In this fourth video blog in an ongoing series, MSK Partner Charles Kolstad explains how tax code section 451(c) may come to the rescue, and reviews applicable financial statements.
In this third video blog on CVCs, Hard Forks, ICOs and other related issues, MSK Partner Charles Kolstad speaks to the tax consequences of investing in an ICO, allocations, and the distribution of shares.
In this second video blog on CVCs, Hard Forks, ICOs and other blockchain-related issues, MSK Partner Charles Kolstad discusses Hard Forks and compares realization events to recognition events.
In this video blog, MSK Partner Charles Kolstad discusses ICOs, and token types such as security tokens and utility tokens. Stay tuned for more video blogs!
On April 30, 2018, the California Supreme Court issued its opinion in Dynamex Operations West, Inc. v. The Superior Court of Los Angeles County. It is likely that this case will drastically alter the landscape in California as to how workers are classified. From a tax perspective, the result could be significantly increased costs and administrative burdens for businesses operating in California.
For tax purposes, workers are divided into two categories- employees and independent contractors. The tax withholding and reporting obligations with respect to each category of worker are substantially different and significant dollars can turn on how a worker is classified. (more…)
The Tax Cuts and Jobs Act suspends miscellaneous itemized deductions (i.e., those deductions subject to a 2% floor) from 2018 through 2025, creating an incentive for taxpayers to try and characterize their expenses as giving rise to itemized deductions rather than miscellaneous itemized deductions. General discussion of the new tax law has overlooked this repeal’s impact on estates and non-grantor trusts (i.e., most irrevocable trusts), including a time-sensitive planning opportunity.
Prior to the new legislation, an individual could claim miscellaneous itemized deductions for certain types of expenses that were not specifically enumerated in Internal Revenue Code Section 67. These expenses were not deductible until they exceeded 2% of an individual’s adjusted gross income. Expenses specifically enumerated in Section 67 were itemized deductions not subject to the same 2% floor, making them more attractive to taxpayers than miscellaneous itemized deductions. The new legislation suspends miscellaneous itemized deductions but keeps itemized deductions (subject to certain other restrictions not relevant here). (more…)
General Rule- Deduction for Settlement Payments.
If an employer settles a claim made by an employee (or former employee), the employer may generally claim a deduction for the amount that is paid to the employee to resolve his/her claims. The expense is treated as an ordinary and necessary business expense and a deduction may be claimed pursuant to Section 162(a) of the Internal Revenue Code.
For example, if an employer pays an employee $25,000 to settle the employee’s claims for back wages, emotional distress, and age discrimination, the employer may deduct the $25,000 on its tax return (the employer’s tax reporting obligations with respect to the $25,000 payment and how the payment should be allocated among the claims made by the employee are topics for a different article). (more…)
The new partnership audit rules substantially change the audit procedures for partnerships (including multi-member LLCs) and may require that you update certain provisions within your partnership or LLC agreement to maintain compliance.
In partnership audits, the IRS has historically adjusted the returns of partners, rather than the partnership, because partnerships do not actually pay an entity level tax but pass through their income and losses to the partners. The Bipartisan Budget Act of 2015 (the “Act”) substantially changed these rules for partnerships with tax years beginning after December 31, 2017.
Under the Act, the IRS will examine partnerships and make any adjustments at the partnership level in the year that the audit is completed rather than the year under review. The partnership will pay the tax, interest and penalties on any underpayments at the highest statutory rate for each partner’s distributive share of the underpayment (i.e., the highest corporate rate for corporate partners and the highest individual rate for individuals). This change in the rule shifts the cost of the adjustment to the partners holding a partnership interest at the time of the audit rather than those partners who held a partnership interest in the year of underpayment. (more…)
The Tax Cuts and Jobs Act released by the Conference Committee, that resolved differences in the versions of the Act passed by the Senate and the House of Representatives, is almost certain to be signed into law by the President. You can read our preliminary summary of this far-reaching tax legislation here, but these are the highlights:
- Tax brackets are adjusted, with the maximum rate reduced from 39.6% to 37%.
- The mortgage interest deduction on a principal residence is limited to debt of $750,000 (down from $1 million).
- Several itemized deductions are reduced or eliminated, including state and local taxes (“SALT”) in excess of $10,000.
- The standard deduction is doubled to $12,000 for single individuals and $24,000 for joint filers.
More on provisions affecting individuals
Estate and Gift Tax (more…)
Fans of college athletics may have heard something about tax legislation barreling through Congress this month, and didn’t pay much attention since it sounded like boring stuff that only meant something to big tech companies stashing their billions overseas. But buried in the 500 pages of the legislation that has now passed both chambers is a year-end tax planning opportunity for sports fans. Or, more precisely, a tax break that has been available to sports fans for over thirty years will be eliminated starting in 2018. (more…)