- Traditional estate planning strategies focus on reducing assets included in the estate but ignore liabilities, which can also reduce net worth.
- Closely-held family businesses often have undisclosed moral obligations to founders and owners in the form of future compensation.
- Establishing a written death benefit only (DBO) plan can formalize these moral obligations as a deductible business expense and reduce estate tax by decreasing net worth through an increased liability accrual.
S corporations are legally structured in a way that allow them to go untaxed. This is because income that is recognized by owners is taxed at the personal level and not via the business. Moreover, an S corporation is a pass-through or flow-through entity, which means income passes through to the shareholders. This newsletter details tax management information and methods used by and relevant to S corporations.
This document provides an overview and contents of Chapter 16, which discusses S corporations. Key points include:
1) S corporations allow income and losses to flow through to shareholders but the character of items is determined at the entity level. Distributions are generally not taxable but gains may be recognized on property distributions.
2) S corporations must generally use a calendar year but may elect a fiscal year if certain deferral or business purpose tests are met. Accrual, cash, and hybrid accounting methods are allowed.
3) Basis accounts include outside basis, at-risk basis, accumulated adjustment account (AAA), and previously taxed income account, which determine tax treatment of losses, distributions, and sales.
How to transform a family business: insights from the trenches Browne & Mohan
The document discusses insights into transforming a family business. It begins by providing background on the prevalence of family businesses globally and in India. It then outlines some of the common challenges family businesses face, such as unclear roles and decision-making bottlenecks. The document recommends conducting an assessment of the family business' "maturity" to identify gaps. It suggests transformations on both the family side, such as establishing governance structures and succession planning, and the business side, like evaluating operations and investing in capabilities. The goal is to professionalize processes while preserving family identity.
This document discusses planning for health care costs in retirement. It outlines that retirees need significant savings to cover health care expenses - $116,000 for men and $131,000 for women is recommended. Health care costs can be divided into recurring costs like doctor visits and prescription drugs, which average $1,885 annually, and non-recurring costs like hospital stays that increase with age. Proper retirement planning requires considering total expected costs like health premiums, taxes, and debt payments in addition to direct health care expenses.
Strategies to Maximize Employee Retention Credit and Paycheck Protection Program (PPP) Forgiveness.
This presentation and these materials are designed to provide information in regard to the subject matter
covered. This presentation and these materials are provided solely as a teaching tool, with the
understanding that Stephen Moskowitz, Moskowitz LLP, and the instructor are not engaged in rendering
legal, accounting, or other professional service and that they are not offering such advice in this
presentation and these accompanying materials.
Common tax deductions that taxpayers often overlook include expenses related to job searches, home offices, health insurance premiums, student loan interest paid by parents, and certain charitable donations. Taxpayers can also potentially deduct casualty losses from disasters like Superstorm Sandy. Other opportunities for tax savings include the child tax credit, filing as head of household, and accounting for reinvested dividends to accurately calculate capital gains or losses. Taxpayers should check with a tax professional before claiming any deductions.
S corporations are legally structured in a way that allow them to go untaxed. This is because income that is recognized by owners is taxed at the personal level and not via the business. Moreover, an S corporation is a pass-through or flow-through entity, which means income passes through to the shareholders. This newsletter details tax management information and methods used by and relevant to S corporations.
This document provides an overview and contents of Chapter 16, which discusses S corporations. Key points include:
1) S corporations allow income and losses to flow through to shareholders but the character of items is determined at the entity level. Distributions are generally not taxable but gains may be recognized on property distributions.
2) S corporations must generally use a calendar year but may elect a fiscal year if certain deferral or business purpose tests are met. Accrual, cash, and hybrid accounting methods are allowed.
3) Basis accounts include outside basis, at-risk basis, accumulated adjustment account (AAA), and previously taxed income account, which determine tax treatment of losses, distributions, and sales.
How to transform a family business: insights from the trenches Browne & Mohan
The document discusses insights into transforming a family business. It begins by providing background on the prevalence of family businesses globally and in India. It then outlines some of the common challenges family businesses face, such as unclear roles and decision-making bottlenecks. The document recommends conducting an assessment of the family business' "maturity" to identify gaps. It suggests transformations on both the family side, such as establishing governance structures and succession planning, and the business side, like evaluating operations and investing in capabilities. The goal is to professionalize processes while preserving family identity.
This document discusses planning for health care costs in retirement. It outlines that retirees need significant savings to cover health care expenses - $116,000 for men and $131,000 for women is recommended. Health care costs can be divided into recurring costs like doctor visits and prescription drugs, which average $1,885 annually, and non-recurring costs like hospital stays that increase with age. Proper retirement planning requires considering total expected costs like health premiums, taxes, and debt payments in addition to direct health care expenses.
Strategies to Maximize Employee Retention Credit and Paycheck Protection Program (PPP) Forgiveness.
This presentation and these materials are designed to provide information in regard to the subject matter
covered. This presentation and these materials are provided solely as a teaching tool, with the
understanding that Stephen Moskowitz, Moskowitz LLP, and the instructor are not engaged in rendering
legal, accounting, or other professional service and that they are not offering such advice in this
presentation and these accompanying materials.
Common tax deductions that taxpayers often overlook include expenses related to job searches, home offices, health insurance premiums, student loan interest paid by parents, and certain charitable donations. Taxpayers can also potentially deduct casualty losses from disasters like Superstorm Sandy. Other opportunities for tax savings include the child tax credit, filing as head of household, and accounting for reinvested dividends to accurately calculate capital gains or losses. Taxpayers should check with a tax professional before claiming any deductions.
