Jorgen Rex Olson, Author at Think Outside the Tax Box

AUTHOR SPOTLIGHT

Jorgen Rex Olson

A Pacific Northwest native, Mr. Olson graduated from Washington State University in 2008 with a degree (cum laude) in history. Subsequently, he graduated from the Indiana University School of Law (McKinney) in Indianapolis in 2012. Since graduating from law school, Mr. Olson has held various positions, including a position as an independent researcher on Section 1031. In addition to his work at TOTTB, he writes for several sites including Financial Planning Magazine, The CPA Journal, and Accounting Today. When not working, he enjoys playing indoor soccer, boxing, and exercising. He currently resides in the greater Seattle metro area.

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An Overview of the Risks and Possibilities of Related Party Exchanges

IRC § 1031 exchanges have the ability to confer substantial financial benefits to taxpayers. Although taxpayers may use § 1031 to place themselves in a superior economic position, taxpayers may not exploit this section in an abusive manner. Taxpayers can use exchanges to give themselves different types of benefits, but one of the primary benefits is the deferral of federal income tax. When conducted correctly, 1031 exchanges are regarded as a form of legitimate tax avoidance. One of the main issues involved with these transactions is determining the boundaries between abusive tax avoidance and non-abusive tax avoidance. In the context of “related party exchanges” – i.e. those transactions which involve subsection 1031(f) – this issue shows up in a relatively complex fashion, because the related party rules are not well understood by most practitioners. Furthermore, determining abusive tax avoidance with related party exchanges is difficult because of the scarcity of case law.

Based on the case law which we have, and on the other authoritative references, we can put together a reasonable overview of the risks of related party exchanges. This overview should prove useful when providing expert counsel to taxpayers seeking to conduct this type of transaction. For direct exchanges, the 2-year ownership rule found in 1031(f)(1)(C) should be used as the dominant source of guidance. For “indirect exchanges,” taxpayers must be aware of the higher levels of risk involved, as there is a greater possibility of abusive tax avoidance.

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CURRENT EDITION

Avoid IRS Red Flags in Multiple Business Strategies: A Guide for the Wary Tax Business Owner

In the labyrinth of tax planning and business structure, the path to protecting your client’s multiple business strategy from the ever-watchful eye of the IRS can be as intricate as a well-played game of chess. However, while the strategic moves might be complex, the rules of the game are quite clear. Today, let’s dissect these rules with a blend of cautionary tales and cheeky wisdom, ensuring your business maneuvers stay sharp and IRS-compliant.

Ever heard of the tax strategy to just “create a new C corporation” and shift income by paying management fees from your main company? Well, so has the IRS, and they are highly skeptical when they see it in the field. The Aspro, Inc. v. Commissioner case serves as a stark reminder for taxpayers about the importance of meticulous documentation and the strict adherence to IRS guidelines for deducting management fees. Aspro, an Iowa-based C corporation in the asphalt-paving business, faced scrutiny over its practice of paying “management fees” to its shareholders, which the IRS and subsequent court rulings reclassified as non-deductible disguised dividends.

The Role of Webinars in Accountants’ Marketing and Sales Efforts

In modern business, accountants face a dual challenge: They must maintain a firm grasp of financial intricacies and regulatory frameworks and navigate the increasingly competitive marketing and sales landscape. As traditional methods evolve, entrepreneurial accountants must leverage innovative marketing tools to bolster their outreach and attract clientele. Webinars have emerged as a powerful medium among these marketing tools, offering a dynamic platform for education, engagement, and lead generation. Herein, I will explore the fundamental role of webinars in accountants’ marketing and sales efforts, shedding light on their benefits, strategies, and best practices.

Navigating the Plagiarism Minefield: Strategies and Solutions for Certified Tax Planners

In the AI era, especially with tools like GPT, plagiarism isn’t just copying another’s work, but also presenting AI-generated content as one’s unique thought without understanding or modifying its output. It’s about intent and attribution. If someone blindly takes an AI’s output and presents it as their own, especially in professional or academic settings, it can be considered a form of plagiarism. For certified tax planners, understanding and addressing this nuanced form of plagiarism is crucial for maintaining professional integrity and credibility.

