Business Tax Archives

Tax Implications of Debt vs. Equity in Related Entities

Investors who engage in successful ventures often also invest in less successful ones. In some cases, one venture ends up funding another. When a taxpayer operates through multiple legal entities, this can lead to numerous complexities. For example, “due to” and “due from” intercompany transactions raise questions, even if they do not involve international transfers.…

S Corporation: Distribution of Appreciated Assets

Those who set up S corporations usually do so as their accountant told them that it could save taxes. This is often true. The S corporation can result in tax savings. This may include the standard reduction in self-employment/payroll taxes or, for more advanced tax planning, income taxes. The ability to freeze the value of…

Partnerships Have to Maintain Accurate Capital Accounts

One of the tax benefits of partnerships is that they are flexible. The parties can agree to differing terms and the values and dollars associated with those terms can be trued-up in subsequent years. The allocation of profit and loss provisions provides an example. Depending on their agreement, the parties can allocate profits and losses…

Overcoming the IRS’s Constructive Dividends Argument

Those who own C corporations have to be careful about what amounts are paid out to or benefit the corporate shareholders. This is particularly true for closely held and family corporations. On audit, the IRS will often assert that these distributions are constructive dividends. This is usually a bad answer for taxpayers as it increases…

The Late S Corporation Election

The Subchapter S corporation remains a popular choice of entity for small and medium-sized businesses. This is true even after the TCJA of 2017 lowered the income tax rate for C corporations to 21 percent. Unlike many other changes made by the TCJA, the 21 percent flat corporate rate is permanent. It is not going…

Website Development Tax Deductions & the Start-Up Rules

There are several tax laws that have to be considered to determine when and how costs to develop websites are deductible. These expenses are almost always deductible. These tax laws raise timing questions. It’s a matter of when the expenses are deductible. For those who are developing website businesses as side-hustles, the issue takes on…

Choice of Entity: Tax Plans for Pharmacies

Our laws have long said that taxpayers are free to structure their legal affairs to minimize their taxes. Congress has even provided very specific provisions to accomplish this. Section 1202 stock is an example. This provision is intended to encourage start-ups to take business risks by rewarding those who are successful by allowing them to…

Double Tax on Inter-Company Transfers

There are those who make things happen. They are usually the ones doing what it takes even when doing so is difficult, tiring, and draining. They are the ones that often make personal sacrifices and take risks to succeed. They are the ones that had the luck or grit to stick with something to see…

S Corporation Election Not Signed by Community Property Spouse is Valid

There are tax implications for just about everything we do. Even simple business transactions present tax opportunities and pitfalls. While we prefer to focus on tax opportunities, we also spend a lot of time fixing tax problems. We are in Texas, which is a community property state. So one issue we see over and over…

Contribution to Corporation, then Sale of the Corporation

Most income tax planning involves questions about income, deductions or credits, character, or timing, or some combination of these questions. When viewed from these categories, even simple transactions can present tax planning opportunities. The contribution of property to a corporation by its shareholder is an example. A contribution triggers taxable income to the shareholder. Our…