The document discusses the key characteristics and tax advantages of an S corporation. An S corporation is a business structure that allows business income and losses to pass through to shareholders for taxation under individual tax rates, avoiding double taxation. It provides liability protection like a C corporation but taxes profits like a partnership. Key benefits include lower overall taxes, ability to remove profits tax-free as distributions, and flexibility to manage employment taxes through executive salaries.
How to Prepare Your Startup for Venture Capital Funding Roger Royse
This document discusses how to prepare a startup for venture capital investment. It covers sources of startup funding such as founders' personal savings, debt financing, government grants, friends and family investments, angels/seed investors, and venture capital. It also discusses choosing an entity structure, founder equity allocation, advisors, stock options versus restricted stock units, vesting schedules, transfer restrictions, safe/convertible notes, capitalization tables, staged financings, pitch decks, term sheets, valuations, liquidation preferences, board representation, protective provisions, and deal structures. The document provides guidance on all key considerations for startups seeking venture capital.
How to Split the Pie, Raise Money and Reward ContributorsRoger Royse
This document discusses various considerations around splitting equity among founders of a startup, rewarding contributors, and raising money. It covers models for splitting founders' equity based on their relative contributions, such as a dynamic split model that assigns weights to contributions. It also discusses equity for advisors, preferred stock, liquidation preferences, vesting schedules, cap tables, and taxation of compensatory partnership interests. The document provides examples and templates to illustrate these concepts.
The document provides an overview of S-Corporations, explaining that they allow business owners to split business proceeds into a salary and income portion in order to pay employment taxes only on the salary and avoid self-employment taxes on the income portion. It notes the setup requirements to form an S-Corp and quarterly/annual maintenance requirements, and compares the employment tax savings of an S-Corp to a sole proprietorship.
Estate Planning for Owners of Closely-Held BusinessesMoskowitz LLP
Estate planning for owners of closely-held businesses is designed to avoid unintended consequences. The death of an owner can have significant estate and gift tax consequences that can be mitigated with lifetime and postmortem estate planning techniques.
This presentation and these materials are designed to provide information in regard to the subject matter
covered. This presentation and these materials are provided solely as a teaching tool, with the
understanding that Stephen Moskowitz, Moskowitz LLP, and the instructor are not engaged in rendering
legal, accounting, or other professional service and that they are not offering such advice in this
presentation and these accompanying materials.
Prepare Your Startup for Venture Capital InvestmentRoger Royse
This document provides an overview of preparing a startup for venture capital investment. It discusses various sources of startup funding including founders' personal savings, debt financing, government grants, friends and family investments, angels/seed investors, and institutional venture capital. It then focuses on venture capital, explaining the economics from the investors' perspective, factors that make a company a good fit for VC, and considerations around management, metrics, and choosing a VC firm. The document also covers structuring recommendations for venture capital including choice of entity, founder equity arrangements, currency (options vs. stock), vesting, and other deal terms.
This document provides information on 2021 tax planning strategies for individuals and businesses. It discusses the difference between reactive tax preparation and proactive tax planning. The stages of effective tax planning include planning, implementation, quarterly maintenance, and tax return preparation. Various tax planning strategies are outlined for deferring or accelerating income, bunching deductions, maximizing retirement contributions, checking IRA distribution requirements, converting traditional IRAs to Roth IRAs, and reducing Roth conversion taxes. Year-end tax planning considerations for businesses include employee retention credits, net operating loss carrybacks, and research and development cost deductions and amortization.
Increase Profit and Make Better Business Decisions through your Tax Services Moskowitz LLP
Year-round tax planning with Mosokowitz LLP; The road to tax savings begins with us!
This presentation and these materials are designed to provide information in regard to the subject matter
covered. This presentation and these materials are provided solely as a teaching tool, with the
understanding that Stephen Moskowitz, Moskowitz LLP, and the instructor are not engaged in rendering
legal, accounting, or other professional service and that they are not offering such advice in this
presentation and these accompanying materials.
How to Prep for Venture Capital Funding Part 2: Venture Capital Termsideatoipo
Getting venture capital funding is the ultimate yet often elusive goal of many Silicon Valley startups. Venture capital funding dramatically improves a startup's chances of having a big IPO or buy out exit. Most startups at their inception have the hope, if not the expectation, that they will eventually receive venture capital funding.
In the current environment, venture capital funding has become more competitive, but it is still available. This presentation is the second of two parts and will cover typical venture capital deal terms and points, negotiating with venture capitalists and what to expect in the current environment.
Corporate and startup attorney Roger Royse will discuss:
1) Should you be approaching venture capitalists now
2) How (and when) you should value your startup for venture capitalists
3) What are typical venture capital financing terms
4) What terms you may negotiate and what terms are standard
5) How to protect yourself from dilution, freeze outs and forfeiture of shares
6) How to manage your investors after the close
7) Planning for a venture capital backed exit
8) What to do when things go wrong
9) Troubled company terms, down rounds and recaps
10) How to access and leverage funding sources during a global economic crisis
and more!
1) In 2010, virtually anyone can convert traditional retirement accounts like IRAs and 401(k)s into Roth accounts, allowing future growth to be tax-free.
2) Converting early in 2010 provides more time for tax-free growth and protects more funds from future taxes.
3) Those considering conversion should work with a financial advisor to evaluate if conversion is appropriate for their individual situation and to help pay any taxes due.
