The Role of Life Insurance in Estate Taxes The recent U.S. Supreme Court case, United States v. Connelly, provides business valuation practitioners opportunities to a cautionary tale and also an opportunity to assist business owners structure or restructure their buy-sell agreements. The authors summarize the case and offer tips to assist business owners transition a business using life insurance. Introduction Does the fair market value standard require the insurance proceeds owed to a company at the date of a shareholder’s death need to be added to the value of the business for tax purposes? The Supreme Court ruled that, yes,…
-
-
Federal Rules and Regulations Governing ESOPs Business valuation reports of employer’s securities owned by ESOPs are subject to review by plan fiduciaries, government agencies, and IQPAs auditing the ESOP’s financial statements. Each of these readers have their own responsibilities to the participants and beneficiaries of the plans. This article will examine the federal rules and regulations governing ESOPS, the responsibilities of the report readers, and the use of the report as audit evidence. Introduction Business valuation reports of employer’s securities owned by Employee Stock Ownership Plans (ESOP) are subject to review by plan fiduciaries, government agencies, and independent qualified public…
-
Connelly v. United States—Do Redemption Agreements Create a Business Liability? Most have some form of agreement and financing in place to address sudden changes in ownership. In Connelly v. United States, a unanimous U.S. Supreme Court may have turned many of those plans on their heads. The question before the Court was whether a redemption agreement created a liability to the company. The author discusses the decision and impact it may have on succession planning. One of the great challenges for privately held businesses is dealing with the unexpected departure of an owner, whether by disability or death. Most have…
-
And How the IRS Unravels Contract Law in its Newest Cryptocurrency Proposals This article details the issues with the proposal put forth by the IRS related to cryptocurrency transaction reporting and identifies the actionable bits of information that may be useful to practitioners. This article also covers proposed rules expanded definition of a broker and whom the new regulation will cover along with the what and whys; a second article will cover the how. This article details the issues with the proposal put forth by the IRS related to cryptocurrency transaction reporting and identifies the actionable bits of information that…
-
Ethical and Practical Implications Too many appraisers omit the contingent BIGL in their appraisals. It certainly is easier to yield to the pressure of estate attorneys, CPAs, and the IRS on this point, but in light of the evidence for inclusion, is this the ethical path? The author discusses the merits and ethics of including the BIGL. Too many appraisers omit the contingent built-in capital gain tax liability (BIGL) in their appraisals. It certainly is easier to yield to the pressure of estate attorneys, CPAs, and the IRS on this point, but in light of the evidence for inclusion, is…
-
This article discusses the recent settlement of National Spine and Pain Center signed with the U.S. Department of Justice and provides the basis to discuss the importance of obtaining an opinion regarding the FMV physician compensation. On August 6, 2021, the U.S. Department of Justice announced that it had reached a settlement with National Spine and Pain Center, LLC (NSPC), a Maryland physician management services organization (MSO). As part of the settlement agreement, NSPC signed a non-prosecution agreement and agreed to pay $5.1 million to resolve criminal Medicare Anti-Kickback Statute violations.[1] An affiliate of NSPC, Physical Medicine Associates, Ltd. (PMA)…
-
of a Tax Loss Target Company Acquisition This article summarizes the factors that acquirers—and their valuation and other financial advisers—should consider when structuring an M&A transaction that involves a target corporation with such income tax attributes. Introduction Valuation analysts and other financial advisers (collectively, analysts) are often retained to advise acquisitive clients with regard to proposed merger and acquisition (M&A) transactions. Such analysts typically focus on the pricing and structuring of the proposed M&A transaction. However, these analysts are expected to work with—and to support—the acquirer’s accounting, taxation, legal, and other professional advisers, particularly in the assessment of the risks…
-
Non-Litigation #2 and Litigation #4 The NACVA’s Standards Board was formed to continually review the organizations’ standards and to ensure that the NACVA’s Professional Standards remain up to date, relevant, and relatively consistent with the standards of the other professional organizations. This article addresses the second Non-Litigation and the fourth Litigation FAQ Interpretations published by the NACVA. [su_pullquote align=”right”]Resources: NACVA Professional Standards Standards FAQ Library [/su_pullquote] Business valuation/appraisal standards are promulgated by different business appraisal organizations. The NACVA’s Standards Board was formed to continually review the organizations’ standards and to ensure that the NACVA’s Professional Standards remain up to date,…
-
in Not-for-Profit Entities There is an established body of knowledge that addresses economic damages in connection with for-profit organizations, but little about how these concepts apply to not-for-profit organizations. In this article, the author sets forth how those concepts apply to charitable organizations. “You will be much more in control, if you realize how much you are not in control.”―Benjamin Graham, The Intelligent Investor Valuation experts deal with a variety of engagements when it comes to economic damages, which may include loss of profits, earnings (past or future), damage to property, or loss of business value. Most of literature and…
-
Tracking IRA basis is critical for avoiding double taxation of assets, but this can be especially difficult for those who inherit retirement accounts. Reviewing the decedent’s Form 8606 is an important first step, and other tax forms can also provide valuable information if this form cannot be found. To read the full article in Kiplinger, click: How Beneficiaries Can Determine IRA Basis.
