The Tax Reform and Jobs Act changed the tax treatment of certain self-created intangible property. This leads to an important question. Does tax reform affect goodwill created or acquired in a business? Some say that the value of goodwill, when a business is sold, could now be considered ordinary income. If so, this could create a huge tax-hit for S and C corporation owners … [Read more...]
Does the spouse partnership really work?
As we explained in a past issue of the Tax Reduction Letter, a spousal partnership can save you a lot of money on taxes. More money, in fact, than a sole partnership or S corporation can. But some of our readers have asked us if an IRS attribution rule (that applies to spouses who conduct passive activities) kills the spousal partnership strategy. Our answer is an emphatic … [Read more...]
How to deal with the qualified improvement property snafu
As part of the Tax Cuts and Jobs Act, Congress created the qualified improvement property category. It was intended to let you fully expense qualified property with bonus depreciation. Unfortunately, Congress made a drafting error in the law which means you can’t use bonus depreciation for qualified improvement property. But don’t let that get you down. We’ll explain how … [Read more...]
Tax Time Bomb: Passive Foreign Investment Companies
Thinking about owning a passive foreign investment company (PFIC)? Perhaps through a (non-U.S.-owned) mutual fund? Our advice, in just one word, is… “don’t!” Why? Because the IRS punishes owners of PFICs with high tax-rates and extremely burdensome reporting requirements. You might think that all this doesn’t apply to you, but you may be in for a big, nasty surprise. You … [Read more...]
How to survive a business-mileage audit
IRS auditors are human. (Despite what you may think.) This means that auditors aren’t always familiar with every nuance of the tax code and so occasionally get things wrong. For example, you may be keeping a 90-day mileage log, but your IRS auditor may disallow all of your auto expenses because you can’t provide a 12-month mileage log. And the IRS auditor would be be … [Read more...]