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Management

Real Estate Investor vs. Professional: Why It Matters

Real Estate Investor vs. Professional: Why It Matters

Income and losses from investment real estate or rental property are passive by definition — unless you’re a real estate professional. Why does this matter? Passive income may be subject to the 3.8% net investment income tax (NIIT), and passive losses generally are deductible only against passive income, with the excess being carried forward. Of course the NIIT is part of the Affordable Care Act (ACA) and might be eliminated under ACA repeal and replace legislation or tax reform legislation. But if or when such legislation will be passed and signed into law is not certain. Even if the NIIT...

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Want to Help Your Child (or Grandchild) Buy a Home? Don’t Wait!

Want to Help Your Child (or Grandchild) Buy a Home? Don’t Wait!

Mortgage interest rates are still at low levels, but are likely to increase as the Fed continues to raise rates. So if you’ve been thinking about helping your child — or grandchild — buy a home, consider acting soon. There also are some favorable tax factors that will help: 0% capital gains rate. If the child is in the 10% or 15% income tax bracket, instead of giving cash to help fund a down payment, consider giving long-term appreciated assets such as stock or mutual fund shares. The child can sell the assets without incurring any federal income taxes on the gain, and you can save the taxes...

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Operating Across State Lines Presents Tax Risks — or Possibly Rewards

Operating Across State Lines Presents Tax Risks — or Possibly Rewards

With the ease and popularity of e-commerce, as well as the incredible efficiency of many supply chains, all sorts of companies are finding it easier than ever to widen their markets. Doing so has become so much more feasible that many businesses quickly find themselves crossing state lines. But there lies a risk in doing this: Operating in another state means possibly being subject to taxation in that state. The resulting liability can, in some cases, inhibit profitability. But sometimes it can produce tax savings. Do you have “nexus”? Essentially, “nexus” means a business presence in a...

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Choosing Between a Calendar Tax Year and a Fiscal Tax Year

Choosing Between a Calendar Tax Year and a Fiscal Tax Year

Many business owners use a calendar year as their company’s tax year. It’s intuitive and aligns with most owners’ personal returns, making it about as simple as anything involving taxes can be. But for some businesses, choosing a fiscal tax year can make more sense. What’s a fiscal tax year? A fiscal tax year consists of 12 consecutive months that don’t begin on January 1 or end on December 31 — for example, July 1 through June 30 of the following year. The year doesn’t necessarily need to end on the last day of a month. It might end on the same day each year, such as the last Friday in...

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Now’s a Great Time to Purge Old Tax Records

Now’s a Great Time to Purge Old Tax Records

Whether you filed your 2016 tax return by the April 18 deadline or you filed for an extension, you may be overwhelmed by the amount of documentation involved. While you need to hold on to all of your 2016 tax records for now, it’s a great time to take a look at your records for previous tax years to see what you can purge. Consider the statute of limitations At minimum, keep tax records for as long as the IRS has the ability to audit your return or assess additional taxes, which generally is three years after you file your return. This means you likely can shred and toss — or electronically...

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Do You Know the Tax Implications of Your C Corp.’s Buy-Sell Agreement?

Do You Know the Tax Implications of Your C Corp.’s Buy-Sell Agreement?

Private companies with more than one owner should have a buy-sell agreement to spell out how ownership shares will change hands should an owner depart. For businesses structured as C corporations, the agreements also have significant tax implications that are important to understand. Buy-sell basics A buy-sell agreement sets up the parameters for transferring ownership interests following stated “triggering events,” such as an owner’s death or long-term disability, loss of license or other legal incapacitation, retirement, bankruptcy, or divorce. The agreement typically will also specify how...

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