Lone accountant takes on IRS and wins - Interesting case on the taxation of insurance company demutualizations.
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S corp fiscal year?
Subject: Choosing a fiscal year
Hello Tax Guru,
I was not sure if I can post on your blog, I had a question about Fiscal year and S-Corp. Is there no situation where an S-Corp can have a fiscal year end on June 30th like you suggest for other corporations or am I misunderstanding the S-Corp?
thanks, great blog!
S corps are required to use the same tax year as their shareholders, which is almost always a calendar (December 31) year.
If income shifting between years is a critical factor, a C corp is an easy way to accomplish this.
Your personal professional tax advisor should be able to help you set up a structure with one or more entities to achieve whatever goal you have.
thanks for the great info. Our challenge is that we are receiving a product order prepayment from the US DOD for $250K and may not have to pay our factory till after Jan 1st. 2009 and we don't want to pay taxes on the $250K sitting in the bank, what would you do?
Will will apply for S-Corp status with IRS.
thanks for your help!
Using a C corp to smooth out that income and have control over the timing of the taxes on it is a very simple task for any experienced professional tax advisor. You need to start working with one ASAP.
Thanks again Kerry!
Gifts to married grandkids?
Subject: Tax free gift question
My grandmom gifts us money each year
For example we are all married but she does not gift the spouses
can she gift each grandchild 24,000 for example writer me the check for 24,000 because I am married?
But without it being written, handed to or directly given to the spouse in anyway?
Or does 12,000 have to be written in my name and 12,000 in my wife's name?
The annual gift tax exclusion is currently $12,000 from any individual to any other individual. I'm not clear how you came up with the idea of her being able to give $24,000 to one grandchild. That makes no sense.
If your grandmother wants to give $12,000 to you and another $12,000 to your wife, two separate checks would be the cleanest way to do this. Giving one $24,000 check to you would look too much like that was a gift to just you and would require her to file a Gift Tax return.
Gifts are completely tax free for the recipients and any tax or return filing requirements are the responsibility of the giver, your grandmother. She should be working with her own personal tax and estate planning professionals to plan out the best strategies for her situation and goals for her family.
Good luck. I hope this helps.
Slightly Easing Off on Tax Preparers – Interesting look at the “more likely than not” issue from the latest edition of Practical Accountant.
Is Ben Stein on drugs?
I guess I fell for the hype that economist/actor/game show host Ben Stein was an intelligent person because he would have been the last person I would have expected to write an article like this in the NY Times, calling for tax hikes and denying the reality of the fact that lower tax rates generate more tax revenue.
Thanks to Ohio CPA Dana Stahl for passing this along in this email:
Mr Guru - shocking commentary from Ben Stein, who I thought was pro-growth!
That is a very surprising analysis from Ben Stein, who I had always taken as being more savvy on supply side economics.
He seems to be drinking the Obama Kool-Aid.
Income Gain Exclusions – The Scoop on Code Sec. 121 – From TrustMakers, including the newly passed change.
Tax Break on Capital Gains Narrows - More details on the new changes to the tax free home sale rules.
Cigarette Tax Burnout - What a shame. The rulers who tried to exploit nicotine addicts bumped up against the reality of the fact that people will modify their behavior to avoid paying taxes rather than just bend over and accept more financial rape.
More info on new tax law
CCH has a free seven page explanation of the new tax law that was passed last week, with more info than any of the other sources I’ve cited previously.
New Homebuyers' Tax Credit
New Tax Credit Amounts To a Free Loan for $7,500 – More details on the new temporary credit for some people buying homes between 4/9/08 and 6/30/09. As always, this new credit doesn’t apply to the evil rich.
There’s also a new special website devoted just to this new credit.
One very interesting aspect to this new credit is that people have the option to claim it on their 2008 1040 for homes purchased between 1/1/09 and 6/30/09, as described on the FAQ page:
18. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
Yes. The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.
19. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.
We're all going to get soaked...
Businessman charged in plot to kill IRS agent - An insanely extreme way to deal with an audit.