This document discusses several tax issues related to startup companies, including:
1) Choice of entity considerations such as availability of losses, fringe benefits, public offerings, liability, intellectual property, and ownership transfers.
2) Qualified small business stock and relevant tax benefits at the federal and state levels.
3) Proposed §305 regulations regarding deemed distributions on convertible instruments.
4) Dynamic split models for allocating founder's equity.
5) Tax treatment of convertible debt issued as an investment.
Idea to ipo funding 101 royse - august 11 2020Roger Royse
This document provides an overview of various sources of funding for startups, from founders' personal savings to venture capital. It discusses funding from founders, debt financing, government grants and loans, friends and family investors, angel investors, venture capital firms, and alternative sources like crowdfunding and initial coin offerings. For venture capital specifically, it covers typical terms, economics, metrics VCs consider, and structuring a startup to be attractive to VCs, including choice of entity, founder equity structures, and vesting. The overall purpose is to educate entrepreneurs on their funding options from early startup stages through growth with institutional investors.
There are many people creating new entities in order to protect their assets and liability. This small presentation of running an S-Corporation has been provided to offer some "Basic" understanding of certain requirements that are often overlooked when choosing the S-Corporation entity type.
The document provides information about electing S corporation status for Cane, Inc. It discusses:
- Cane, Inc. has been a C corporation with less than $100,000 annual income, but expects losses in the next few years due to imports
- Electing S corporation status could allow deducting anticipated losses and provide tax benefits
- Requirements for S corporation eligibility include being a domestic corporation with one class of stock and 100 or fewer shareholders
- Cane, Inc. could elect S status if it has identical voting and non-voting stock and shareholders consent before the deadline
Variable annuities and mutual funds are long-term investment vehicles designed for retirement. Variable annuities offer tax-deferred growth and death benefits while mutual funds allow for more flexibility but do not provide the same tax benefits. Both have associated fees that impact returns. Retirement planning should consider factors like longer lifespans, inflation, and rising healthcare costs to ensure adequate savings.
The document discusses succession planning for family businesses and navigating taxes. It begins by noting that any transfer of assets between individuals or entities carries potential tax implications like income, gift, estate, or excise taxes. The key is to identify the client's objectives upfront, understand their history and fears, and tailor a plan to minimize taxable transfers and maximize tax exclusions and credits. This allows transferring value below taxation thresholds while still maintaining some control. Tools like trusts, annual gift exclusions, and flow-through entities can help transfer assets out of the estate while addressing client concerns about maintaining control and access to income. The overall goal is a comprehensive plan that moves assets to the desired destination with the fewest tax obstacles.
A special report that discusses what to do with your tax refund, specifically strategies to optimize the use of your income tax refund; saving for your future, improving your financial well-being, addressing risk management strategies, education savings, reducing non-deductible debt, RRSP or non-registered savings, contributing to a Tax-Free Savings Account (TFSA), building an emergency fund and receiving your tax fund earlier than expected.
As a result of RRSP contributions, interest expenses, tax shelter deductions or various other tax deductions and credits, your clients may be expecting, or have recently received, an income tax refund from the Canada Revenue Agency (CRA). If they have received a tax refund, it may be a good opportunity to determine if they can use some or all of it to improve their financial well-being. This special report will discuss some strategies that may help them use their income tax refund more wisely and assist them in meeting their financial goals.
The document discusses the key characteristics and tax advantages of an S corporation. An S corporation is a business structure that allows business income and losses to pass through to shareholders for taxation under individual tax rates, avoiding double taxation. It provides liability protection like a C corporation but taxes profits like a partnership. Key benefits include lower overall taxes, ability to remove profits tax-free as distributions, and flexibility to manage employment taxes through executive salaries.
How to Prepare Your Startup for Venture Capital Funding Roger Royse
This document discusses how to prepare a startup for venture capital investment. It covers sources of startup funding such as founders' personal savings, debt financing, government grants, friends and family investments, angels/seed investors, and venture capital. It also discusses choosing an entity structure, founder equity allocation, advisors, stock options versus restricted stock units, vesting schedules, transfer restrictions, safe/convertible notes, capitalization tables, staged financings, pitch decks, term sheets, valuations, liquidation preferences, board representation, protective provisions, and deal structures. The document provides guidance on all key considerations for startups seeking venture capital.
How to Split the Pie, Raise Money and Reward ContributorsRoger Royse
This document discusses various considerations around splitting equity among founders of a startup, rewarding contributors, and raising money. It covers models for splitting founders' equity based on their relative contributions, such as a dynamic split model that assigns weights to contributions. It also discusses equity for advisors, preferred stock, liquidation preferences, vesting schedules, cap tables, and taxation of compensatory partnership interests. The document provides examples and templates to illustrate these concepts.
The document provides an overview of S-Corporations, explaining that they allow business owners to split business proceeds into a salary and income portion in order to pay employment taxes only on the salary and avoid self-employment taxes on the income portion. It notes the setup requirements to form an S-Corp and quarterly/annual maintenance requirements, and compares the employment tax savings of an S-Corp to a sole proprietorship.
Estate Planning for Owners of Closely-Held BusinessesMoskowitz LLP
Estate planning for owners of closely-held businesses is designed to avoid unintended consequences. The death of an owner can have significant estate and gift tax consequences that can be mitigated with lifetime and postmortem estate planning techniques.
This presentation and these materials are designed to provide information in regard to the subject matter
covered. This presentation and these materials are provided solely as a teaching tool, with the
understanding that Stephen Moskowitz, Moskowitz LLP, and the instructor are not engaged in rendering
legal, accounting, or other professional service and that they are not offering such advice in this
presentation and these accompanying materials.
