While the idea of beating the market is more suited to the financial investment sector, McKinsey & Company recently applied some of the same principles to business strategy. In a review of 3,000 large nonfinancial companies, this overview examines the players that avoid profit depletion and maximize value creation, even during economic downturns. Tried and true business practices are tested as the numbers stack up. The results reveal what it takes to win consistently, regardless of market fluctuations. Interestingly, the report draws a parallel between the social class system and the corporate class system, what it takes to breakout and…
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In Friedberg v. Commissioner, the Tax Court rejected the claim by the IRS that the appraisal submitted by the taxpayer was not qualified because it wasn’t reliable, and improperly applied the methodology to value a property. In the Tax Court’s ruling, it stated that the appraisal was “qualified” as defined in Treasury Regulation 1.170A-13(c)(3) and rejected the IRS’s attempt to disqualify the appraiser. In a deposition, the appraiser admitted that he had never valued certain development rights that were part of his valuation of the easement. The IRS presented this information as evidence to discredit the appraiser, but the Tax…
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How would you value a three-year old video game company that only has two games on the market and just 130 employees? Apparently, the answer is $3 billion. How does a valuation come up with this kind of number and more importantly, can it even be accurate? Check out this Forbes.com profile of the deal between Japanese internet giant, Softbank, mobile online gamer, Gungho and the hot property, Supercell. [button link=”http://www.forbes.com/sites/joshuakennedy/2013/10/17/how-do-you-value-a-three-year-old-company-with-a-100-year-ambition/” color=”silver”] View Full Article[/button]
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Because of increased IRS audit procedures, multi-national corporations face great risk when it comes to transfer pricing from both a compliance and tax planning perspective. The familiar multi-nationals like Amazon or Microsoft have made headlines regarding transfer pricing disputes and adjustments that run into the billions. In an excellent article by the Journal of Accountancy, small, closely-held companies are not immune to such risks, especially when they venture into overseas expansion. Here, you’ll find a great overview of transfer pricing issues from a financial reporting and tax perspective. [button link=”http://www.journalofaccountancy.com/issues/2013/oct/20137721″ color=”silver”] View Full Article[/button]
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The Tax Court recently denied an IRS motion for summary judgment in an estate and gift tax case where an elderly mother made gifts to her daughters, while requiring them to pay all tax liabilities due if she happened to die within three years of making the gifts. In the calculation for gift tax purposes, the mother reduced the value of the gifts by the estimated tax liability. This reduction was denied by the IRS. For the full details on this fascinating case, visit the Journal of Accountancy website. “The Tax Court also rejected the argument that under the estate-depletion…
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Recently, the FASB issued exposure drafts of Accounting Standards Updates (ASUs) which propose reductions in the cost and complexity of accounting for intangible assets acquired by private companies, as well as subsequent testing for goodwill impairment. The proposed changes in the drafts involve alterations to Accounting Standards Codification (ASC) Topic 85, Business Combinations, and Topic 350, Intanbigles—Goodwill and other. Among the suggested changes to Topic 85 is the proposal that a company involved in a business combination may elect (but would not be required) to recognize only the acquired intangible assets that are the direct result of contractual rights…
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In 2011, after a six-year pilot program, the IRS made the Compliance Assurance Process (CAP) a permanent fixture. The intention was to give large corporate taxpayers a pre-filing period where discrepancies or contentious issues could be ironed out to simplify examination after filing. The goal was to provide each side with more confidence in the contents at the time it was officially filed. The problem: CAP agreements are taking a long, long time to settle. You can find the details in a succinct article originally posted by complianceweek.com. [button link=”http://www.complianceweek.com/irs-takes-heat-over-large-corporate-pre-filing-process/article/313664/” color=”silver”] View Full Article[/button]
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A rough ride This article examines recent state legislation in Georgia that requires entertainment production companies and their payroll providers to withhold state income tax on payments made to loan-out companies as a prerequisite to claiming tax credits. Peter Stathopoulos examines the difficult transition involved with this legislation that may spawn similar proposals in other states that host a large amount of filming projects.
