TaxView Archive - Main

Fall 2007
Accounting Board Seeks to Clarify Reporting of Uncertain Tax Positions
Determining tax liability has long involved as much art as science. Accounting for tax liabilities adds a further layer of judgment–or some would say confusion–to the process.

Municipal Bonds' Tax-Exempt Status Faces Court Challenge
State and local government bonds have long been a favorite vehicle for investors seeking to minimize their tax burden, as the bonds’ interest payments are exempt from federal income taxes.

Kiddie Tax Begins to Take a Bigger Bite
The federal “kiddie tax” is no longer child’s play.

Summer 2007
Research Tax Credit Extended and Sweetened
Once again, Congress has breathed new life into the politically popular Research Tax Credit, which expired December 31, 2005. The extension was contained in The Tax Relief and Health Care Act of 2006. The politically popular Research Tax Credit was extended retroactively for qualified expenses incurred after December 31, 2005 but before January 1, 2008.

New York State Adopts Combined Reporting Law
One man's tax loophole is another's tax incentive. It all depends on your perspective. That's certainly the case in New York State, where Governor Eliot Spitzer pushed the state legislature to adopt the so-called "combined" approach to corporate taxes (used by 17 other states including California and Illinois), in order to close a budget gap that has been estimated at $1.6 billion.

529 College Tuition Plans Come of Age
The "529 Plan" has now graduated to become a permanent fixture in college-saving plans. Last year, Congress and the Administration dropped a Sunset provision that had scheduled the popular college tuition programs for expiration in 2010. Instead, they made the 529 Plan (a reference to its section in the Internal Revenue Code legally known as a Qualified Tuition Plan) permanent.

SPRING 2007
Determining the Taxable Nature of Employer Gifts
In late February, celebrities crowded the Kodak Theatre in Hollywood to present the annual Academy Awards. In past years, the ceremony’s sponsors gave the presenters, performers and winners gift bags, or “swag,” each valued in excess of $100,000, to help ensure a star-studded turn-out.

E-Filing: The Future Is Now
Increasingly, corporate tax returns are being delivered with the click of a mouse rather than by courier. This year, more corporate returns will be filed electronically than ever before.

Sharing the Wealth, Family-Style, with FLiPs
Many families with substantial assets are rediscovering the virtues of a 40-year-old legal structure, the Family Limited Partnership (FLiP), as a means of shifting assets between generations with minimal tax consequences.

WINTER 2006
On Target Tax Planning Tips and Strategies
Many people do not think about their tax situation until they are forced to do so. However, waiting until 2007 before acting will be too late. Some careful tax-planning before December 31, 2006, can produce meaningful tax savings for many filers. In this special year-end issue, TaxView offers its annual collection of tips, suggestions and reminders, which readers may find useful in their tax planning.

The Pension Act Toughens Rules for Charitable Deductions While Sweetening Retirement Plan Provisions
One of the more important laws enacted by Congress this session is the Pension Protection Act of 2006 (Pension Act). The stimuli for enactment of the law were the bankruptcies of numerous large corporations, including Enron and Worldcom, in which employees and retirees saw their underfunded defined benefit retirement plans terminated and taken over by the federal Pension Benefit Guaranty Corporation (PBGC).

FALL 2006
Section 409A Can Have Significant Impact on Companies in Several Areas Part II: Deferred Compensation and Risk of Forfeiture
As discussed in the Summer 2006 issue of TaxView, Internal Revenue Code Section 409A, enacted as part of the American Jobs Creation Act of 2004, makes sweeping changes to the treatment of nonqualified deferred compensation (NQDC) plans. A failure to meet the Section 409A requirements may result in the early inclusion of amounts in gross income, an additional tax of 20% of the compensation required to be included in gross income and interest at the underpayment rate plus 1%.

New York City’s Unincorporated Business Tax
People who choose to live and work in big cities get used to the tradeoffs and compromises that accompany city life—putting up with more traffic, noise and congestion in exchange for easier access to theaters, museums and business centers, for example. But some residents of New York City must also deal with a unique issue that many consider an ugly worm in the Big Apple: the City’s infamous Unincorporated Business Tax (UBT).

