Wednesday, December 31, 2008
Real Estate Section 1031 Exchange Escrow Earnings
IRS has ruled that earnings on section 1031 exchange escrow funds are not taxable if used for exchange fees on small exchanges (exchange proceeds are $2 million or less).
S-Corporation Shareholder Reasonable Salary
Tax court case Beckley: S-corporation must properly document shareholder loans to avoid IRS challenge re: constructive dividends. This C-corp case can be applied to s-corporations with regard to salary instead of constructive dividends.
Monday, December 22, 2008
Year-End W-2 Reminders
Business Tax: Personal use of company-owned car should be added to each employee’s Form W-2, Wage & Tax Statement. Standard mileage rate not available for cars costing more than ~$15,000.
S-corporation: Shareholder’s health insurance premiums should be added to the shareholder’s Form W-2, Wage & Tax Statement. This income is not subject to FICA, and is then allowed as a deduction on the shareholder's income tax return (yes, it seems silly: the rules require you to add it to income and then turn around and deduct it).
S-corporation: Shareholder’s health insurance premiums should be added to the shareholder’s Form W-2, Wage & Tax Statement. This income is not subject to FICA, and is then allowed as a deduction on the shareholder's income tax return (yes, it seems silly: the rules require you to add it to income and then turn around and deduct it).
Tax News Roundup 22 Dec 2008
Rental real estate: Where taxpayers showed good faith, IRS granted extension to treat all their interests in rental real estate as single rental real estate activity (PLR 200851001). This is good news for taxpayers, but an expensive and risky way to go about it. Better to just make the election on the tax return.
S-Corporation: IRS allowed continued treatment as an S-corporation even though stock was issued to stock to LLC/ineligible shareholder, ruling that the action was inadvertent (PLR 200851008).
S-Corporation: IRS did not allow a corporation to re-elect S-corporation status before the 5-year post-termination period was up (PLR 200851003).
S-Corporation: IRS continuing to allow late S-corporation elections where reasonable cause can be shown (PLR 200851015; PLR 200851022).
Trust: Trust disregarded and self-employment tax imposed on distributions where trusts lacked economic substance (Alfred J. Olsen, et ux. v. Commissioner, TC Memo 2008-275).
Estate: Estate allowed to deduct attorney's fees for estate administration, although attorney's papers were sloppy and record was otherwise “thin” (Estate of Thelma G. Hurford v. Commissioner, TC Memo 2008-278.
S-Corporation: IRS allowed continued treatment as an S-corporation even though stock was issued to stock to LLC/ineligible shareholder, ruling that the action was inadvertent (PLR 200851008).
S-Corporation: IRS did not allow a corporation to re-elect S-corporation status before the 5-year post-termination period was up (PLR 200851003).
S-Corporation: IRS continuing to allow late S-corporation elections where reasonable cause can be shown (PLR 200851015; PLR 200851022).
Trust: Trust disregarded and self-employment tax imposed on distributions where trusts lacked economic substance (Alfred J. Olsen, et ux. v. Commissioner, TC Memo 2008-275).
Estate: Estate allowed to deduct attorney's fees for estate administration, although attorney's papers were sloppy and record was otherwise “thin” (Estate of Thelma G. Hurford v. Commissioner, TC Memo 2008-278.
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