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News, Articles & Resources

Category: Business Transactions

Interest Expense No Longer Characterized As Investment Interest

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The Tax Court, in the case of William C. Lipnick v. Commissioner, No. 1262-18, 153 T.C. No. 1 (2019), addressed the treatment of interest expense that was initially related to a debt-financed distribution. William Lipnick, the taypayer in the case, received interests in a partnership by gift and bequest from…

S Corporation Shareholder Denied $8,000,000 Loss Deduction Due to Poor Structure of Loan

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An S corporation does not pay federal income taxes.  Instead, its income or losses pass through to its shareholders, and they report the income or loss on their federal individual income tax returns.  A shareholder can deduct losses, but only up to the adjusted basis of the shareholder’s stock and…

Is My Client’s Small Business Subject to the Business Interest Expense Limitation?

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Beginning in 2018 the federal income tax deduction of business interest can be limited. The law provides a “small business” exception to this limitation.  However, businesses conducted in multiple related entities must be combined when determining if the small business exception applies. The limitation on business interest expense was originally…

Can a Partner/LLC Member be Treated as an Employee?

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We are often asked whether an LLC, which is treated as a partnership for income tax purposes, can pay a member as an employee on a W-2 rather than simply making gross distributions from which the member pays self-employment taxes and makes quarterly estimated payments for income taxes.  The short…

IRS Disagrees with Tax Court on Partner Excluding Debt Cancellation Income

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The IRS has recently announced a non-acquiescence in four Tax Court cases involving the cancellation of partnership indebtedness.  Generally, the discharge of indebtedness gives rise to gross income to the obligor.  However, Code Section 108 provides a number of exceptions.  Section 108(a)(1)(A) provides an exclusion if the cancellation of indebtedness…

IRS Issues Relief from Repair Regulations and Form 3115 Filing Requirement for Small Taxpayers (Rev. Proc. 2015-20)

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On Friday, February 13, 2015, the IRS released an advance version of Rev. Proc. 2015-20, 2015-5 I.R.B. 450, that allows a “small business taxpayer” to make certain tangible property and dispositions changes in methods of accounting with an I.R.C. § 481(a) adjustment that takes into account only amounts paid or incurred,…

Bross Trucking Inc. v. Commissioner of Internal Revenue

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T.C. MEMO 2014-107 (2014). Bross Trucking is a fascinating case from an estate planning perspective because it presents facts that occur frequently in the representation of family businesses and the planning issues confronting the entrepreneur.  In estate planning for families, advisors often encounter circumstances where the family business is growing, either…

Uncertainty Still Looms – Tax Increase Prevention Act of 2014

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With only two weeks remaining in 2014, Congress did the expected and passed the Tax Increase Prevention Act of 2014 (TIPA), with President Obama signing the Act into law soon thereafter.  For the 2014 tax year, TIPA extends certain business and individual tax breaks, most commonly known as the “extenders.” For…

Back-to-Back Loans Under Federal Regs

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Background Corporate losses and deductions that can pass-through and be deducted by a shareholder are limited by I.R.C. §1366(d)(1). This limit is the shareholder’s total adjusted basis in the corporation’s stock and debt.  If a shareholder’s share of losses and deductions exceeds such basis, the excess losses are suspended and…

NJ Corporate Dissolutions Required

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It is essential that the corporation be dissolved with the New Jersey State Treasurer through the Division of Revenue to avoid future Corporation Business tax, penalty, and interest. Every corporation subject to the New Jersey Corporation Business Tax Act must file New Jersey Corporation Business Tax Returns whether the corporation discontinued…

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