Tax
Treatment of partner income for investment LLC (Sec 704 Question)
A promoter planning to establish an investment LLC proposes to maintain separate capital accounts for different investment projects, allowing each partner to share in the profits of a specific project according to their contribution to that project, rather than allocating profits uniformly based on overall ownership percentages. The article illustrates the operation of this structure through a specific example and asks whether pre-agreeing to this arrangement in the operating agreement has substantial economic effect, thereby gaining IRS recognition.
Mineral and royalty ownership tax question
Two brothers each hold equal mineral and royalty interests in Texas, Oklahoma, and New Mexico. The younger brother is seriously ill with a life expectancy of 6-12 months and wishes to transfer his interests to the older brother for management, with monthly payments of his share of the income, while avoiding probate. The older brother asks how to deduct the younger brother's share of income from his personal income to reduce tax burden.
Residential Rental Property or Commercial Property
A residential rental building purchased in 2005, with a restaurant operated by an S corporation on the first floor since 2015, occupying 45% of the area, and the owner residing upstairs. The restaurant paid no rent. Does the building need to be converted to commercial rental? How should the conversion basis be determined? This article provides professional analysis based on case studies.
Accounting for New Business
An entrepreneur plans to establish a new company in 2020, but previously purchased approximately 3,000 items of inventory worth about $50,000 as an individual, with some lacking receipts. The core issue is: how can the unclaimed inventory cost be legally transferred to the company, and how can the company's repayment of the individual's advance be structured to avoid taxation. Based on available information, this article analyzes possible accounting treatment paths and tax risks, emphasizing the need to consult professional advisors.
Section 179
A client, a single-member LLC taxed as a disregarded entity on Schedule C, plans to purchase a truck before December 31 and place it in service that same day. With 60% business and 40% personal use, the question is whether he can claim the Section 179 deduction on Form 4562 for the full 60% business portion. This article examines the applicable rules.
Tax implications to US non-residents who are beneficiaries of 401k
An estate administrator asks: If the parents of a deceased friend (non-U.S. residents) are beneficiaries of a traditional 401k account, do they need to pay taxes to the U.S. federal and state governments? This article outlines relevant tax points, emphasizing the need to consider specific facts and professional advice.
Cost basis for inherited asset recovered abroad that was previously confiscated by foreign government (and hence not part of estate at time of death))
A user inquires: their family's factory in Eastern Europe was nationalized in the 1940s, and when the owners passed away in the 1970s and 1990s, the property was not part of the estate. In the 2000s, the children, as U.S. citizens, recovered the property through legal proceedings (now land and dilapidated buildings) and plan to sell it. The issue is how to determine the tax basis for capital gains. This article outlines the facts and points out that the general rule (value at date of inheritance) does not apply here, and professional tax advice should be sought.
Can an Inherited IRA be put into a Special Needs Trust?
A disabled individual receiving SSDI, aiming to maintain SSI eligibility to keep Medi-Cal, wishes to roll an IRA inherited from a parent into a special needs trust, but faces the risk of a taxable event. This article analyzes feasible paths and considerations.
Owning Partnership Interest with S-Corp
This article analyzes the risks of the IRS potentially challenging the "genuine business purpose" when professionals hold partnership interests in an accounting firm through an S corporation, and discusses whether factors such as self-employment tax savings and liability protection are sufficient to constitute reasonable business substance.
How do I record the purchase and sale of a business vehicle in service for less than a year?
An owner-manager of a multi-member LLC purchased a 12-passenger company van in January 2019, originally planning to use it for more than one year, so it was recorded as a fixed asset and depreciated using the straight-line method over 5 years. However, the van was sold in November of the same year. During tax filing, it was discovered that assets placed in service and sold within the same year cannot be depreciated, causing an accounting dilemma. Based on the original consultation, this article explores the correct accounting classification and tax implications.