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Don’t Overpay Tax on Crypto Forks and Airdrops

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Practically overnight, cryptocurrency has gone mainstream, with more and more investors funneling money into Bitcoin, Dogecoin, and other cryptocurrencies. The IRS has responded with increased interest and scrutiny, demonstrated by the addition of the cryptocurrency question on the front page of 1040.

Whether you have invested in cryptocurrency or not, you are required to answer this tax return question. Many investors choose to take the most conservative position to avoid future correspondence from the IRS but trying to avoid a letter is no reason to pay more tax than necessary.

Keep reading to learn more!

Don’t Overpay Tax on Crypto Forks and Airdrops Read More »

Qualifying Your Clients for the R&D Credit

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Companies that specialize in the Credit for Increasing Research Activities (also known as the R&D tax credit) sell hard to our clients. During tax season they are online looking for businesses who may qualify for this credit—especially startups. They cast an extremely wide net that has the potential for a lot of bycatch. While it’s true that the R&D credit is often overlooked by small businesses and their return preparers, it’s not as easy to qualify for the credit as some of these companies want small business owners to believe. Savvy tax professionals can help to ensure that their qualifying business clients receive the benefit of this credit while avoiding situations that would make them ineligible for it.

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Trump And Clinton Returns and What Regular Folk Need to Know About Carryovers

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It seems like the left and the right have entered into a competition as to which side can make the silliest tax observation. The New York Times came out strong for the left as its team of reporters was handed fragments of Trump’s 1995 tax filings. They proceeded to “explain” flow-through entities and net operating losses, fairly mundane tax concepts, as if they were tools of Satan. It did not take long for the right to strike back at least as imprudently.

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Recent Decision on S Corp Redemption Illustrates Advantage of Cross-Purchase Over Redemption

S Corp Redemption Decision Illustrates Advantage of Cross-Purchase

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There are some significant lessons in the recent decision in the case of Estate of Michael Connelly. Sorry to spoil the surprise, but what I think the big one is is that co-owners of S corporations (and other sorts of entities) should consider a cross-purchase rather than redemption when they have a buy/sell agreement. That is particularly true if life insurance funds the arrangement.

Keep reading to find out why.

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Turning Services Into Property Can Create a Non-recognition Event

Turning Services into Property Can Create a Non-recognition Event

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It’s not often that we get to wave a magic wand and turn a taxable transaction into a non-taxable transaction, but partnership taxation offers us this opportunity. Partnership taxation is extraordinarily flexible and combines tax-favored aspects of both corporate entity taxation and individual taxation.

Proper planning and use of this flexibility can actually turn a contribution in return for a partnership interest from a recognition event that results in taxable income to you to a non-recognition event that merely adds to your basis in the partnership.

The difference between contributing services versus property for a partnership interest is huge. Contribute services, and you have taxable compensation. Contribute property, and you have a non-recognition event. Determining whether your contribution is classifiable as property rather than services saves a ton in tax. Keep reading to learn how.

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Should You Move to Puerto Rico for Crypto Tax Savings

Should You Move to Puerto Rico for Crypto Tax Savings?

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At least once a week in the cryptocurrency community, there is a new post or article encouraging crypto investors to relocate to Puerto Rico to avoid tax. Relocating to the Caribbean is certainly an attractive proposition, but is it too good to be true? In the words of every good tax professional everywhere, “It depends.” Becoming a resident of Puerto Rico does have some potential tax benefits that come with it, but it is no slam dunk decision. Let’s take a trip together to the Island of Enchantment, grab a cocktail on the beach, and lower our tax bill!

Should You Move to Puerto Rico for Crypto Tax Savings? Read More »

Keeping Your Records

Cecile Barker and Why You Need to Keep Records Longer Than You Thought

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Cecile Barker has bad news from the Eleventh Circuit. They have upheld the Tax Court’s disallowance of his multi-million dollar net operating loss deduction (NOL) largely generated by SoBe Entertainment LLC. SoBe Entertainment is a record label that has represented numerous artists included Brooke Hogan, daughter of Hulk Hogan. The indirect Hulk Hogan connection makes Mr. Barker a tangential figure in a fascinating story you can read about in Conspiracy – Peter Thiel, Hulk Hogan, Gawker and the Anatomy of Intrigue by Ryan Holiday. For purposes of this article, we will stick to the tax story which began with a Tax Court opinion in 2018, which I covered previously.

Cecile Barker and Why You Need to Keep Records Longer Than You Thought Read More »

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