March 1, 2021 - Think Outside the Tax Box

March 1, 2021

Monetized Installment Sale – Risky Business

The monetized installment sale (MIS), which is more of a product than a tax concept sounds very attractive. In the right circumstances MIS promises a very long deferral of capital gains tax for a reasonable cost. But does the strategy actually work?

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Land Conservation Easements: Tax Avoidance or Evasion?

Question: I was going to look into a conservation easement (CE) for a client and noticed the IRS has focused heavily on compliance efforts for abusive syndicated transactions. Are there any legitimate conservation easement transactions, or is it best to stay away from this strategy until things calm down? Answer: Sounds too good to be true, right? A $500,000 charitable tax deduction for a $100,000 land purchase in December. In your search for information, you may be scared off by the court cases and Department of Justice investigations of the promoters of syndication easements. Syndication deals are partnerships that own land ideal for conservation and allow groups of investors to pool their money in the business, which typically will also include other activities beyond just the land ownership. These deals have come under heavy scrutiny in the past few years as CEs became a listed transaction and more cases have wound their way through the court system. The IRS even announced a settlement program for syndicated conservation easements in mid-2020. Click here to read the full answer.

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Deducting Business Meals and Entertainment: The good, the bad, the very recently changed

“Say dog.” My dad once told me that a friend paid for his lunch and said, “Say dog, then I can write this off.” She bred show dogs. File that under “nope.” That is not how the meals and entertainment (M&E) deduction works. Not even before the Tax Cuts and Jobs Act (TCJA) changed the rules. The deduction for M&E is a favorite of many of our clients and rightfully so. Nevertheless, it can be a fraught area if taxpayers and their advisors don’t have a comprehensive understanding of how the rules for deducting expenses apply across the many different scenarios in which our clients are likely to apply them. The IRS issued the final regulations for deducting M&E expenses under Internal Revenue Code (IRC) § 274 on October 9, 2020. It made some additional, short-term adjustments when the Consolidated Appropriations Act (CAA) became law on December 27, 2020. Here is an overview of the new regulations, how to use them to your clients’ benefit, and how to avoid the most common pitfalls.

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How to Turn a 1031 Real Estate Capital Gain Into a Passive Investment

You may be familiar with the concept of a 1031 exchange as a way to defer gain on the sale of rental or investment real estate. But what happens when you want to completely exit the real estate game? A 1031 Exchange may not be the best option for you. There are a few drawbacks associated with a 1031 exchange, including the limited time frame you must acquire the replacement property, and that you must continue to invest in real estate. If you’re looking to continue deferring current or previously exchanged gains, a Delaware Statutory Trust (DST) may provide a solution to these issues. But investing in a DST property or properties is like any investment. It comes with its own risks and rewards. Read on to find out more.

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