Prepare Your Startup for Venture Capital InvestmentRoger Royse
This document provides an overview of preparing a startup for venture capital investment. It discusses various sources of startup funding including founders' personal savings, debt financing, government grants, friends and family investments, angels/seed investors, and institutional venture capital. It then focuses on venture capital, explaining the economics from the investors' perspective, factors that make a company a good fit for VC, and considerations around management, metrics, and choosing a VC firm. The document also covers structuring recommendations for venture capital including choice of entity, founder equity arrangements, currency (options vs. stock), vesting, and other deal terms.
This document provides information on 2021 tax planning strategies for individuals and businesses. It discusses the difference between reactive tax preparation and proactive tax planning. The stages of effective tax planning include planning, implementation, quarterly maintenance, and tax return preparation. Various tax planning strategies are outlined for deferring or accelerating income, bunching deductions, maximizing retirement contributions, checking IRA distribution requirements, converting traditional IRAs to Roth IRAs, and reducing Roth conversion taxes. Year-end tax planning considerations for businesses include employee retention credits, net operating loss carrybacks, and research and development cost deductions and amortization.
Increase Profit and Make Better Business Decisions through your Tax Services Moskowitz LLP
Year-round tax planning with Mosokowitz LLP; The road to tax savings begins with us!
This presentation and these materials are designed to provide information in regard to the subject matter
covered. This presentation and these materials are provided solely as a teaching tool, with the
understanding that Stephen Moskowitz, Moskowitz LLP, and the instructor are not engaged in rendering
legal, accounting, or other professional service and that they are not offering such advice in this
presentation and these accompanying materials.
How to Prep for Venture Capital Funding Part 2: Venture Capital Termsideatoipo
Getting venture capital funding is the ultimate yet often elusive goal of many Silicon Valley startups. Venture capital funding dramatically improves a startup's chances of having a big IPO or buy out exit. Most startups at their inception have the hope, if not the expectation, that they will eventually receive venture capital funding.
In the current environment, venture capital funding has become more competitive, but it is still available. This presentation is the second of two parts and will cover typical venture capital deal terms and points, negotiating with venture capitalists and what to expect in the current environment.
Corporate and startup attorney Roger Royse will discuss:
1) Should you be approaching venture capitalists now
2) How (and when) you should value your startup for venture capitalists
3) What are typical venture capital financing terms
4) What terms you may negotiate and what terms are standard
5) How to protect yourself from dilution, freeze outs and forfeiture of shares
6) How to manage your investors after the close
7) Planning for a venture capital backed exit
8) What to do when things go wrong
9) Troubled company terms, down rounds and recaps
10) How to access and leverage funding sources during a global economic crisis
and more!
1) In 2010, virtually anyone can convert traditional retirement accounts like IRAs and 401(k)s into Roth accounts, allowing future growth to be tax-free.
2) Converting early in 2010 provides more time for tax-free growth and protects more funds from future taxes.
3) Those considering conversion should work with a financial advisor to evaluate if conversion is appropriate for their individual situation and to help pay any taxes due.
This document discusses several tax issues related to startup companies, including:
1) Choice of entity considerations such as availability of losses, fringe benefits, public offerings, liability, intellectual property, and ownership transfers.
2) Qualified small business stock and relevant tax benefits at the federal and state levels.
3) Proposed §305 regulations regarding deemed distributions on convertible instruments.
4) Dynamic split models for allocating founder's equity.
5) Tax treatment of convertible debt issued as an investment.
Idea to ipo funding 101 royse - august 11 2020Roger Royse
This document provides an overview of various sources of funding for startups, from founders' personal savings to venture capital. It discusses funding from founders, debt financing, government grants and loans, friends and family investors, angel investors, venture capital firms, and alternative sources like crowdfunding and initial coin offerings. For venture capital specifically, it covers typical terms, economics, metrics VCs consider, and structuring a startup to be attractive to VCs, including choice of entity, founder equity structures, and vesting. The overall purpose is to educate entrepreneurs on their funding options from early startup stages through growth with institutional investors.
There are many people creating new entities in order to protect their assets and liability. This small presentation of running an S-Corporation has been provided to offer some "Basic" understanding of certain requirements that are often overlooked when choosing the S-Corporation entity type.
The document provides information about electing S corporation status for Cane, Inc. It discusses:
- Cane, Inc. has been a C corporation with less than $100,000 annual income, but expects losses in the next few years due to imports
- Electing S corporation status could allow deducting anticipated losses and provide tax benefits
- Requirements for S corporation eligibility include being a domestic corporation with one class of stock and 100 or fewer shareholders
- Cane, Inc. could elect S status if it has identical voting and non-voting stock and shareholders consent before the deadline
Variable annuities and mutual funds are long-term investment vehicles designed for retirement. Variable annuities offer tax-deferred growth and death benefits while mutual funds allow for more flexibility but do not provide the same tax benefits. Both have associated fees that impact returns. Retirement planning should consider factors like longer lifespans, inflation, and rising healthcare costs to ensure adequate savings.
The document discusses succession planning for family businesses and navigating taxes. It begins by noting that any transfer of assets between individuals or entities carries potential tax implications like income, gift, estate, or excise taxes. The key is to identify the client's objectives upfront, understand their history and fears, and tailor a plan to minimize taxable transfers and maximize tax exclusions and credits. This allows transferring value below taxation thresholds while still maintaining some control. Tools like trusts, annual gift exclusions, and flow-through entities can help transfer assets out of the estate while addressing client concerns about maintaining control and access to income. The overall goal is a comprehensive plan that moves assets to the desired destination with the fewest tax obstacles.
