Legal Updates & Commentary for Tax & Estate Planning
Partnership Allocations
A few weeks back we discussed the allocation of a partnership’s income and losses among its partners. Specifically, we considered the requirement that an allocation to a partner must have substantial economic effect if it is to be respected by the IRS. The determination of whether an allocation has substantial economic effect for…
Be sure to start with Part I, here!
Real Estate as an Active Business
The active conduct of a trade or business does not include the holding for investment purposes of land, or other property, or the ownership and operation (including the leasing) of real property used in a trade or business, unless the…
This is a question that we encounter with some frequency in the context of family-owned corporations, and the backdrop against which the issue arises is not uncommon.
In the Beginning
The older generation may have acquired a building many years ago, either as an investment that would generate a stream of rental income from unrelated…
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…
The Passive Loss Rules
In general, if a taxpayer’s aggregate losses from passive activities exceed the taxpayer’s aggregate income from passive activities for the taxable year, the excess losses may not be deducted against other income for that taxable year. Such excess losses are suspended and are carried forward, to be treated as deductions from…
Don’t miss Part I, here!
“I appreciate your eagerness,” said the adviser. “You can just imagine how I feel every morning when I read through the latest tax news. It takes a Herculean effort to contain myself.”
“OMG,” he’s crazy, “what was my dad thinking when he retained this guy?!”
“I see the look…
The employee-owner of a corporate business will sometimes ask his or her tax adviser, “How much can I pay myself out of my corporation?”
The astute tax adviser may respond, “First of all, you are not paying yourself. The corporation is a separate entity from you, its shareholder. That being said, the corporation can pay…
WTH?
It is not unusual to come across an IRS letter ruling that elicits the following reaction from many of its readers: “why did they expend the time and money to request this ruling?”
On the face of such a ruling, the IRS’s response may seem pretty obvious; even if the readers could not cite…
Flexible Economic Arrangements
We represent a number of entrepreneurs. The form of business entity that they most often choose to operate is an LLC that is treated as a partnership for income tax purposes. They recognize that the LLC is not a taxable entity, that there are no limitations upon who may invest in an…
I recently encountered a situation in which a partially-liquidated corporation sought to claim a net operating loss (“NOL”) as a result of payments made by the corporation in settlement of certain claims relating to its business. The corporation had previously distributed its business assets, but had retained liquid assets in an amount that it estimated…