Basic Estate Planning Techniques: Credit Shelter, Marital Deduction and Life Insurance Trusts
Among the most common types of trusts used in estate planning are the credit shelter trust, also known as a bypass trust; the marital deduction or QTIP trust; and the irrevocable life insurance trust. Each can provide different benefits, depending on the desired goals of the estate plan.

SUMMER 2006
A Closer Look at TIPRA, Including an Estate Planning Opportunity
On May 17, 2006, President Bush signed into law the $70 billion tax package known as the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA). At first glance, TIPRA appears to deal solely with income taxes, such as the section that spares millions of Americans from the Alternative Minimum Tax (AMT) this year. However, a closer reading suggests that it holds a major new benefit for the estate plans of high net-worth individuals.

Section 409A Brings Significant Changes to Deferred Compensation Plans
Enacted as part of the American Jobs Creation Act of 2004, Section 409A of the Internal Revenue Code was written to put some teeth into the “constructive receipt” rule that the IRS uses to determine whether deferred compensation is taxable or nontaxable.

Some States Take New Approach to Taxable Income Apportionment
For many years, states that impose a tax on corporate income (only Nevada, South Dakota, Washington and Wyoming do not) relied on an evenly weighted, three-factor formula to determine the taxable portion of income generated by companies with multi-state operations.

Basic Estate Planning Techniques: Trusts Part 5 in a Series
Trusts can play an important role in estate planning. A trust is a legal agreement between two parties: the creator of the trust, or the grantor, and a trustee, who administers the trust.

SPRING 2006
Surviving a State Tax Audit
Among the most unwelcome news for any company is that its tax return has been selected for audit. While the mathematical odds of a company finding itself in that position at any given time are relatively slim, corporate audits by state tax departments are on the rise.

Basic Estate Planning Techniques: Estate-Splitting Strategies May Reduce Taxes
Married couples have a number of strategies available to them to help minimize the tax bite ultimately taken out of their combined estate. How ownership of their combined assets is split between them while they are alive can play an important role in determining just how effective their estate plan will be.

FAS 109 Calculations Provide Greater Accuracy for Business Planning
The objective of FASB Statement No. 109, Accounting for Income Taxes (FAS 109), is to recognize both the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in a company’s financial statement or tax return.

WINTER 2005
On Target Tax Planning Tips and Strategies
April 15^th, 2006 (March 15^th for calendar year corporations)—the deadline most individuals and businesses face for filing their 2005 income tax returns—may seem a long way off, but now is the time to start preparing for it. A little bit of planning now can help avoid the headaches and hassles that come with a last-minute rush as the filing deadline approaches. In this special year-end issue, TaxView offers its annual collection of tips, suggestions and reminders, which readers may find useful in tax-planning discussions with their accountants or financial advisors.

“Points” to Consider in Mortgage Refinancing
Despite contained but steady upward pressure on interest rates exerted by the Federal Reserve Board recently, rates for home mortgages have not followed suit. As of early October 2005, interest rates on 15-year fixed rate mortgages averaged 5.09%; 30-year loans were at 5.52%; and adjustable rate mortgages (ARMs) stood at 5.08%, according to Bankrate.com. As a result, refinancing and home equity line of credit activity remains strong and may raise some tax-related issues for those participating in the trend.

FALL 2005
Unclaimed Property Can Be a Hidden Liability
Over the past several years, the number of states conducting unclaimed property audits of businesses and other entities that hold such assets has been on the rise, sparking a need for companies to pay greater attention to their potential liability in this area. States view unclaimed property as a substantial source of non-tax revenue, especially during economically challenging periods.