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  • Avoiding Passive Loss Limitations Through Short-term and Alternative Rentals

    Short-term rentals like AirBnb are becoming increasingly popular with taxpayers who invest in real estate. For many taxpayers, the appeal of these properties is the flexibility and cash flow potential. However, there may be an overlooked third tax benefit. In many situations these short-term rentals may not qualify as a rental activity to the IRS, and that may offer a big tax break. While many rental activities generate losses, this can leave taxpayers facing the frustrations of not always getting to deduct those losses right away due to the passive activity limitations.

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    How Business Owners Can Boost Income by Avoiding the $10,000 SALT Cap

    Taxpayers have been whipsawed by confusing rules for the $10,000 limit on deducting state and local taxes (SALT), the most politically charged piece of the Tax Cuts and Jobs Act (TCJA) of 2017. The cap has caused nearly 11 million individuals to lose an annual deduction worth $323 billion. But many owners of private businesses known as passthroughs can avert that financial pain. If you own your company and thus report your business income on your personal federal income tax return, here’s what you need to know.

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    GOFUNDME & KICKSTARTER: TAXABLE? DEDUCTIBLE?

    Millions of taxpayers in the United States are using crowdfunding websites like GoFundMe and Kickstarter to raise money for important needs, such as paying medical bills, paying legal fees, or funding a new business venture. Both the IRS and the courts have been surprisingly silent on the tax consequences of crowdfunding platforms. The good news is that established tax law provides a clear road map for answering most tax questions created by raising money from a crowdfunding website. By knowing these rules, taxpayers can use crowdfunding to raise cash and minimize their overall tax exposure.

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    My Client Stuck with a Mistaken C Corporation Election?

    My client formed three limited liability companies (LLCs) to hold his rental properties. Without consulting me, he filed Form 8832, Entity Classification Election, to elect C corporation treatment, effective January 1, 2020, for these LLCs. I want the LLCs to be disregarded entities, which is the most tax-efficient structure for his situation. What is the best way to undo these elections?

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    Quick Guide to Claiming Work-From-Home COVID-19 Expenses to Reduce Your Tax Bill

    This information is particularly important if you are the owner/shareholder of your own corporation – C or S corp. You can set up payroll and designate tax-free reimbursements for you to be working at home – as well other tax-free money for you and for your employees. (We will discuss employees momentarily. Yes, it’s essential.) If being an employee is your main source of income – watch out! The short answer to employees claiming an office in home deduction this year is... There is no deduction!

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    Five Tax Reduction Strategies for the Casual Cryptocurrency Owner

    With so many people looking for more ways to make money outside their 9 to 5 jobs, many are turning to money making methods using technology including trading in cryptocurrency. For tax purposes, the IRS considers cryptocurrencies property, not as currency. Just like other property types, stocks, investments, or real estate, when you sell, swap, or otherwise dispose of your cryptocurrency for more or less than you acquired it for, you incur a tax reporting obligation. As an example, there would be a $1,000 capital gain if 0.1 bitcoin is bought for $2,000 in June of 2020 and then sold for $3,000 two months later. This profit must be reported on the tax return and a certain amount of tax is due on the gain, depending on the tax bracket of the taxpayer. In this example, the gain would be short term requiring the profit to be taxed at the filer’s ordinary tax rate. These rates range anywhere from 0-37%.

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    Extra Taxes on S Corporation Distribution?

    My client plans to take about $15,000 in distributions in excess of his basis from his S corporation construction business. I know this generates tax for him. He’s in the 32 percent tax bracket and single. Does he also have to pay the 3.8 percent net investment income tax and the 0.9 percent additional Medicare tax on this amount? Is there a way for him to avoid taxes on this amount?

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    Reduce Taxable Income Up to $25,000 with Passive Rental Losses

    You have likely heard that owning rental real estate provides great tax benefits. This is true for a multitude of reasons, but there’s one benefit that is arguably the best of the bunch: The Small Taxpayer Allowance for Deducting Passive Rental Losses. Based on average household income levels, more than three-quarters of taxpayers can potentially qualify for this fantastic tax benefit that offers taxable income reduction of up to $25,000.

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