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
Parents Getting Good Kids In Trouble
When a parent hires a child in the family business, makes them an officer in that business, or grants them an equity interest in the business, the parent’s goal in doing so is to help the child. Unfortunately, those same acts may place the child in harm’s way. Similarly, when a child seeks to assist
Arm’s Length Merger or Gift?
Every now and then, a case comes along that is just chock-full of lessons, not only for taxpayers, but for their advisors as well. The Tax Court’s decision in Cavallaro v. Comr
. describes such a case. It involves closely held corporations, related party transactions, a tax-free reorganization and, oh yeah, a huge taxable gift.
No Money To Pay A Bonus? Did It Really Happen?
Sometimes, the U.S. Tax Court will rule on a matter the outcome of which would seem – at least to an outsider, or on some visceral level – to have been a foregone conclusion. Indeed, one is often left wondering how such a matter was allowed to progress through an IRS audit, IRS Appeals, the
Section 409A, Part IV: Equity Compensation
Equity compensation is attractive to employees and employers alike. Because the opportunity to participate in the growth of a company provides potentially unlimited compensation to employees, its incentive value is quite powerful to employers. In this last post in this series on Section 409A, we will sort through the types of equity compensation that are
Section 409A, Part III: Alternative Compensation Arrangements
Our last post described the portions of an executive employment agreement that may be impacted by Section 409A. However, Section 409A may also impact the structure of other, less traditional compensation paid to key employees. In the context of a closely-held business, two commonly-encountered alternative compensation arrangements used outside of the context of an individual
Section 409A, Part I: What Is It?
Ask most closely-held business owners what words come to mind when they hear the names “Enron” and “Worldcom” and many would say things like “bankruptcy,” “failure,” “scandal” and “greed.” Ask those same business owners what impact those two names had on the ways they are able compensate their key employees and most would likely say
Holding Property For Investment? Make Sure To Act Like It.
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
Founder Can Still Be “Active” In The Business
In several previous posts, we noted the importance of determining, in the case of a family or other closely-held business, where the goodwill for the business resides: in the business, in the shareholder-employees, or in another employee. In the absence of an employment agreement or non-compete, we noted that it may be possible to
Separating A Foundation From The Family Business
When people hear about a family business dispute, what most often comes to mind are sibling rivalries and disagreements, or a falling out between a parent and a child, with each side seeking to go its own way. In fact, these are the usual scenarios. There is a set of circumstances, however, that arises with