A special report that discusses what to do with your tax refund, specifically strategies to optimize the use of your income tax refund; saving for your future, improving your financial well-being, addressing risk management strategies, education savings, reducing non-deductible debt, RRSP or non-registered savings, contributing to a Tax-Free Savings Account (TFSA), building an emergency fund and receiving your tax fund earlier than expected.
As a result of RRSP contributions, interest expenses, tax shelter deductions or various other tax deductions and credits, your clients may be expecting, or have recently received, an income tax refund from the Canada Revenue Agency (CRA). If they have received a tax refund, it may be a good opportunity to determine if they can use some or all of it to improve their financial well-being. This special report will discuss some strategies that may help them use their income tax refund more wisely and assist them in meeting their financial goals.
The IRS expects that more than 70% of taxpayers will receive a refund in 2017. 1 What you do with a tax refund is up to you, but here are some ideas that may make your refund twice as valuable.
Advocates Letter Format Shor Tpresentation PrintableThomas Tysl
Partner with Advocates For Savings to cut costs through analyzing expenses like worker's compensation insurance, taxes, credit card processing fees, and more. Their experts can find savings opportunities across various business areas and connect you with relevant subsidy and stimulus programs. Their services aim to improve your bottom line at no risk, as clients only pay a percentage of recovered savings or overpayments.
8 Tips for Avoiding Insolvency Land MinesJames Baer
This document provides 8 tips for avoiding insolvency issues:
1. Budget for future payables such as payroll, taxes, and retirement to avoid personal liability issues.
2. Consider obligations like severance, vacation pay, and insurance which could damage reputation if unpaid.
3. Conduct thorough analysis of funds to cover projected costs and ensure management accurately portrays financial obligations.
It then discusses each tip in more detail, focusing on issues like personal guarantees, priority of payments, regulatory compliance, litigation risks, record keeping, and realistically assessing time remaining.
The document discusses investing outside of registered retirement savings plans (RRSPs) and strategies to minimize taxes on investment income earned outside an RRSP. It recommends investing in corporate class mutual funds or T-Series mutual funds, which allow you to defer capital gains taxes when switching between funds and provide monthly income payments that are partially treated as a return of capital and not immediately taxed. When combined with an overall asset allocation and tax management plan, these non-registered investment options can help maximize wealth over the long run.
This document provides information about financial planning topics including wealth transfer strategies, marriage and finances, college savings plans, intergenerational wealth planning, and advance medical directives. Specifically, it discusses how low interest rates create opportunities for grantor retained annuity trusts and charitable lead annuity trusts. It also outlines how marriage can impact building wealth, retirement benefits, estate planning, taxes, and debt. The document then provides an overview of key facts about college savings plans and rising college costs.
The document discusses the Deferred Sales Trust (DST) as a strategy to defer capital gains taxes when selling appreciated assets like real estate. It explains that the DST allows the seller to transfer ownership of the property to a trust in exchange for a promissory note, deferred the capital gains tax until payments on the note are received. The trust then sells the property and uses the proceeds to invest and make scheduled payments to the seller over time according to the negotiated promissory note. This allows the seller to defer capital gains taxes for years while receiving a stream of income. Key benefits are tax deferral, estate tax savings, maintaining family wealth, and providing retirement income.
This document summarizes the following:
- MacKay LLP, an accounting firm operating in Western and Northern Canada, has joined the Crowe Horwath International network of accounting firms and will rebrand as Crowe MacKay LLP effective January 2014.
- The CEO discusses the rebranding process and emphasizes that MacKay LLP will remain independent and focused on its clients in Western and Northern Canada.
- Several tax relief measures for victims of the 2013 Alberta floods are outlined, including the ability to apply for an extension on tax filing deadlines and details on tax treatment of disaster relief payments.
This article on your 2016 tax return and tax planning tips for nonqualified deferred compensation plans is reprinted with permission of myNQDC.com, a respected source of information, content, and tools on nonqualified deferred compensation.
Strategies for Proposing Law Frm Rate Increases Richard Brzakala
This article examines various strategies that a law firm can utilize when approaching corporate clients for rate increases, including how to manage client rate freezes and refusals for rate increases.
Executive bonus plans can boost employee retention by incentivizing key employees to stay. Offering a Section 162 executive bonus plan allows businesses to reward top performers without providing the same benefits to all employees. The business can pay life insurance premiums for executives and deduct the cost, while the income is taxable to the employee. To offset the tax burden, the bonus can be increased or the business can loan money for taxes. This system of "golden handcuffs" encourages executives to remain for long periods like retirement. The plans provide benefits like cash value that executives can use for retirement income or exchange for annuities.
While it is generally a good idea to draw from taxable accounts first during retirement, there are some exceptions. The optimal order to tap retirement accounts depends on factors like the client's tax situation, risk tolerance, investments, and income needs. For tax-deferred accounts like IRAs, taking required minimum distributions (RMDs) after age 70-1/2 can potentially increase taxes due to larger distributions pushing clients into higher tax brackets. In some cases it may be better to draw from tax-deferred accounts earlier to pay taxes at a lower rate. Roth IRAs are best left untouched as long as possible since RMDs are not required.