Avoiding Conflicts Under FAS 109
The closing paragraph of a recent article in The Tax Adviser, the journal of the American Institute of Certified Public Accounts, states the issue succinctly: “An auditor’s use of the ‘tax specialist’ for tax matters is more important than ever before,” author Katherine D. Morris, CPA, writes in the May 2005 issue. “Clear guidance on tax services is needed to satisfy audit firms, CEOs, CFOs and audit committees.”

Basic Estate Planning Techniques - Part 3 in a Series
The vast majority of estates—about 98%, according to IRS estimates—are not subject to federal estate tax under current regulations, and changes to the tax code may push that percentage even higher. But for those estates that do face the possibility of taxation, the unified credit can be a useful tool for minimizing or even eliminating estate tax liability. To be used most effectively from an estate planning perspective, the unified credit should be utilized in conjunction with the annual gift tax exclusion.

SUMMER 2005
Sales and Use Tax: The Nexus Question
Nexus, also known as sufficient physical presence, is the pivotal factor in determining whether a company conducting business transactions in another state is required to collect sales and use tax on behalf of the state where those transactions take place. While there are some general guidelines that apply in determining nexus, there can be significant variations from state to state. Since 45 states and the District of Columbia impose a general sales tax (and the other five states exert taxing authority that could trigger nexus in some situations), nexus can quickly become a complicated issue.

Basic Estate Planning Techniques - Part 2 in a Series
Effective estate planning is not just about minimizing taxes and making sure assets are distributed according to your wishes after death. It should also address issues that could arise in the case of a severe and/or prolonged illness or injury that leaves you unable to make rational decisions or to communicate with caregivers. Two documents that address those issues and should be included in any comprehensive estate plan are a living will and a healthcare proxy. Together, they constitute an advance medical directive. As was so dramatically illustrated by the Terri Schiavo case in Florida recently, the absence of an advance medical directive can lead to a multitude of problems.

Software Review: Small Business Favorites
It’s rare when a start-up company, no matter what its size, doesn’t implement at least one rudimentary business software system right out of the gate. For many, that means an off-the-shelf package to handle basic tasks such as banking, financing, managing customer information, tracking income and expenses, tracking and paying sales tax, profit and loss statements, and gathering information and preparing reports to file income tax returns.

SPRING 2005
Stock Options and the 83(b) Decision
When an employee receives property, including stock, in connection with the performance of services, IRC Sec. 83 governs how the worker is taxed. Generally, under IRC Sec. 83, an employee includes the fair market value of stock in gross income for tax purposes not when the stock is initially granted, but when the restrictions on the stock are no longer applicable (i.e., when the stock vests). Nevertheless, the employee also has the option of making an IRC Sec. 83(b) Election at the time of receipt, which, in effect, accelerates the moment tax is due—often helping to fix the tax at a lower amount.

Estate-Planning Techniques - First in a Series
It is a generally accepted fact that many individuals pay too little attention to how their assets will be distributed after their demise, but a recent survey casts some light on just how widespread a problem this really is. A poll of some 800 affluent adults conducted by PNC Advisors found that more than a third of people with $10 million or more in investable assets do not have wills—the most basic of estate-planning documents. In addition, more than half (56%) of those potentially intestate multimillionaires admitted that the main reason for this glaring deficiency was simple procrastination.

Seeking a Solution to the Quagmire of State Sales and Use Taxes
The morass of individual state sales and use taxes currently in effect and the lack of uniformity in administrative and compliance procedures have long been thorns in the sides of companies conducting business across state lines. Rapid growth of online commerce and the de facto competitive advantage enjoyed by out-of-state merchants who choose not to collect sales tax on transactions have exacerbated the problem. However, some relief may be on the horizon in the form of the Streamlined Sales Tax Project (SSTP).

WINTER 2004
On-Point Tax Planning Tips and Strategies
“Of those to whom much is given, much is required.”
When soon-to-be-President John F. Kennedy spoke those words to the Massachusetts State Legislature some 40 years ago, he wasn’t talking about tax planning for high-net-worth individuals and business owners. But he could have been.

