Tax & Sports Update

Divide and Conquer: The Latest Scoop on Code Section 355 Spinoffs

Posted by Joseph B. Darby III on Jul 10, 2015 11:01:00 AM

YAHOO.jpgYahoo has been much in the news of late – although Yahoo probably wishes that such were not the case. Yahoo’s stock plummeted and then mostly recovered in late May, as the result of some curious and perhaps even unguarded remarks by an IRS official at a Washington D.C. Bar Association event.

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Topics: EBIDTA, Tax Law, 355 Spinoff, 5% ruling standard

A Clever Disclaimer Strategy for Joint Brokerage Accounts

Posted by Joseph B. Darby III on May 29, 2015 1:31:00 PM

clock.jpgThe following is a clever “hybrid” tax strategy — combining estate planning and income-tax planning — that was brought to my attention by my partner and good friend, Henry Comstock.

Joint Financial Accounts

Married couples very frequently hold investment assets, including brokerage accounts, in a “joint” account where both parties are named as co-owners, and on the death of the first spouse the assets automatically pass by operation of state law to the survivor. An easy and logical marital arrangement, so far as it goes.

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Topics: Joint brokerage accounts, Tax Law, Estate Planning

Investing in a Professional Corporation

Posted by Joseph B. Darby III on May 12, 2015 2:47:00 PM

Meeting.jpgA “professional corporation” in Massachusetts is a legal entity formed under M.G.L. Ch. 156A, and is intended for the conduct of various professions that are subject to state licensure. In recent years, most or all of the regulated professions have also authorized the use of an  LLC as a legal entity through which persons can conduct professional activities (this is typically referred to as Professional LLC or PLLC).

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Topics: Professional Corporation, Professional LLC, S Election, Tax Law, S Corporation

Liquidating an S Corporation in Same Year as an Asset Sale

Posted by Joseph B. Darby III on Apr 23, 2015 1:24:00 PM

stock.jpg

The Problem

An S corporation is often configured such that the S shareholders’ “outside” tax basis in their shares is greater (often by a lot) than the S corporation’s “inside” tax basis in its assets. For example, if the S corporation stock passes through an estate, or if there has been a stock purchase for fair market value at a time when the stock had increased significantly in value compared to the tax basis in the underlying assets, outside tax basis can easily be substantially higher than inside tax basis.

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Topics: Tax Law, S Corporation

Catcher in the Wry: The Tangled Syntax and Startling Insights of Yogi Berra

Posted by Joseph B. Darby III on Apr 20, 2015 3:18:00 PM

The Yankees' Yogi Berra was a terrific baseball player—a three-time MVP of the American League and 15-time all-star—but, as we all know, being famous is not what made Berra famous. What transformed him from Hall of Fame catcher and manager into an iconic figure was his invention of that highly stylized form of folk wisdom: the Yogi Berra Quote. Yogi-isms are difficult to deconstruct or even explain in an intelligent manner without using examples. You have to see one to see what there is to see. The following are some of the more famous (and authentic) Berra quotes:

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Topics: Sports

Thoughts on How to Buy Out a 50% Interest in an S Corporation

Posted by Joseph B. Darby III on Apr 16, 2015 2:43:00 PM

split.pngAssume an S corporation is owned 50-50 by two individuals, and one wants to buy out the other. This transaction will not come within the scope of the transactions where a § 338(h)(10) or §336(e) election will be applicable, so there is no “easy” path to get (mostly) capital gain to the seller and a full step-up in tax basis to the buyer. The question, therefore, is how best to implement this acquisition in a “tax efficient” manner.

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Topics: Tax Law, S Corporation

S Corporation - When Should You Keep the S Corporation Alive After an Asset Sale?

Posted by Joseph B. Darby III on Apr 16, 2015 2:36:00 PM

dollarsign.jpgThe Situation

In contrast to the situation discussed in another blog post where, immediately after an asset sale, the S corporation's inside tax basis is greater than the shareholders outside tax basis, an entirely different tax strategy may make sense if the tax basis relationship is reversed — i.e., when the inside tax basis is higher than the outside tax basis.

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Topics: Tax Law, Partnership Tax, S Corporation

Converting an S Corporation into an LLC Tax Free! – The Drop-Down Transaction

Posted by Joseph B. Darby III on Mar 19, 2015 10:44:00 AM

LLC.jpgAssume an S corporation is owned 50-50 by two individuals, and one wants to buy out the other. This transaction will not come within the scope of the transactions where a § 338(h)(10) or §336(e) election will be applicable, so there is no “easy” path to get (mostly) capital gain to the seller and a full step-up in tax basis to the buyer. The question, therefore, is how best to implement this acquisition in a “tax efficient” manner.

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Topics: Corporate Tax, Tax Law, Partnership Tax, S Corporation

The Holy Grail: How to Get Inside Tax Basis When Buying S Stock

Posted by Joseph B. Darby III on Mar 5, 2015 11:00:00 AM

holygrail.jpgOne of the important differences between an S corporation and a partnership, and one of the drawbacks to choosing S corporation status, is the fact that if a partnership makes a § 754 election, then a purchaser of an interest in the partnership can receive the equivalent of a step-up in “inside” tax basis (meaning the tax basis of partnership assets in the hands of the partnership) and thereafter enjoy enhanced amortization or depreciation deductions.

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Topics: Corporate Tax, Tax Law, Partnership Tax, S Corporation

Inversion Transactions: We Gotta Get Out of This Place!

Posted by Joseph B. Darby III on Jun 11, 2014 3:19:00 PM

Inversion transactions – transactions whereby a U.S. corporation merges into a foreign corporation and essentially expatriates from the United States to tax purposes – have become front-page news once again, as some of the most famous brand names in U.S. corporate history have left or are attempting to leave U.S. tax jurisdiction. The recently departed include Eaton Corporation, a Cleveland-based manufacturer that has made itself, through merger, a resident of Ireland. Others seemingly headed out the door include Medtronic, Inc. the Minneapolis-based medical device company, which is also planning to head off and become a resident of the Auld Sod. Other famous corporate expatriations in recent memory include Stanley Black & Decker, Seagate Technology, Fruit of the Loom, Ingersoll-Rand and Tyco International. Meanwhile, the list of companies that have seriously considered inverting includes such legendary brand names as Pfizer, the pharmaceutical giant, Walgreens, the iconic drugstore company, and Chiquita, the top banana in the banana business. In the case of Pfizer, its attempted buyout of Astra Zeneca PLC fizzled, nixing the effort to move Pfizer's corporate headquarters to the United Kingdom – at least not for the moment. But the UK continues to offer a holding company regime that is increasingly attractive to foreign multinationals, including a 20% corporate tax rate (reduced to a 10% rate if the corporation qualifies under the "innovation box" rules) and no tax on repatriation of foreign profits. Lots of people seem deeply offended that companies like Eaton and Medtronic, apparently solely for tax reasons, wants to leave the United States and relocate elsewhere. But the United States, with the highest corporate tax rates in the world, has no one to blame but itself. An increasing number of U.S. companies seem willing to be accused of "bad citizenship" in the United States if it saves them a bundle in taxes. In the case of Walgreens, the iconic American drug store proposed to reincorporate its headquarters in Switzerland, which according to news reports would have saved Walgreens $4 billion of taxes in the next 5 years. That would pay for a lot of Swiss chocolate.

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Topics: Tax

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