This document provides an overview of different business structures and considerations for business owners in choosing the right structure. It discusses sole proprietorships, partnerships, and corporations, explaining their tax implications, liability issues, and other pros and cons. Choosing the right structure depends on factors like the nature and size of the business, taxation goals, liability risks, and financial needs. Professional advice is recommended to understand legal and tax implications of each option.
- It is critical to regularly review beneficiary designations for registered accounts and life insurance policies to ensure they match your current intentions, as situations like divorce and remarriage can cause outdated designations.
- Without proper beneficiary designations, assets may have to pass through probate instead of going directly to intended beneficiaries, causing delays and potential fees.
- Doctors should consider incorporating or using holding companies to potentially defer more tax through structures utilizing insurance policies and loans.
The document provides guidance for firms to evaluate their financial viability during an economic downturn. It recommends estimating cash flow by projecting income from different types of projects over time and accounting for costs. If cash flow is negative, firms will need to borrow funds or tap reserves. It also suggests controlling costs by reducing variable costs where possible without laying off essential staff. Finally, the document stresses the importance of clear fee agreements and collecting debts while continuing to refine skills and services through downturns.
The document discusses how a Deferred Sales Trust (DST) can help clients defer capital gains taxes and reduce their overall tax burden when selling highly appreciated assets like homes, businesses, or real estate. A DST allows the seller to defer capital gains taxes until they receive payments from the trust over a chosen period of time. It converts the illiquid asset into a stream of monthly payments that can provide retirement income or be passed down to heirs. Key benefits include tax deferral, estate tax benefits, maintaining family wealth, estate liquidity, and probate avoidance. The DST purchases the asset from the seller via an installment sales agreement, then sells the asset and invests the proceeds to generate the cash flow needed to make payments to
Entrepreneurs will face a huge number of decisions as they move from concept to commercialization. One of the
first major decisions is what type of legal entity to form in order to move their great ideas forward. Why does it
matter? Because different entities have very different rules regarding limited liability, management and control
flexibility, capital structure, tax efficiency and eligible investors.
The document discusses the Deferred Sales Trust (DST) as a strategy for property owners to defer capital gains taxes when selling appreciated assets like real estate. The DST allows the seller to transfer ownership of the property to a trust in exchange for a promissory note, deferred the capital gains tax until payments on the note are received. The trust then sells the property and uses the proceeds to invest and make scheduled payments to the seller over time based on terms in the promissory note. This allows the seller to defer capital gains tax for years while maintaining access to the value of the property through the installment payments. Key benefits of a DST include tax deferral, estate tax benefits, maintaining family wealth, and providing retirement income
Similar to TAXES MAG_10-16_The Forgotten Variable (20)
This document discusses various tax planning strategies that can be implemented before or after death to minimize estate taxes and income taxes. It covers reducing the value of assets, increasing liabilities, utilizing annual gift and estate tax exemptions, planning for basis step-ups, structuring closely-held business interests, and final year income tax planning techniques. Key ideas include making annual exclusion gifts, using grantor trusts, private annuities, self-cancelling installment notes, and converting traditional IRAs to Roth IRAs.
This document discusses various tax planning strategies, including:
1) Simple income tax planning strategies like IRA conversions to Roth IRAs and using Section 529 plans.
2) Estate planning techniques such as irrevocable life insurance trusts (ILITs) and spousal lifetime access trusts (SLATs).
3) Using non-grantor charitable lead trusts to make charitable gifts with pre-tax income.
4) Intentionally defective grantor trusts, also known as IDIOT trusts, which allow for leveraged gifting using notes with low interest rates.
The document provides explanations and examples of how these different strategies can help clients reduce taxes and plan their estates. It is
A Fresh Look at Charitable Lead Annuity Trusts - 2016Brian T. Whitlock
The document discusses charitable lead trusts (CLTs) and how they can provide estate and gift tax benefits. It explains that a CLT is an irrevocable trust that makes payments to charity for a set period of time, after which the remaining assets pass to non-charitable beneficiaries. The value of the payments to charity is subtracted from the initial gift value, reducing the taxable gift. Lower interest rates currently allow CLTs to effectively reduce the taxable gift to zero for assets with returns above the Section 7520 rate. The document provides examples of how CLTs can work for different types of assets.
This document discusses various issues related to choosing an appropriate business entity. It begins with revisiting basic choice of entity considerations and provides several case studies examining different business scenarios. It then covers some unusual issues that can impact choice of entity, such as capital requirements, IRC Section 1202 relating to qualified small business stock, and ESOP plans under IRC Section 1042. Alternative entities like captive insurance companies, IC-DISCs, and cooperatives are also mentioned. The document uses diagrams to illustrate the lifecycle of a family business enterprise and how the appropriate entity may change over time. It also examines unusual financing considerations and tax provisions that can drive the choice of entity.
This document summarizes key 2011 individual income tax changes and tips. It discusses expanded IRS Form 1099 reporting requirements, the loss of some tax credits, a 2% payroll tax cut, and Illinois increasing its income tax rate from 3% to 5%. It provides details on new Forms 1099-K and 8949 for reporting stock basis and sales. The document also outlines various tax credits, deductions, and rates that were extended through 2012, including the alternative minimum tax exemption amounts.
The document summarizes the key estate planning impacts of the 2010 Tax Relief Act. It discusses the $5 million estate tax exemption for 2010 deaths, the ability to elect no estate tax for 2010, and implications of carrying over the decedent's basis instead of a step up. It also outlines gift and GST tax changes, the reunified $5 million exemption starting in 2011, and planning strategies in light of the new laws.
