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Archive for John Dundon

Tax Implications Of Converting An LLC To A Corporation

John Dundon

Recently a husband/wife owned 3 LLC’s that each successfully elected to be treated as S-corporations for federal income tax purposes by filing IRS Form 2553 – Election by a Small Business Corporation. Subsequently this great couple found themselves entertaining a rather complicated buyout offer of all 3 of their LLCs. This post addresses the tax implications of converting an LLC to a Corporation as part of a buyout strategy.

Their fundamental question – can the LLCs do a tax deferred corporate reorganization under IRC 351-368?

The husband/wife were concerned that their LLCs electing S corporation status might not be able to engage in a corporate reorganization because the LLC’s were comprised of ‘member interests’ and they did not have any “stock” – which is a key term in IRC 368 governing statute.

This drove them into the weeds of IRC 708 pertaining to the merger of two or more partnerships. Fortunately they came to me and turns out the main concern here is converting the legal form of the businesses from LLCs to a corporation which can require a state licensed business attorney.

Keep in mind however, the husband/wife converted each of their LLC’s tax status from a partnership to a corporation without changing the LLC’s legal form in Colorado. As such they only needed to:

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Are You A U.S. Citizen Living Outside The United States?

John Dundon - Expatriate Filing Extension

International Taxpayers Extension Request is for US taxpayers residing outside of the USA. Your 2018 income tax forms are due June 17th 2019. That date is coming up here soon and it usually catches people off guard.

If this might be you, worry not… Simply File IRS Form 4868 for automatic extension of time to file US individual tax return.

Filing this form gives you an additional 4 months (until October 15th) to file your income tax forms. However you still must estimate what your federal income tax liability will be and get that payment into the US Treasury ASAP. That payment was actually due April 15th 2019.

If you live outside of the US you should not be penalized for late payment if you pay by June 15th, but you will be assessed interest for the late payment.

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Yikes! New Treatment Of Patents Under Tax Cuts And Jobs Act

John Dundon- Patents

One of my more favorite clients has done quite well for herself financially by being the Primary Inventor over the last 10 years on 30 + patents (7 internationally protected). It is so humbling to have her trust when it comes to the US Tax Code as she is so very smart and tenacious in pursuit of the truth… definitely keeping me on my toes.

Being who she is, of course she read that the Tax Cut & Jobs Act (TCJA) removed patents from the definition of ‘Capital Asset‘ as per the newly amended Internal Revenue Code section 1221(a)(3). She called me all concerned that the proceeds from selling her patents and other projects would now be considered ordinary income for tax purposes.

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What Is A Specified Service Trade or Business (SSTB)?

John Dundon - What Is A Specified Service Or Trade Business

When not riding my mountain bike in the Rocky Mountains I tend to hang out with tax nerds … pretty much all the time, to the extent that tax nerds actually ‘hang out’ that is.  At one of our most recent ‘meetups’ (think band camp without the instruments) we had a lot of fun indulging in freshly picked peaches & poking holes in the bizarrely nuanced albeit new ‘concept’ (if you will) of what a Specified Service Trade or Business (SSTB) is ‘proposed to be’ according to our esteemed ‘rule-writers’ from the US Treasury.

Worth noting is that there were a LOT of smart people in the room, many of whom spent their entire adult lives reading and writing about (as well as applying) the US Tax Code/Regulations. 

We all generally agreed that no business wants to be deemed a SSTB (as the acronym alone sounds like a disease) and that as a result there will be all sorts of skulduggery rearing its ugly head in the not too distant future from US Taxpayers and perhaps our beloved federal government alike.

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The Perturbing New Treatment Of Patents Under The Tax Cuts And Jobs Act

John Dundon- Patents And Tax Cuts And Jobs Act

One of my more favorite clients has done quite well for herself financially by being the Primary Inventor over the last 10 years on 30 + patents (7 internationally protected). It is so humbling to have her trust when it comes to the US Tax Code as she is so very smart and tenacious in pursuit of the truth… definitely keeping me on my toes.

Being who she is, of course she read that the Tax Cut & Jobs Act (TCJA) removed patents from the definition of ‘Capital Asset‘ as per the newly amended Internal Revenue Code section 1221(a)(3). She called me all concerned that the proceeds from selling her patents and other projects would now be considered ordinary income for tax purposes.

YIKES!

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Another Surprise! Business Losses Limited For The Unincorporated

John Dudon - Limited Loss Deductions F

Unless your business is registered as a Corporation you may be subject to excess business loss limitations. Let that sink in for a while.

In AMERICA you can no longer report losses of more than $250,000 in any given tax year … unless of course your business affairs are incorporated.

This shittiest of the #Stoopid Tax Cut & Jobs Act reporting requirements – IRS Form 461 is but one of many new mind numbing forms. If you don’t believe me, check out line 13 of the form – my personal fav:

“If line 12 is a negative number, enter it here as a positive number. If line 12 is a positive number, enter it here as a negative number.”

IRS Form 461 Line 13

What the ….?!?!

Why must we use the tax code as some sort of social engineering tool?

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Tax Planning For Pass-Through Entities After Tax Reform

John Dundon - Passthrough Entities

(NOTE READERS: THERE WAS SUCH A HIGH LEVEL OF INTEREST IN THE PASS-THROUGH POST WRITTEN BY MANASA NADIG YESTERDAY, WE WANT TO SHARE WITH READERS ANOTHER HIGHLY READ POST ON PASS-THROUGHS WRITTEN BY JOHN DUNDON)

Tax planning under the TCJA for pass through entities is a post for small business owners everywhere paying US income taxes.

