Federal income tax

There has been a lot of publicity lately regarding Burger King’s proposed acquisition of Tim Hortons, as Burger King is expected to move its corporate headquarters to Canada following the acquisition. These type of corporate inversions, where U.S. companies move their headquarters outside of the U.S., have been gaining momentum. We have also seen large companies, such as Apple, benefiting from using foreign holding companies to protect income for their foreign operations from U.S. taxation. Many politicans criticize these moves as unpatriotic. However, they also offer corporate taxpayers the opportunity to benefit from lower corporate tax rates. read more

July 18, 2014August 6, 2015

Income Tax on Carmelo Anthony’s NBA Contract

By Jason Palmisano

Carmelo Anthony is a professional basketball player who recently signed a lucrative new NBA free agent contract with the New York Knicks. Michael McCann recently wrote an article in Sports Illustrated providing a breakdown of the potential income tax consequences if he had signed with the Chicago Bulls, Miami Heat, or Houston Rockets for the maximum amount with each team. Note, the “Jock Tax” in the chart is is a standard 4% agent commission. (hat tip: Paul Caron) read more

June 26, 2014August 6, 2015

Inherited IRAs Subject to Bankruptcy Creditors

By: Jason Palmisano

In 2001, Heidi Heffron-Clark of Wisconsin inherited an individual retirement account (IRA) valued just over $450,000 from her mother. In 2010, Heidi and her husband filed for bankruptcy. The Clarks sought to exclude the inherited IRA from their bankruptcy estate which would block their creditors from obtaining any proceeds from the inherited IRA. At the time of the bankruptcy filing, the inherited IRA was worth approximately $300,000. In a unanimous decision, the Supreme Court of the United States held the inherited IRA was included in their bankruptcy estate and was not protected from the Clark”s bankruptcy creditors. The Supreme Court reasoned an inherited IRA is distinct from an individual’s own IRA, and thus not exempt from creditors in bankruptcy, for 3 reasons: read more

May 29, 2014

Have a Foreign Bank Account?

By: Amanda Wilson

A taxpayer that has a foreign bank account is required to file a special form, the Report of Foreign Bank and Financial Accounts, disclosing information about the account. Failure to file this form, which is commonly referred to as an FBAR, can result in significant penalties. A person that fails to properly file an FBAR can be subject to a penalty up to $10,000 per violation. This penalty can be increased to the greater of $100,000 or 50% of the balance in the account at the time of the violation if the violation was willful. read more

May 27, 2014

IRS May Issue Guidance on Parnter/Employee Issue

By: Amanda Wilson

When deciding how to form their new business, small business owners are often encouraged to organize as an S corporation because of self-employment tax savings. This recommendation is because the IRS does not recognize that a partner in a partnership can also be an employee. As a result, the IRS takes the position that all of the partner’s income from the partnership should be subject to self-employment taxes, instead of just the amount that reflects a reasonable salary. In contrast, an owner of an S corporation can clearly be treated as both an owner and an employee, resulting in self-employment tax savings. read more

Category: Federal income tax

Foreign Operations? Should You Follow Burger King’s Example?

Income Tax on Carmelo Anthony’s NBA Contract

Inherited IRAs Subject to Bankruptcy Creditors

Have a Foreign Bank Account?

IRS May Issue Guidance on Parnter/Employee Issue