Patient Protection And Affordable Care Act (2011 Update)Brian T. Whitlock
The document summarizes how the Affordable Care Act will impact various entities. It outlines mandates and changes to regulations for health care providers, insurers, employers, individuals and suppliers. Key provisions include coverage mandates, insurance exchanges, penalties for employers not providing coverage, essential health benefits requirements and various taxes targeting high-cost plans and medical devices.
2011 IJO Protecting And Transferring The Family JewelsBrian T. Whitlock
The document discusses strategies for protecting a family's business and assets, including minimizing risks, taxes, and administration expenses when transferring the business or financial assets. It recommends identifying business and personal risks and using tools like trusts, insurance, and transferring assets to protect the family and business. The last part discusses strategies for tax efficiently transferring the business to family or third parties while managing finances to impact the business's value.
The document discusses the benefits of exercise for mental health. Regular physical activity can help reduce anxiety and depression and improve mood and cognitive functioning. Exercise causes chemical changes in the brain that may help protect against developing mental illness and improve symptoms for those who already suffer from conditions like anxiety and depression.
How has depreciation changed in your years of practice? Whether you have been in practice for 5 years or 40 years, the changes in the rules on depreciation have been staggering. Let’s walk down memory lane and see just where each of us gets lost in the Depreciation Maze.
This document discusses strategies for protecting family assets in a struggling economy. It recommends identifying business and personal risks through proper insurance coverage and asset protection. Key tools include trusts, wills, beneficiary designations, and transferring assets to minimize taxes and expenses. The goal is providing for loved ones' financial security even if risks materialize.
The document provides an overview of recent tax laws and proposals including the Economic Stimulus Act, Heroes Earnings Assistance Act, Housing Assistance Act, and the American Recovery and Reinvestment Act. It summarizes provisions such as tax rebates, home buying credits, and business incentives. It also discusses potential upcoming changes like health care reform, international tax reform, and allowing Bush-era tax cuts to expire. The document concludes with recommendations for individual and corporate tax planning opportunities in 2009.
This document discusses estate planning considerations for unmarried couples. It covers non-tax issues like legal documentation of rights, as well as tax issues around income, gifts, and estate taxes. It describes various asset transfer techniques unmarried couples can use to minimize taxes and legally protect assets, such as terminable interest property trusts, lifetime gifts, and lifetime transfers of appreciating assets.
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FAMILY TAX PLANNING FORUM
either reducing Assets or by increasing Liabilities. A change
in the value of either variable is equally effective. If we
accept that mathematical hypothesis as true, then why
do we focus so much on the Assets variable? Why are the
Liabilities the neglected variable? Are there no liabilities
to be identified, recognized, quantified, memorialized,
recorded and thus secured? Where should we be looking
to identify potential Liabilities?
Uncovering Liabilities
Generally Accepted Accounting Principles (GAAP) only
require the financial professionals to record a relatively
narrow subset of a company’s total known liabilities on
the balance sheet of the business enterprise. One of the
jobs of an effective estate tax planner may be to assist the
valuation and appraisal professionals in analyzing the
financial information that is prepared for business clients
and presented to the valuation experts.
As most Certified Public Accountants know, the best
way to read a financial statement is to begin by with the
footnotes to the financial statements. A careful reading
of the footnotes may uncover narrative descriptions of
risks and liabilities that have not been reflected on face
of the Balance Sheet of the business enterprise. Typical
undisclosed liabilities include such things as: environ-
mental hazards (related to Underground Storage Tanks
or potential Environmental Protection Agency “Super
Fund” liability); product liability and warranty claims;
uncashed coupons and gift certificates; ongoing or
threatened litigation; market and business risks (e.g.,
high levels of customer or supplier concentrations);
“going business” concerns; underfunded defined benefit
pension plans; union contracts that contain withdrawal
liabilities or underfunded welfare benefit plans; long-
term lease obligations; and Nonqualified Deferred
Compensation (NQDC) Plans.
Once these liabilities have been identified and quanti-
fied, they can be properly brought to the attention of the
valuation professionals and factored into the business
valuation.
Moral Obligations and
Undisclosed Liabilities
Third-party business obligations (e.g., leases, warranties,
pension plans and union contracts) are routinely formal-
ized and reduced to writing. The fact that they are in
writing makes them easy for the auditors to identify and
at least list them in the financial statement footnotes.
Family businesses often operate under moral obligations
and handshake agreements. These unwritten promises are
nearly impossible to uncover. Larger businesses routinely
enter into nondisclosure agreements with suppliers and
employment contracts or noncompete agreements with
key-employees. Closely-held family businesses, rarely if
ever, have family members sign employment agreements
and other restrictive covenants.
Founders and first generation business owners frequently
operate under handicap that I refer to as “scarcity.” Capital,
credit and talent are scarce, and these three foundational
components can be hard to attract to a start-up business.
As a result, the first generation entrepreneur takes on a
greater burden. He or she tends to be over worked and
undercompensated during the early years of the business
enterprise. It does not make sense for an entrepreneur to
subject the business to the strain of additional debt, plus
the costs associated with securing and paying that debt,
merely to turn around and have the business pay the same
cash to the entrepreneur in form of higher personal com-
pensation, subject to current income and payroll taxes. The
pragmatic entrepreneur pays him/herself only enough to
pay the home mortgage, put food on the table and clothe
and educate the kids. All other cash is generally retained
in the business in an effort to keep the cost of capital as
low as reasonable.
