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About 18 months ago, I issued an E-Blast that dealt with the fact that time was running out on using “bottom dollar guarantees” as a way to shift liabilities allocated to a partner who needs additional debt so as to “cover” negative tax capital accounts so as to avoid gain recognition. Well, the Department of the Treasury issued temporary regulations on October 5, 2016 that, in effect, ended the viability of this planning idea. In general, one of the many tax advantages of a partnership over other entities is that a partner’s share of partnership liabilities increases the partner’s outside […]

Under the Tangible Property Regulations Generating Significant Tax Saving Opportunities The IRS issued Notice 2017-6 on December 20, 2016 that once again extended the time period during which certain automatic accounting method changes can be requested with respect to the tangible property regulations (“TPR”). Under the provisions of the Notice, certain automatic accounting changes can be requested on Form 3115 provided it is filed with the income tax return for a tax year beginning before January 1, 2017. Of particular note is that this Notice permits taxpayers that previously made accounting method changes for repairs and maintenance costs in the […]

Like many borrowers, you may be drawn to nonrecourse loans because the arrangements can shield you from personal liability. But they don’t provide protection in all cases. “Carveouts” in the loan documents can saddle you with full liability if violated. However, you may be able to minimize personal liability for violations through savvy negotiating. Under a nonrecourse loan, the lender agrees that the borrower won’t be held personally liable on the loan. Theoretically, that means the lender’s only “recourse” in the case of default lies in the collateral (generally real estate). However, the lender may include specific carveouts — or […]

Exchanging Property Sec. 1031 exchanges are named after Internal Revenue Code Sec. 1031, which allows you to exchange business or investment property (the relinquished property) for business or investment property of a like kind (the replacement property) without recognizing any gain or loss until the disposition or liquidation of the replacement property occurs. The provision also allows a deferred, or “forward,” exchange whereby the relinquished property is transferred before the acquisition of the “replacement property.” The replacement property must be identified within 45 days of when the relinquished property is transferred. The replacement property also must be acquired within 180 […]

One of the many tax advantages of a partnership (including limited liability companies treated as partnerships for tax purposes) over other forms of doing business is the fact that the tax basis in a partner’s partnership interest (“outside basis”) includes the partner’s share of partnership liabilities. Outside basis is important in determining how much of an allocated loss can potentially be deducted and whether a distribution of cash (including marketable securities distributed by a partnership other than an investment partnership) is taxable. The way to determine a partner’s share of liabilities is set forth in lengthy and complex regulations. In […]

DOL Audit Quality Study In May 2015, the Department of Labor (the “DOL”) issued a report on their examination of 400 of the 81,000 employee benefit plan (“EBP”) audits filed for the year 2011. The audits were categorized by the size of a CPA Firm’s EBP audit practice, not reflective of the overall size of the firm. The results showed that firms with smaller EBP audit practices had a greater occurrence of audit deficiencies than firms with larger EBP audit practices. Firms that performed only one or two EBP audits a year showed a 75% deficiency rate while firms that […]