Tax Archives

Can Your Business Deduct Credit Card Interest When the Card Is in Your Name?

Small businesses often struggle to get credit. Banks want collateral, financial history, and revenue figures that newer or smaller operations cannot always produce. When the business itself cannot qualify for a loan or a credit card, the owners step in. They open credit cards in their own names, charge business expenses to those cards, and…

Can the IRS Ignore Your Request for an Estate Tax Valuation Explanation?

When a family member dies and leaves behind interests in a closely held business, the estate has to figure out what those interests are worth. This is rarely straightforward. There is no ticker symbol, no public market, no closing price to look up. The estate hires an appraiser, applies valuation methodologies, and reports a number…

Can the IRS’s Automated System Issue a Valid Notice of Deficiency?

Every year, millions of taxpayers receive letters from the IRS proposing adjustments to their tax returns. Most people assume those letters came from a human being who reviewed the file, weighed the facts, and made a considered decision to send the notice. That assumption is increasingly wrong. The IRS relies heavily on automated systems to…

Who Gets the Tax Credit When You Outsource Payroll to a PEO?

Many businesses outsource their payroll, human resources, and employment tax responsibilities to professional employer organizations. These arrangements make sense. The PEO handles the administrative burden of onboarding workers, processing wages, withholding taxes, and managing benefits. The business owner focuses on running the business and directing the workers. But when it comes time to claim employment-related…

Selling a Furnished Vacation Home: Allocating Between Real & Personal Property

A vacation home is nice to have. Many vacation homes are owned for years–if not decades. The capital gains tax can be substantial when the owner goes to sell the property. And unlike a primary residence, the $250,000 or $500,000 gain exclusion under Section 121 is not available for a property that was never the…

Contribution of A Note to a Subsidiary: The Zero-Basis Rule

Businesses organized through multiple related entities routinely use promissory notes to move money between them. A parent company may issue a note to a subsidiary to capitalize it or fund operations. Affiliates lend to one another as part of ordinary treasury management. In the partnership context, a partner who wants to demonstrate additional financial commitment—but…

Can an Active Limited Partner Avoid Self-Employment Tax?

Self-emploiyment taxes are an additional tax over and above any income tax that may be due. The amount can be significant—these Social Security and Medicare taxes can add up to 15.3% on top of ordinary income tax rates. For smaller businesses, it is often a very large part of the overall tax due. How this…

Missed Opportunity When a Partner Dies: the Section 754 Election

There are tax opportunities that come up when someone dies. Many of these relate to those who own real estate in LLCs or partnerships. One such a opportunity the Section 754 election for partnerships. This is a valuable election–one of the most commonly missed–thatallows the partnership to adjust its inside basis in assets to match…

Short-Term Vacation Rentals and Material Participation

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…

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…