In reality, many family businesses operate under a sort
of moral obligation to the founders and first generation
business owners. That moral obligation is the unspoken
promise to reward them “someday” for all of the blood,
sweat and tears that they have either put into the busi-
ness in the past or may promise to put into the business
in the future before they ultimately retire. That unspoken
promise is usually manifest in the fact that the business will
continue to pay the business owner and the spouse of the
business owner for some indefinite period of time. That
payment may be in the form of continuing compensation
or a lump-sum payment in the event of the individual’s
sudden death.
The Income Tax Aspects
of Compensation
Section 162(a) of the Internal Revenue Code of 1986,
as amended, permits a business to deduct as a trade or
business expense “a reasonable allowance for salaries
or other compensation for personal services actually
rendered.” Where an individual is highly qualified,
working 60–70 hours a week, and doing the job of
3 or 4 different people, the limit of what might be
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past and current services. The only knownTax Court case
dealing with DBO plans is A.F. DiMarco Est. The Tax
Court in DiMarco looked at a death benefit plan payable
to employees of IBM. Under the plan, a class of employees
were eligible to irrevocably name a beneficiary that would
receive a lump sum death benefit equal to three times the
employee’s salary if the employee died while employed
by the company.
Income Tax Aspects of
DBO Payment
If reasonable, the benefit paid by the employer represents a
deductible expense under Code Sec. 162 as compensation.
The benefit received by the beneficiary would be subject
be gross income in the hands of the recipient. If both the
employer and the employee are in the same relative tax
brackets, then the burden of the income tax should be
offset by the benefits of the deduction.
Ancillary Corporate Income Tax
Benefits of DBO Plans
If the employer does not attempt to fund the accrued
liability for the payment of the death benefit, then
it should be expected that the employer will pay this
unfunded liability either out of its accumulated surplus
operating or its operating income. If the employer is a
corporation operating under Subchapter C of the Inter-
nal Revenue Code, then the creation of a DBO liability
should reduce corporation’s exposure to the Accumulated
Earning Penalty Tax under Section 531 of the Internal
Revenue Code of 1986, as amended. The purpose of the
accumulated earnings tax is to prevent corporation from
accumulating its earnings and profits beyond the reason-
able needs of the business for the purpose of avoiding
income taxes on its shareholders.3
Code Sec. 533 permits
earnings to be accumulated beyond “the reasonable needs
of the business.”
Code Sec. 537(a) defines “the reasonable needs of a busi-
ness” as reasonable anticipated business needs, redemption
needs of a business relative to the death of any shareholder
that might need to redeem stock in order to pay death
tax; excess business holding redemption needs related to
a tax exempt shareholder that might need to redeem stock
in order to avoid excise taxes; and product liability loss
reserves as defined in Code Sec. 172(f). If the accrual of
the DBO liability satisfied the reasonableness standard for
deductibility under Code Sec. 162, then the payment of a
DBO liability should arguably be a reasonably anticipated
business need.4
PayrollTax Aspects of Death Benefits
Any payment or series of payments made to an employee
or his dependents after the termination of employment
due to death under a plan established by the employer
for an entire class of employees as described in Code Sec.
3121(a)(13) and Code Sec. 3306(b)(10) are not subject
to either FICA or FUTA taxes.
Accrued compensation and death benefits paid out in
the same calendar year during which the employee also
performed services (i.e., the year of death) are subject to
FICA and FUTA and should be reported on IRS Form
W-2. Conversely, if the DBO benefit is paid in a calendar
year after death (during which the employee did not pro-
vide any services), then the payment should be reported
on IRS Form 1099 and it is not subject to payroll tax or
income tax withholding.5
Computation of Liability (DBO Plans)
If the death benefit is fully insured and the employer owns
a life insurance policy on the life of the employee equal
to the death benefit, then the only benefit of accruing a
liability would be to offset the value of the life insurance
policy that is owed by the employer for the purpose of
satisfying the death benefit obligation. This would be a
limited benefit.
On the other hand, if the death benefit is uninsured and
a general obligation of the employer, then it would be a
clear tax planning advantage for the employer to accrue a
liability for this unfunded death benefit obligation.
There is no clear directive from the IRS or the Treasury
regarding the appropriate tables for computing the present
value of DBO Plans. Since the liability is a lump sum that
can be expected to be paid at some point following death
of the employee, it would be logical to assume that the
accrued liability would be equal to the present value of a
lump sum. The computation of the present value of a lump
sum requires the selection of a life expectancy factor and the
selection of an applicable interest rate (sometimes referred to
as the discount rate). The higher the discount rate, the lower
the present value of the future amount. The shorter the life
expectancy, the sooner the death benefit would be expected
to be paid and the greater accrued liability. Conversely, the
greater the life expectancy, the longer the beneficiary must
wait for the payment and the smaller the accrued liability.
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OCTOBER 201610
FAMILY TAX PLANNING FORUM
expectancy of a person using the 1990 Census
information was calculated to be 17.2 years.
The life expectancy of a person under the 2000
Census was calculated to be 17.7 years. The life
expectancyunderthe1.72Tableswascalculated
to be 20 years. The life expectancy under Code
Sec. 1.401(a)(9) was calculated to be 21 years.
9
Stephan R. Leimberg & RobertT. LeClair, Estate
PlanningTools, BrentmarkSoftware, Inc., Leim-
berg Version 2016.00 & LeClair, Inc.
10
Rev. Rul. 92-68, 1992-2 CB 257; A.F. DiMarco
Est., 87TC 653, Dec. 43,390 (1986) acquiesced
in result in part 1990-2 CB 1.
This article is reprinted with the publisher’s permission from the Taxes The Tax Magazine®
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