-
The Internal Revenue Service has announced it is lowering to 80% from 85% the amount taxpayers must have paid to escape an underpayment of estimated income tax penalty for 2018. The usual rule requires at least a 90% payment of tax shown on the return. To read the full article in the Journal of Accountancy, click: IRS Expands Relief from Underpayment Penalty.
-
The Internal Revenue Service has proposed regulations meant to address inconsistent treatment that could arise as a result of the temporary increase in the exclusion amount for estate and gift taxes that was included in the Tax Cuts and Jobs Act. To read the full article in the Journal of Accountancy, click: Estate and Gift Exclusion Clawback Addressed in Proposed Regs.
-
It has been over a year since the law known as the Tax Cuts and Jobs Act (TCJA) was passed. Taxpayers and tax advisers are continuing to peel back its layers of complexity to understand the various provisions. Taxpayers with state tax obligations and state tax practitioners face an additional challenge of understanding the implications of the new or amended federal provisions on state taxation. To read the full article in The Tax Adviser, click: The TCJA and State Considerations for Business.
-
The Internal Revenue Service has highlighted 12 abusive tax schemes it wants taxpayers and tax practitioners to be on alert for this year. Phishing and scam phone calls are the biggest repeat offenders. To read the full article in the Journal of Accountancy, click: IRS’ “Dirty Dozen” Scams—2019 Edition.
-
April 2019 In the first quarter of 2019, there were no reported U.S. Tax Court cases involving either business, estate, or FLP valuation issues. Notwithstanding the above, there were several cases that valuation and litigation support professionals will want to consider. In this article, five recent cases are discussed. One of the leading cases circulating amongst the business valuation community is Kress v. U.S., Case No. 16-C-795 (U.S.D.C. Eastern District of Wisconsin), it has received considerable attention, especially by business valuation professionals. The Veriton Partners Master Fund Ltd. v. Aruba Networks, Inc. (April 16, 2019), a Delaware Supreme Court case…
-
The IRS posted a draft of a form that affected taxpayers will submit with their 2019 tax returns showing how they computed their qualified business income (QBI) deduction under Sec. 199A. Taxpayers who have QBI, qualified real estate investment trust (REIT) dividends, or qualified income from a publicly traded partnership (PTP) will use Form 8995, Qualified Business Income Deduction Simplified Computation, to report the computation. To read the full article in the Journal of Accountancy, click: Taxpayers Will File QBI Deduction Computation with IRS Next Year.
-
If your clients are super wealthy and want to avoid a big tax bill, they’re better off retiring in Michigan than in Maryland. The IRS collects around $18 billion in estate taxes annually, according to the agency. To read the full article in Financial Planning, click: Where Should Rich Clients Retire?
-
After Dec. 31, spouses responsible for paying alimony won’t get a tax deduction, due to a change under the Tax Cuts and Jobs Act. To read the full article in Financial Planning, click: Hurry Up—Get Your Clients Divorced.
-
The IRS released guidance Friday on the standard mileage rate for business, medical and certain moving expenses incurred in 2019. To read the full article in Journal of Accountancy, click: 2019 Standard Mileage Rates Announced.
-
The IRS issued guidance clarifying that taxpayers may generally continue to deduct 50% of the food and beverage expenses associated with operating their trade or business, despite changes to the meal and entertainment expense deduction made by the tax law known as the Tax Cuts and Jobs Act. According to the IRS, the amendments specifically deny deductions for expenses for entertainment, amusement, or recreation, but do not address the deductibility of expenses for business meals. To read the full article in the Journal of Accountancy, click: Meals Continue to be Deductible Under New IRS Guidance.