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James Duffy

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Jim is a partner in Taft’s Tax practice and practices principally in the areas of federal tax law; tax credit financing; individual, partnership and corporate tax planning; M&A; tax-exempt organizations and general commercial and corporate law.

Jim has been actively practicing in the area of the New Markets Tax Credits (NMTC) program since its inception in 2001. He has organized community development entities (CDEs) and represented CDEs, borrowers and other parties in structuring and closing numerous NMTC transactions. Jim also advises clients regarding Qualified Opportunity Zone matters.

Jim advises LLCs, partnerships, corporations and individuals in connection with the formation of new companies, mergers and acquisitions, formation of joint ventures, like-kind exchanges, ownership succession planning, and general business operations. These clients are involved in a variety of industries, including banking, venture capital, real estate, construction, consulting and investing.

Jim also advises charitable and non-charitable tax-exempt organizations, including health care entities, schools, religious and civic organizations. In addition to advising management of these organizations with respect to matters pertaining to general operation and maintenance of tax-exempt status, Jim has assisted clients in forming, restructuring and dissolving tax-exempt organizations, as well as forming donor- advised funds.

Prior to joining the firm, Jim worked at the law firm of Lewis Rice and Fingersh in St. Louis, Missouri, where he concentrated his practice in federal and state taxation. He also clerked for the Hon. Robert P. Ruwe of the U.S. Tax Court in Washington, D.C.

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Under the “partial disposition rule,” if you replace a roof (or other structural component in a building such as an elevator), you can claim a tax deduction equal to the remaining tax basis (undepreciated cost) of that roof you replaced.  You then capitalize the cost of the replacement roof, elevator or other component and begin to depreciate it. You must elect to use the partial disposition rule to take this deduction, but you make the election simply by claiming the…

Continue Reading Did you know that you can deduct the cost of the roof that you replace on your investment property?

The gain on sale of land that is held primarily for sale to customers in the ordinary course of business is taxable at ordinary income rates (and not at the more favorable capital gains rates).  In addition, those gains may be subject to self-employment tax.  The prospective increase in sale value from subdivision can suddenly become much less attractive given the increased tax burden.  Persons holding land for sale as described above are known as “dealers.”  Whether you are a dealer…

Continue Reading Did you know that if you subdivide land you own into parcels for sale you risk converting capital gain into ordinary income?

Content by Jim Duffy and Michelle DiVita

Minnesota (and other states) generally impose income tax on companies engaged in multi-state business on that portion of a company‘s income that is attributable to Minnesota. Minnesota makes this determination based on the percentage of sales a company makes within the state of Minnesota. Under Minnesota law, receipts from performance of services are attributed to the state where the services are received. If the location where services are received is not readily determinable…

Continue Reading Did you know that a recent Minnesota tax court case might impact how your business income is allocated to Minnesota?
  As discussed in prior installments of Did You Know,  Section 1202 of the tax code makes the gain on the sale of certain corporate stock nontaxable.  This is not a deferral. It will never be taxed in the future. One of the many requirements for stock to qualify for this treatment is that it must be issued by a C corporation (not an S corporation).  Unfortunately, if you have an S corporation, simply terminating its S corporation status (i.e., converting
… Continue Reading Did you know that you might be able to convert your S corporation into a Section 1202 corporation to get tax-free treatment on the gain?

Content by Jim Duffy

The key advantage lies in the ability to avoid paying capital gains taxes on appreciated assets, such as real estate, stocks, or other investments. A donor can generally claim a charitable deduction for the full fair market value of the property. By contrast, if a donor sells these assets and contributes the sale proceeds, the donor would incur capital gains tax on the appreciation which would decrease the benefit of the deduction to the donor. However…

Continue Reading Did you know that the tax benefits of contributing property to a charity are often greater than donating cash?

Content by Jim Duffy

Generally, the tax consequences to a debtor of debt cancellation depend in large part upon whether the debt is recourse or non-recourse debt. Non-recourse debt is debt where the lender has no recourse against the borrower, but its remedy for nonpayment is limited to property that has been pledged or mortgaged to secure the debt. By contrast, a lender making a recourse loan may have a security interest in property of the debtor, but will also…

Continue Reading Did You Know that whether or not a security interest is perfected does not affect the tax consequences of debt cancellation?

In a prior installment of Did You Know, I described the benefits of Section 1202 stock. That section of the Internal Revenue Code allows taxpayers to exclude gain on the sale of qualifying stock from their taxable income in an amount equal to the greater of $10 million or 10 times their tax basis in the stock sold. A strategy known as “stacking“ may allow you to multiply the benefits of the $10 million gain exclusion.

Stacking refers to the…

Continue Reading Did You Know that you may be able to increase the amount of gain excluded on section 1202 Stock by gifting the stock to others?

Content by Jim Duffy

As you may be aware, when a corporation files an election to be taxed as an S corporation, all of the shareholders must consent to that election. If you live in a community property state, your spouse may be an owner in the corporation, even if he or she does not actually own any stock by name. The income tax regulations provide that when a stock of corporation is owned by a husband and wife as…

Continue Reading Did you know that your S election could be invalid if your spouse did not consent to it?

Content by Dave Bartoletti, Jim Duffy and Nathan Hagerman

As you may be aware, the Supreme Court decision in South Dakota v. Wayfair in 2018 substantially expanded the ability of states to require out-of-state sellers to collect and remit sales tax on sales into that state. Many companies that make sales into multiple states have found it challenging to maintain compliance with the sales tax requirements for all of the states into which they make sales. These liabilities have taken…

Continue Reading Did You Know a potential liability for failure to collect sales tax may not be covered by R&W insurance?

You can if it’s qualified small business stock (a.k.a. “1202 stock“) that you have held for at least six months. Section 1202 stock is stock in a qualified small business corporation (“QSBC”) that is acquired at original issuance. A QSBC is a C corporation that conducts a “qualified business” (e.g., no legal or medical services businesses, no finance, etc.), the gross assets of which are $50 million or less. For stock acquired after September 27, 2010, that is held for…

Continue Reading Did You Know that you can make a tax-free exchange of C corporation stock?