Now that the Tax Cuts and Jobs Act (TCJA) is in full swing, many of you have been clamoring for tax planning strategies. This post addresses some essential aspects of the Act and suggest some strategic implications to be used for planning purposes.

One of the most significant changes coming out of the TCJA are the new tax rates:

  • The individual tax rate is reduced to a maximum 37%.
  • The tax rate for pass-through entities can be reduced by 20%.
  • The corporate tax rate is reduced from 35% to as low as 21%.

As a result of these new tax rates there is a growing debate over whether a business should be organized as a pass-through entity or a full blown ‘C’ corporation. 

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Tax Professionals: Do You Have A Data Protection Plan?

John Dundon - Do You Have A Data Protection Program

My friend, Deborah Rodgers, a dedicated and decorated public servant serving since the dawn of time as an IRS Stakeholder Liaison in the Denver Office called the other day before the government shutdown with all sorts of questions about my firm’s data protection plan. Time with Deborah is ALWAYS well spent!

Working inside the proverbial heart of the beast she truly knows my pain as I invest significantly in a data protection planning. Out of compassion she felt compelled to share with me that the IRS needs help too from taxpayers and tax practitioners alike to work diligently together towards protecting their private data.

It is evident to both of us that with increasingly sophisticated profiling aplenty online and otherwise people compiling and processing all the personal and business data required for reporting taxes to the IRS had best have a plan in place to protect that data. 

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Year End Tax Planning For Individuals – Why It Is So Important This Year!

John Dundon- Tax Planning

Year End Tax Planning For Individuals

If you happen to be like me – desperately seeking any distraction from this holiday season – there is no better time than the present to start some year-end tax planning. Why is tax planning particularly important this year for almost EVERYONE? Basically the Tax Cuts and Jobs Act brought generational changes to the tax rules. The last time the tax code changed this dramatically was in under President Reagan in 1986.

  • People who thought the reporting under Obama Care was onerous are in for a surprise, a BIG surprise. Tax professionals and taxpayers alike are challenged with understanding these new laws and regulations. With the average age of the tax professional in Colorado being 68 years old, many are simply closing up shop. When it is time to engage you may find yourself out in the cold without adequate representation. Little is more disenfranchising than the discovery you handed over hard earned money to our esteemed authorities because your head was in the sand.

Yes – it might be the driest stuff you read all day. Yes -it will be worth the 3 minutes of your time to peruse.  Not all considerations below may apply specifically to you but they are worth knowing about and sharing with friends or family.

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Tax Planning Time For Small Business Owners

John Dundon- TP Small

As we run full tilt into the holidays – between storing boats & fishing poles, repairing bikes, readying hunting gear and waxing skis don’t forget to THINK about next spring’s tax time.

An ounce of preparation today can save BIG $$ come spring. Particularly if you are looking to lower your tax bill for this year and possibly the next… and who isn’t interested in that?!?

This year tax planning takes place in the light of a new – Tax Cuts and Jobs Act (TCJA) — a generational change in how the United States taxes income. In fact:

  1. the last time the US Tax Code changed this much was in 1986 under President Reagan
  2. tax practitioners are retiring in droves – thoroughly defeated with the sheer volume of changes
  3. the US Treasury is still behind in producing regulations to govern these new statutes
  4. the 2018 filing season may very well  be delayed as a result

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Tax Planning For Pass-Through Business Entities After Tax Reform

John Dundon, Pass-Throughs And Tax Cuts And Jobs Act

Tax planning under the TCJA for pass through entities is a post for small business owners everywhere paying US income taxes.

Now that the Tax Cuts and Jobs Act (TCJA) is in full swing, many of you have been clamoring for tax planning strategies. This post addresses some essential aspects of the Act and suggest some strategic implications to be used for planning purposes.

One of the most significant changes coming out of the TCJA are the new tax rates:

  • The individual tax rate is reduced to a maximum 37%.
  • The tax rate for pass-through entities can be reduced by 20%.
  • The corporate tax rate is reduced from 35% to as low as 21%.

As a result of these new tax rates there is a growing debate over whether a business should be organized as a pass-through entity or a full blown ‘C’ corporation. 

Read more

What Is A Specified Service Or Trade Business(SSTB)?

John Dundon - Specified Service Or Trade Business

When not riding my mountain bike in the Rocky Mountains I tend to hang out with tax nerds … pretty much all the time, to the extent that tax nerds actually ‘hang out’ that is.  At one of our most recent ‘meetups’ (think band camp without the instruments) we had a lot of fun indulging in freshly picked peaches & poking holes in the bizarrely nuanced albeit new ‘concept’ (if you will) of what a Specified Service Trade or Business (SSTB) is ‘proposed to be’ according to our esteemed ‘rule-writers’ from the US Treasury.

Worth noting is that there were a LOT of smart people in the room, many of whom spent their entire adult lives reading and writing about (as well as applying) the US Tax Code/Regulations. 

We all generally agreed that no business wants to be deemed a SSTB (as the acronym alone sounds like a disease) and that as a result there will be all sorts of skulduggery rearing its ugly head in the not too distant future from US Taxpayers and perhaps our beloved federal government alike.

Read more