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In the first installment of a two-part series, the AICPA reviews the most important developments affecting estate, gift and generation-skipping transfer (GST) tax and trust income tax over the last 12 months. In the period from June 2012 through May 2013, the analysis covers legislative developments, rulings, pending cases, the American Taxpayer Relief Act of 2012 and inflation adjustments for 2013. The second installment, coming in October, will focus primarily on GST and estate tax issues. [button link=”http://www.aicpa.org/Publications/TaxAdviser/2013/September/Pages/Ransome_Sep2013_2.aspx” color=”silver”] View Full Article[/button]
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As corporations and their CFOs prepare to launch their 2014 budgets, Michael R. Press of M. R. Press Consulting, writing for CFO.com, points out ideal opportunities to maximize ROI through tax incentives at the state and local levels. In a tightly-detailed, three step approach, Press explains that with the right goal criteria, corporations can recoup virtually all of the initial investment capital related to these regulations. “It’s important to know that the way a company’s business units define projects for capital budgeting purposes is not the same as the way the government defines economic development “projects” supported by incentives. This…
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New Jersey Governor, Chris Christie recently vetoed legislation that would have given greater authority to the state’s real estate professionals to provide broker price opinion (BPO) and comparative market analysis services. Citing “consumer confusion” Christie vetoed bill S.2551 that some said would provide additional business opportunities for real estate licensees within the state. Passed by the New Jersey legislature in June, the bill would have given real estate brokers, broker-salespersons and other sales personnel the power to perform BPOs for any purpose, except for use in the New Jersey Tax Court and eminent domain proceedings. The Appraisal Institute, which strongly…
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Not for profit entities must plan and document their executive compensation packages outlined in IRC Section 4958 To ensure that not for profit entities are being good stewards of their donors, or taxpayers’ contributions, the IRS wields significant power to impose onerous penalties on over-compensated executives from 25% to 200% through the use of IRC Section 4958.
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In early 2009, Carl Pohlad, investor and principle owner of the Minnesota Twins, passed away, leaving controlling ownership of the team to his sons. In settling the estate, the new owners now find themselves embroiled in a tax tangle with the IRS. The primary point of contention exists with what Pohlad’s share in the team was actually worth at the time of death. According to the IRS, Pohlad’s ownership is valued at $293 million and is demanding $121 million in additional estate taxes. The estate contests that upon Pohlad’s death, which was shortly after the economic crisis of 2008, the…
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According to The Hill, Senate Finance Committee Chairman, Max Baucus (D-Mont) has put the committee on notice to expect a comprehensive tax reform overhaul this fall. While not committing to a specific start date, Baucus has promised a thorough rewrite of the tax code sometime after August. Frenzied lobbying has already begun on which allowances should stay and which should go. The move to draft and debate legislation on the Finance Committee — a daunting task that could take weeks of work — is just the latest sign that Baucus is serious about passing the first overhaul of the tax…
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When are “subsequent events” knowable, and what about IRC Sec. 6662(g)(2) penalties? Trout Ranch, LLC v. Commissioner raises additional causes for concern, including subsequent events in appraisal documentation and failures to include them, which may create more valuation penalties on tax filings.
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Careful Estate Planning Overcomes IRS Objections Even After Sudden Death Keller v. United States resulted in a huge family limited partnership (FLP) win—$125 million—in Fifth Circuit Court. In this article, learn what the lead attorneys at the Dallas-based law firm of Meadows, Collier, Reed, Cousins, Crouch, and Ungerman have to say about FLP planning and their victory as well as what every financial advisor can learn from this monumental taxpayer victory.
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Qualifying Offices Can Deduct Up to $1,500 Per Year Michael Cohn at Accounting Today reports that The Internal Revenue Service plans to introduce a simplified way for small business owners and home-based employees to claim the home office tax deduction.
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One in 26 American Families Reports Raising a Child with a Disability The Wills, Trusts, & Estates prof blog notes new detail available on this sort of trust:
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Today Individual Federal Gift Law Exemption is $5.12M. In Months it May Drop to $1M. Result: Surging Demand for Appraisals. Lou Carlozo at Reuters reports that faced with the possibility of the lifetime gift tax exemption dropping precipitously next year and the estate tax rate rising, wealthy individuals are rushing to transfer their assets to family members. More:
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Wealth Managers: Proceed with Caution When Setting Up an FLP Once an esoteric way for families to centralize management of assets, the Family Limited Partnership (FLP) is becoming extremely popular this year, writes the New York Times. Why? Because of the scheduled expiration of the $5.12 million gift tax exemption at the end of this year. Still, setting up an FLP doesn’t make sense for all companies.