Legislative Update: Two New Bills May Affect Taxpayers
While doing your tax planning for the coming year, you need to be aware of two new pieces of legislation passed during the 2004 Congressional session. Both bills—the American Jobs Creation Act of 2004 and the Working Families Tax Relief Act of 2004—contain provisions that may affect both individual and business filers.

FALL 2004
Transfer Pricing: Rules, Regulations and Compliance
The global economy has created an abundance of new business opportunities, but companies that choose to pursue them may also face tax issues they have not encountered before. One potential problem area is transfer pricing.

Independent Contractor or Employee: An Important Distinction to Make
Is someone who provides services to your company, or performs services on behalf of it, an employee or an independent contractor? That’s an important question for both tax-liability and legal reasons, but it’s one that is not always easy to answer.

SUMMER 2004
Unclaimed Value-Added Tax Refunds Add Up to Money Lost for U.S. Taxpayers
With commerce becoming an increasingly global activity in most industries, many companies may be incurring a liability that is not readily apparent on their financial statements. The culprit is the value-added tax (VAT) that most countries outside the U.S. impose on transactions involving goods and services in lieu of the sales tax system used in this country.

Avoiding Tax Pitfalls in S Corporations
There are many legitimate reasons why S corporation status has long been a popular choice among small business owners. However, S corporation shareholders who provide services to the company must exercise caution when choosing how to receive the earnings of the company. They should pay particular attention to the allocation between wages and dividends, because missteps in this area have the potential to trigger significant penalties related to employment taxes.

SPRING 2004
Will They Stay or Go? Battle Lines Are Drawn in Fight To Make Tax Cuts Permanent
When President George W. Bush signed Public Law 108-27 into existence on May 28, 2003, The Job and Growth Tax Relief Reconciliation Act of 2003 became the third-largest tax cut in U.S. history. Its intent was to reduce taxes paid by individuals and businesses and thus stimulate the economy.

States Continue to Eye Cyberspace for Revenue Enhancement
Many consumers and businesses have come to think of catalogs and online merchants as a cost-effective alternative to making purchases from local vendors, who are required by law to collect sales tax and remit it to the state and, sometimes, the local municipality. State governments, not surprisingly, have a decidedly different perspective of such transactions, viewing them instead as lost revenue. While in most cases their tax-levying authority on consumers is clear-cut, states often find it difficult to collect those taxes from end-users, particularly individual end-users.

AMT’s Broadening Reach: A New Twist on “Bracket Creep”
A few years back, large numbers of taxpayers of relatively modest means found themselves victimized by “bracket creep,” a situation where inflation pushes income into higher tax brackets, but with no real increase in the taxpayer’s purchasing power. Inflation may be tame, at least for the moment, but a growing number of middle-class wage earners are now threatened by a new tax demon: the broadening reach of the alternative minimum tax (AMT).

WINTER 2003
Relief Is on the Horizon: A Look at Transaction Costs Related to Acquisitions and Business Integration
In a challenging economy, making every dollar count is part of the corporate DNA. At most companies strategic tax planning plays an important role in achieving that goal. One area that is particularly scrutinized is the tax treatment of transaction costs related to acquisitions and business integration.

“Economic Nexus” Reemerges as Cash Strapped States Weigh In
With budget coffers close to running on empty for many state and local governments, taxpayers can expect to see an increasing amount of attention paid to the issue of “economic nexus” in the months ahead.

Pre-Paid Tuition: Introducing the Independent 529 Plan
Anyone facing the prospect of paying for a college education at some point in the future is likely aware that tuition and related costs have been on the rise. What comes as a shock to many, however, is just how dramatic those increases have been. College costs have consistently increased at about twice the rate of inflation, according to FinAid (www.finaid.org), and at times the rate of increase has been even steeper.

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The information contained in TaxView is for general purposes only and is not intended, and should not be construed, as legal, accounting, or tax advice or opinion provided by Geller & Company to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs. Therefore, the information should not be used as a substitute for consultation with professional accounting, tax, or other competent advisors.

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