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Tax Law for the Closely Held Business blog authors Lou Vlahos and Bernadette Kasnicki presented yesterday, January 17, on how the Tax Cuts and Jobs Act affects not-for-profit organizations. Their presentation–given at the 41st Annual New York State Society Certified Public Accountants (NYSSCPA) Not-for-Profit Conference in New York City–was summarized in article format for The Trusted Professional, the NYSSCPA’s newspaper. Below is an excerpt from the article: The Tax Cuts and Jobs Act has a…
In today’s cautionary tale, we hear about a doctor, his self-directed simplified employee pension (“SEP”) individual retirement account (“IRA”), the investment of IRA funds in a business, and the consequences of crossing over the perilous line between “direction” and “control.” The Facts Dr. V., an anesthesiologist, ran a medical practice with three partners (the “Practice”). Prior to the time of this case, the Practice had adopted a self-directed SEP plan arrangement with Investment Firm,…
Own your own business, decide your own salary… right? Wrong. The Tax Court recently upheld corporate tax deficiencies and accuracy-related penalties assessed by the IRS after it disallowed as a business expense deduction half of $2 million in bonuses paid by an eye care center (the “Center”) to its sole shareholder.  The sole shareholder, who also worked as a surgeon at the Center, served as the Center’s Medical Director, CEO, CFO, and COO (“Dr. A.”). …
For the owner of a closely-held business, and especially one with a limited support staff, it can be easy to drift into carelessness or, worse, neglect, when it comes to maintaining detailed records of the business’s expenses.  However, as one taxpayer recently learned the hard way, such inattention to detail can come back to haunt you when it comes time to file your tax returns. In Nguyen v. Commissioner, tax deficiencies were assessed upon the…
In several previous posts, we have emphasized the importance of educating oneself about the tax consequences of any given business transaction well before that transaction comes to life.  In many situations, such forethought gives a taxpayer the opportunity to weigh the costs and benefits of different courses of action and, as a result, to act thoughtfully in the events leading up to the transaction.  This will minimize any surprises resulting from a close look…
We have previously looked at the recognition period for built-in gains of S corporations, and the effect of the expiration of the temporary reduction of this period, under the American Taxpayer Relief Act of 2012, to five years.  Earlier this week, however, the House Ways and Means Committee approved six “tax extender” bills to extend certain tax provisions that expired at the end of 2013.  Among these bills was H.R. 4453, which would…
In the recent case Thousand Oaks Residential Care Home I, Inc. v. Commissioner, the Tax Court considered whether a corporation’s compensation packages for its owner-employees were unreasonable and thus disallowable as deductions.  The facts can be summarized as follows: in 1973, Petitioners “Mr. and Mrs. F.” purchased a struggling corporation called Thousand Oaks Residential Care I (“TORCH”).  Mr. and Mrs. F. both provided services to TORCH following the purchase.  However, because the corporation initially struggled…
Of the countless details and decisions that the founder of a startup company is inevitably juggling as he launches his startup, one of the most important is making a timely Section 83(b) election.  Under Section 83 of the Internal Revenue Code, an employee is not taxed on restricted stock received from an employer as compensation until the employee’s rights in the stock are either “transferable” or  “not subject to a substantial risk of forfeiture”—that…