In yesterday’s post, we considered the context in which the recently proposed regulations under Section 2704 of the Code will eventually be applied. Today, we will discuss Section 2704 and the valuation of an interest in a closely-held business. We will also review the failed legislative efforts to address the issues covered by the
The IRS Takes The Offensive On Valuation Discounts: Part One
“The” Proposed Regulations
They were years in the making – proposed regulations that seek to address what the IRS believes are abuses in the valuation of family-owned business and investment entities. Based upon the volume of commentary generated in response to the proposed rules, it is clear that the IRS has struck the proverbial raw
Waiving Dividends in a Close Corporation
Why Waive A Dividend?
For the most part, the shareholders of closely-held corporations and their counterparts in the public realm are subject to the same set of federal income tax rules. However, there are situations within each of these two realms where unique policy or practical considerations dictate the application of different sets of rules.
NYC’s UBT and Partner (or is it Employee?) Services
The Adviser’s Dilemma
The tax adviser to a closely held business is often “encouraged” by his client to find ways to reduce the client’s federal, state and local tax bills. One obvious way of accomplishing this goal is by claiming a deduction for a business-related expense. 
In considering whether such an expense is, in fact,
Look! On the Balance Sheet! Is it Debt? Is it Equity? It’s . . . Anyone’s Guess!
Same Old Story
This probably sounds familiar: You are reviewing an already-filed tax return for a closely held business, and you see that the balance sheet reflects a liability that is identified as “loans from shareholders.” You ask to see the loan agreement or promissory note that memorializes the loan. “There aren’t any,” you are
Grouping Activities Under the PAL Rules: Just What the Doctor Ordered
Passive Losses
The Code provides various rules that may limit the ability of an individual taxpayer, who owns an interest in a closely held business, to deduct losses that are attributable to such business.
Under the passive activity loss (“PAL”) rules, for example, the losses realized by a taxpayer from passive activities that exceed the
Sales Tax: With “Power” Comes Responsibility (with apologies to Uncle Ben)
The Responsible Person
Many taxpayers fail to appreciate that a member of a partnership or LLC may be held personally liable for the sales tax collected or required to be collected by the entity.
New York State Tax Law (the “Tax Law”) imposes personal responsibility for payment of sales tax on certain owners, officers, directors,
More Guidance On Partnership Audits
A New Audit Regime
Late last year, we discussed how the IRS has found it increasingly difficult to audit partnerships as they have grown in number, size, and complexity, and to collect any resulting income tax deficiencies, especially in the cases of large partnerships and tiered partnerships.
We noted that, in response to these
The Summer of Breaking Up?
No, I am not referring to some fleeting summer romance. After all, “. . . summer friends will melt away like summer snows.” (George R.R. Martin, A Feast for Crows).
Rather, I am referring to the abundant guidance that the IRS has issued or proposed this summer regarding the requirements that must be satisfied
Real Estate Transfer Tax: Form, Substance, Or Confusion?
They’re Not Making Any More of It
Many of our clients own significant interests in real property, both on Long Island and in New York City. Some of these clients are more active investors than others. They may engage in like-kind exchanges in order to diversify their holdings. They may enter into relatively complex joint