Tax
LLC Tax Treatment: Two Accounting Paths for Shareholder Loan Repayment
A married couple, as LLC shareholders, loaned $100 to the company 13 years ago. In 2018, the company earned its first profit of $166 and now plans to repay the loan. The article analyzes two tax treatment paths: Path 1 distributes the $66 profit as a K-1 distribution; Path 2 calculates the loan principal and interest at 4% compound interest to $166, with the $66 interest reported via 1099-MISC. The author asks whether the IRS allows free choice and mentions using TurboTax Business software.
Overwhelmed by Tax Workload, How to Cope?
A practitioner running a boutique international tax firm, due to taking on too much business this year, fears being unable to meet deadlines despite working 90 hours a week. This article outlines the dilemma and feasible coping strategies.
Analysis of Foreign Tax Credit Limitation and Capital Loss Reporting Issues
The foreign tax credit is subject to a limitation, which is the total U.S. tax multiplied by the ratio of foreign-source taxable income to total taxable income. If there is also U.S. income, the credit cannot reduce the total tax liability to zero. This article further asks whether capital losses should be reported on line 3b of Form 1116, and includes related images and a link to the complete tax return.
Reporting Earnings of an Israeli Subcontractor: Obligations to Israeli Tax Authorities and Other Entities
A US-based contractor providing educational services in Turkey, employing US citizens and an Israeli individual, must determine reporting requirements for payments to the Israeli subcontractor. While US citizens receive Form 1099, the question is whether Israeli tax authorities or other entities require disclosure of the Israeli subcontractor's earnings. This article outlines the relevant considerations without providing definitive tax advice.
Practical Analysis of Capital Gain Treatment and Loss Deduction for Small Business Stock Sales
An investor invested in qualified small business stock in January 2010 and now intends to sell it, applying the 75% exclusion treatment; meanwhile, in the current year, a loss is incurred from selling small business stock purchased three years ago. This article explains how to net the gain and loss, and emphasizes the need to follow specific tax law rules.
Is interest income from foreign enterprises holding U.S. Treasury bonds subject to U.S. federal income tax?
This article analyzes whether interest income from U.S. Treasury bonds held by foreign (non-U.S.) enterprises is subject to U.S. federal income tax, and discusses the possibility of U.S. Treasury withholding tax and the conditions under which enterprises can apply for tax refunds.
Guide to Correcting an Incorrectly Set Up IRA Account Type
An investor opened an IRA account at Vanguard in 2001, intending it to be a Roth IRA, but it was actually set up as a traditional IRA. Contributions over the years did not exceed limits, but now they face tax issues upon withdrawal. This article outlines feasible correction paths, including contacting the custodian, filing relevant tax forms, and seeking professional help when necessary.
Assisting Clients in Filing Ten Years of Overdue Tax Returns: A Practical Guide and Key Considerations
A tax professional faces a complex situation involving a client who has not filed since 2008, potentially owing taxes for 2008-2012 due to early IRA withdrawals invested in a loss-making side business. The article outlines the documents needed for filing, the applicable differences between Form 2848 and Form 8821, and the pros and cons of proactively contacting the IRS, inviting experienced practitioners to share their advice.
Tax Deduction Consultation for Business Owners Purchasing Vehicles: Truck/SUV Depreciation and Usage Analysis
A small business owner with only one employee (an artist) plans to purchase a truck or SUV for about $35,000, used 100% for business (transporting paintings, attending exhibitions, outdoor sketching), driving approximately 5,000 miles per year, expecting fuel economy of 20 miles per gallon, with a residual value of about $10,000 after 5 years. Consults on tax deduction rules and whether the purchase is worthwhile.
CBD Retail and Internal Revenue Code Section 280E: What Tax Risks Do Large Retailers Face?
Although federal law only permits CBD to be legally sold as a component of FDA-approved drugs (such as Epidiolex), large retailers like GNC, Amazon, Walgreens, and CVS still sell CBD products. Based on current law and accountants' perspectives, this article analyzes whether these companies should be subject to Section 280E and the potential impact of that provision on parent companies and overall profits.