Corporate

New regulations aim at corporate related party debt

The IRS may soon have another tool in their belt for attacking corporations capitalized with debt rather than equity.  The Treasury has issued proposed Regulations related to Code Section 385.  This code section was left with a serious ambiguity problem.  It was designed to provide the IRS with the authority to re-characterize debt as equity…

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What the IRS considers a reasonable cost

What is reasonable compensation?  That is a common question raised for privately held companies where owners are working in the company as employees.  Legally the owner has the power to control the amount paid to them for compensation but this power comes with additional tax scrutiny.  This is true for both the double taxed Corporation and the…

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Is granting ownership in your company taxable?

One of the more common reasons I see entrepreneurs give stock in their companies  is to keep top talent, when they lack the cash in their growth stages to pay competitive wages.  Unless such an award is subject to a substantial risk of forfeiture, you have to expect that such awards are taxable, similar to having paid…

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Is it OK to be C Corporation?

What’s wrong with being a C Corporation? Nothing necessarily.  Determining your optimal business structure, depends on your particular situation and goals.  Many small businesses optimize their after tax cash flow as C Corporations.  The common wisdom is that small businesses should be organized as LLCs.  One reason I see this happen in practice, is that the entrepreneur’s…

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Have you filed your FBAR?

If you or your business have a financial interest or signature authority over a financial account that exceeds $10,000 at any time during the calendar year, you probably are required to file a Report of Foreign Bank and Financial Accounts (FBAR).  The form is actually called the FinCEN Form 114. The primary purpose of the…

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Income from short-term obligations of a CFC

In a recent IRS Chief Counsel Advice (CCA 201516064), the IRS warned that short-term obligations between a CFC (Controlled Foreign Corporation) and a US corporate shareholder, could be considered US property, subjecting the CFC to US tax on its undistributed earnings.  Subject to a variety of exceptions a CFC can avoid US tax until it distributes…

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International structure for saving US tax

Many of the entrepreneurial teams I work with hear about the tax saving opportunities some large companies take advantage of by using international entities.  Of course entrepreneurs want to know if they can minimize their tax costs with such structures. In my experience the tax savings opportunity works best if you naturally have operations in…

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