business intentions. A successful business owner buys land. They get into cattle grazing areas or orchards. The owner hires experienced ranch hands and invests in equipment and facilities. The ranch may make money from livestock sales, hay production, or crop harvesting. The ranch would likely report losses for the…
What is a Statutory Employee and Who Qualifies?
Our tax laws usually look to various foundational definitions, such as units of property, activities, or even roles. When it comes to workers who receive compensation for their work, it is often the role that matters the most. We see this in disputes over whether a contractor is really an employee for payroll tax purposes.…