LLC to S-Corporation Conversion Clarified

The IRS has issued a new ruling that applies to a Limited Liability Company (LLC) electing to be taxed as an S-corporation. The ruling clarifies that there does not need to be a short tax year as a C-corporation in the middle of the process of converting from a “partnership” (the default tax status of an LLC) to an S-corporation. Avoidance of the accounting and tax burdens of an intervening C-corporation tax year is welcome to all involved.

Foreign Financial Account Reporting (FBAR – TD F 90-22.1)

“United States persons”, and foreign persons that were located in and doing business in the United States during the calendar year, must report to the United States Treasury their foreign financial accounts if the total value of all such accounts on any day of the year exceeded $10,000. The report, Form TD F 90-22.1, also known as FBAR, must be mailed before July 1 of the following year and no extension of this deadline is possible. “United States persons” are U.S. citizens and residents, including partnerships, LLC’s, corporations, estates, and trusts. Even individuals who are not U.S. residents under immigration law may be considered residents because of the number of days they spent in the U.S. in the last 3 years. An account is foreign based on the geographical location of the account, not the nationality of the financial institution; exceptions exist for US military banking facilities. The penalty for failure to file the report on time is $10,000. FBAR isn't an income tax return, and it shouldn't be mailed with any income tax return.

Beginning of Estate for Tax Purposes

Although a decedent’s estate is created at the moment of death, its income tax year begins the next day. The timing of appointment of personal representative or administrator or executor has no effect on the beginning of the estate tax year. The date of death, therefore, is the last day of the decedent’s personal income tax year. Income received after the date of death is generally reportable on the estate income tax return using the estate’s tax ID#, not the decedent’s personal income tax return and Social Security number. This is true even though many payers issue tax forms, such as 1099’s and W-2’s, in the name and tax ID# of the decedent.

Real Estate Tax Assessment Appeals in San Diego, California

The California State Board of Equalization Letter to Assessors 2009/021, 04/29/2009, confirmed that San Diego County has certified the last day of the real estate tax assessment filing period. The regular appeals filing period for San Diego real estate tax assessments will begin on July 2, 2009 and will end on November 30, 2009.

Small Business Tax Net Operating Loss Election Clarified

The IRS has issued clarification on the election to carry back a small business tax net operating (NOL) loss 3, 4, or 5 years. In this case the IRS has taken the pro-taxpayer interpretation regarding which years’ revenues are used to determine whether the loss is a qualifying small business tax NOL. The election may be made by filing the applicable refund claim forms, by attaching a statement to the tax return for the year in which the small business tax NOL arose.

Updated Life Expectancy for Gift Tax / Estate Tax Valuations

IRS has issued new tables for valuing life estates, term interests, remainders and reversions for estate, gift and income tax purposes. The new tables reflect today’s longer life expectancies. For gifts made in May or June 2009, or deaths occurring then, the gift donor or estate executor may choose to use either the old or new tables.