Monthly Archives May 2016

There can be negative tax consequences when purported loan payments are recast as corporate distributions to shareholders. The courts have ruled that withdrawals from two closely held corporations were constructive corporate distributions rather than loan proceeds and repayments in some cases. As such, the withdrawals triggered capital gains and taxable dividends for the shareholders. Corporate Distribution Basics Non-liquidating distributions paid by C corporations to individual shareholders can potentially fall into three different layers for federal income tax purposes. Withdrawals from each layer have different tax consequences. First Layer: Taxable Dividends to Extent of Earnings and Profits. Corporate distributions of cash or
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Some people think you can always deduct moving expenses on your federal income tax return. Not true. However, you can deduct some moving expenses if you meet the applicable eligibility rules. Good News, Bad News The good news is allowable moving expense write-offs are “above-the-line” deductions. As such, you don’t have to itemize these costs on your tax return to benefit. And the bad news? Your move must be considered work-related for you to be entitled to any deductions. The 50-Mile Test To meet the work-related requirement, you must first pass the 50-mile test. This means the distance between your
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Starting up a business and wondering about how tax deductions will be handled? The most important thing to understand is that most expenses incurred before a business begins functioning cannot be deducted or amortized until the year when the business does become active. Business Expense Basics Section 162 of the Internal Revenue Code allows current deductions for ordinary and necessary business expenses. Basically, Section 162 expenses are various expenses incurred in operating an up-and-running business. Examples include rent, utilities, employee wages, advertising and so forth. Such expenses can generally be deducted in the year when they are paid or incurred. However,
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After several years of processing, the U.S. Department of Labor (DOL) issued new fiduciary regulations on April 6. A previous attempt, back in 2010, was scrubbed when the investment community roundly criticized it as overkill. The new regulations seek to update the Employee Retirement Income Security Act (ERISA) enacted in 1974. Back then, the focus of ERISA was on traditional defined-benefit plans. Today, IRAs and 401(k) plans are far more prevalent in retirement planning. In announcing the final regulations, the White House asserted that conflicts of interest in the retirement advice business cost Americans roughly $17 billion each year. That’s
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If you are about to ask for a business loan, expect to deal with the issue of covenants — constraints lenders impose on your company to keep it operating within specified financial ratios and to prevent it from taking certain actions. These clauses are meant to help the lender mitigate risk and get its money back. But if you are not careful, they can put your company in a stranglehold. Under some very strict loan agreements, if your firm violates a covenant, it can automatically go into default and be forced to pay the loan in full immediately. Typical commercial-loan
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