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Tax Strategy for the Week (December 20th, 2013)

Fun Asia Show Recording-December 19, 2013
Transfers to Charity at Death
Tax Issue

A gift to charity at death is deductible for estate tax but generally not for income tax. Lifetime gifts to charity, on the other hand, reduce the taxable estate and also provide an income tax deduction. The problem with a sizable lifetime charitable gift, however, is that it may leave the donor uncertain about their future financial security. The safest course is to wait until death to be sure that the money will not be needed.

 

Applicable Tax Law

Most gifts to charity, regardless of the amount, are fully deductible for […]

Tax Strategy for the Week (December 13th, 2013)

Fun Asia Show Recording-December 12, 2013
Turning Charitable Contributions into Advertising Expenses
Tax Issue

Charitable contributions made by businesses do not receive the same tax treatment as advertising expenses. Contributions are subject to various limitations and restrictions at both the entity and personal tax level. Carryovers are generally limited to five years and unused deductions are forfeited. Partners, S corporation shareholders, and sole proprietors deduct charitable donations on Schedule A.  Any tax benefit depends on the taxpayer’s marginal tax bracket, potentially resulting in unequal tax treatment among shareholders or partners. The charitable contribution loses its vale as a tax deduction for individuals […]

Tax Strategy for the Week (December 6th, 2013)

Fun Asia Show Recording-December 5, 2013
Standard Mileage Rate – How It Can Avoid Auto Expense Limits
 

Tax Issue

For owners of passenger automobiles, section 280F imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. However, the limitations of section 280F do not apply to depreciation expense calculated using the standard mileage rate method.

 

Applicable Tax Law

Passenger autos. For purposes of the section 280F limitations, a passenger auto is any four-wheeled vehicle that is made primarily for use on public streets, roads, and highways. Its unloaded gross vehicle weight […]

Tax Strategy for the Week (November 29th, 2013)

Fun Asia Show Recording-November 28, 2013
Independent Contractors – How to Avoid Tax Problems
 Tax Issue

There is a real incentive for small business owners to try to avoid payroll taxes and the administrative red tape that goes along with hiring workers as employees. Treating workers as independent contractors is tempting when one considers that there is no corresponding payroll tax return to file, no employer matching for FICA, no unemployment tax, and no workers’ compensation insurance to purchase. The only administrative cost of treating a worker as an independent contractor is the requirement to issue a 1099 to the worker at […]

Tax Strategy for the Week # 2 (November 22nd, 2013)

Fun Asia Show Recording-November 21, 2013
Cost Segregation – How It Can Save Tax
Tax Issue

Taxpayers who acquire real property for use in their business are faced with depreciating real property over 27.5 or 39 years. Certain costs incurred in constructing or acquiring real property often qualify for accelerated depreciation. The ability to shorten the depreciation period can substantially decrease the tax liability of a business and increase its cash flow. It is important to have documentation supporting the reclassification of building components to tangible personal property depreciable over shorter periods.

Applicable Tax Law

Buildings (section 1250 property) are generally eligible for straight-line […]

Tax Strategy for the Week (Novemeber 22nd, 2013)

Fun Asia Show Recording-November 21, 2013
How to Turn a Vacation into a Business Deduction
 
Tax Issue

The unreimbursed cost of travel away from home for business purposes is generally deductible, but travel for personal reasons is never deductible. It is not unusual for travel to include both business and personal elements. Since IRS rules permit a deduction for the business portion of a mixed-use trip, determining what constitutes a business day becomes critical. A careful taxpayer can combine business and personal travel and maximize the amount that is deductible on Schedule C, Form 2106, or a business tax return.

Applicable Tax Law

Travel […]

Tax Strategy for the Week (Novemeber 15th, 2013)

Fun Asia Show Recording-November 14, 2013
Business Expenses Paid With Personal Funds – How to Avoid Tax Problems
 

Tax Issue

In an ideal situation, a business entity pays for all of its business expenses from its own funds, and business expenses are kept separate from personal expenses. However, sometimes employees, corporate shareholders, LLC members, partners, and sole proprietors pay for business expenses with personal funds as a matter of necessity or of convenience. Business expenses paid with personal funds might include vehicle expenses, overnight travel, business meals, and any expense that is an ordinary and necessary expense of a business entity, and, […]

Tax Strategy for the Week (November 8th, 2013)

Fun Asia Program Recording from Rauf Bajaria
Deducting an Improvement as a Repair
Tax Issue

Is it a repair or is it an improvement? Costs paid or incurred to repair property are currently deductible while costs to improve property are depreciated over the life of the property. With increased Section 179 deduction limits and bonus depreciation, businesses may not pay as much attention to what constitutes a repair versus an improvement. However, the increased depreciation expensing provisions were intended to be temporary.  As the provisions expire, determining what constitutes a repair, in order to maximize current business deductions, takes on added significance.

Applicable […]

Tax Strategy for the Week (November 1st, 2013)

Funding a Buy-Sell Agreement
 
Tax Issue

Buy-sell agreements are part of a succession plan put in place to protect the financial interests of the owners and their heirs and to protect the company’s stability in case of an untimely death of one of the owners. The agreement is a legally binding contract that determines who can buy an interest in the company, how much the deceased owner’s share in the company was worth, and whether or not the estate of the deceased must sell.

However, the agreement itself does not fund the buyout. The surviving business partner(s) must come up with the […]

Tax Strategy for the Week (October 25th, 2013)

Funding a Buy-Sell Agreement
 
Tax Issue

Buy-sell agreements are part of a succession plan put in place to protect the financial interests of the owners and their heirs and to protect the company’s stability in case of an untimely death of one of the owners. The agreement is a legally binding contract that determines who can buy an interest in the company, how much the deceased owner’s share in the company was worth, and whether or not the estate of the deceased must sell.

However, the agreement itself does not fund the buyout. The surviving business partner(s) must come up with the […]