Passive Activity Losses
The “passive loss rules” are aimed at preventing individual taxpayers from using their losses from passive activities to offset their income from active businesses. The rules operate by “disallowing” the current deduction of passive losses – the excess of an individual taxpayer’s losses from passive activities for the year over his or
Back to Basics
As we mark the “end” of the tax season (it never really ends), it may be helpful to remind folks that not every expense incurred by a business may be claimed as a deduction in determining the taxable income of the business.
While that may seem obvious, tax practitioners are forever encountering
The IRS recently considered whether an arrangement between members of a corporate group and its affiliated insurance company, involving foreign currency fluctuations, constituted insurance for Federal tax purposes. For reasons that we will describe, the IRS concluded that the arrangement did not constitute insurance. 
Before getting into the details of the IRS’s holding, however,
A Common Fact Pattern
Partner One and Partner Two started LLC in 2002. LLC was treated as a partnership for tax purposes. They contributed a good deal of their savings and labor, but LLC lost money for the first several years of operation. Another partner, deep-pocketed Corporation, was willing to contribute almost one million dollars
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
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
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
With this post, we continue to examine transactions between the closely-held business and its owners. As we saw last week, special scrutiny is given in situations where a business is controlled by the individual with whom it engages in a transaction because there is a lack of arm’s-length bargaining. That is certainly the case
Many successful business people are also community-minded. They have done well for themselves and their business and, at some point, they seek to share some of their success with the communities they serve and in which they operate, and with the communities in which their employees live and work. This charitable inclination reflects, more often
We noted earlier that sales tax is often viewed as a “sideshow” to income tax considerations in structuring a deal. Regardless, it represents real economic cost to the payor. To appreciate its “true” cost, however, one must also consider its income tax consequences.
In the case of the seller or transferor who pays the tax,