Recently, the District Court in Tel Aviv was required to address the question as to whether foreign companies with an Israeli Permanent Establishment (PE) should include on their revenue calculation unrecognized expenses for tax purposes. Such expenses would include payroll expenses for granted employee’s options and the social expenses derived from it, in companies whose revenues are calculated at the 'Cost Plus' pricing method, even though the options were granted to employees under Section 102 of the Israeli Income Tax Ordinance.
We live in the Era of the Limited Liability Company (LLC).
The LLC has become the dominant business vehicle of the early 21st Century: It is the “must use” vehicle for all real estate transactions, and an increasingly popular choice for operating a commercial business as well.
How did this come to pass? The short answer is that the LLC is the most flexible business vehicle available. It is not the perfect choice for every situation, but it is the best choice for a majority of situations these days, and its use is likely to continue to burgeon for several reasons, all of which are most easily explained using automotive vehicular metaphors.
The Boston Red Sox are in a strange place these days – and I am not referring to last place in the America League East, which is a place they have occupied so consistently of late that it has practically become their postal mailing address.
No, I am referring to the fact that they have the 3rd highest payroll in baseball, and yet, quixotically, are a team animated and energized by very young players. During early July when the Red Sox actually played pretty decently (winning four straight series and compiling a 9–4 record) the first three hitters at the top of the lineup were Mookie Betts (age 22), Brock Holt (age 27), and Xander Bogearts(age 22); throw in catcher Blake Swihart (age 23), who was batting ninth during part of that winning streak, and the Red Sox were showcasing impressive and event breathtaking young talent exactly where you want it – up the middle, at catcher, second base, shortstop and centerfield.
Yahoo 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.
The 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.
A “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).
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.
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:
Assume 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.
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.