Do you own a company and want to sell to de-risk your holdings but don’t want to pay tax now? And when you do sell, do you still want lower capital gains rates? That’s the most common goal for those considering tax planning. Capital gains rates are lower than ordinary income rates. Tax planning focuses…
Category: Tax
Tax
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Court Clarifies Tax Treatment of Loyalty Programs
Programs involving third-party vendors providing rewards, like hotels, airlines, and fuel companies, can amass substantial value over time. The term “substantial” is an understatement. “Massive” is more fitting. The tax law for these arrangements is not clear as it touches on concepts like trust funds, accounting methods, and redemption deductions. Given the size of the…
Forget the 5-Year Rule – Change Entity Classification Early
Many believe that once you elect an entity’s tax classification, you are locked into that choice for at least 5 years. Conventional wisdom says that the tax status cannot be changed within a 5-year or 60-month period. However, a recent IRS private letter ruling shows this is not necessarily the case. In PLR 202341001, the…
Breach of Contract as Theft Loss Tax Deduction
Many people have experienced the pain of an investment gone wrong. You put money into a business, loan funds to a friend, or participate in a real estate venture, expecting strong returns. But instead of profits, you end up suffering losses when the deal unravels. It leaves you wondering – can I at least deduct…
Accounting for Interest Deductions as a Tax Planning Option
Tax attorneys frequently come from an accounting background. This may seem like an unrelated skill, but it often plays a pivotal role in effective tax planning. The ability to navigate revenue and expenses and debits and credits not only ensures accurate financial reporting but also lays the foundation for strategic tax planning. Tax planning often…
Can You Still Owe Taxes on a Loan That’s 10 Years Old?
Our legal system allows people to move on from past obligations under certain circumstances. For example, people can discharge debts through bankruptcy, creditors have a limited amount of time to sue for unpaid debts, and even the IRS allows a fresh start for unpaid taxes. These laws strike a balance between allowing those who are…
Triggering Losses by Selling a Business: NQDC Example
Timing issues are one of the aspects of effective tax planning. There are scores of options for timing and tax deferral and recognition that depend on the taxpayer’s circumstances. For example, for corporate taxpayers, these timing issues may involve timing the receipt of income using the installment rules or the use of losses or foreign…
Tax Deductions for Non-Facilitating Costs for IP, M&A & Real Estate
One of the most common disputes between taxpayers and the IRS revolves around the question of whether certain expenses are deductible in the current year or need to be capitalized and recovered over time. This expense versus capitalization issue arises in various contexts. We have considered a number of these disputes on this site. It…
Charitable Tax Deductions & Bargain Sales
Our tax administration operates within the framework of a zero-sum game, leaving little flexibility for taxpayers who encounter technical foot faults or minor errors. Even when taxpayers have complied with most of the tax law requirements, a single misstep can potentially result in the disallowance of a tax benefit or deduction. This zero-sum approach, while…
The Evolution of Foreign Account Tax Reporting
The IRS and Treasury face a number of challenges in administering our tax and financial systems. This includes challenges presented by foreign transactions by U.S. citizens and residents. In recent years, high-profile cases involving Americans using offshore accounts to evade taxes have prompted the U.S. government to crack down on tax evasion and make it…