Did You Know? Commonly Asked Tax Questions

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As you probably know, in a like-kind exchange, any sale proceeds that you do not apply to purchasing a new investment property will be taxable (up to the total gain on the property). The challenge with making a like-kind exchange of property in a seller-financed sale is that the seller doesn’t receive any (or very little) cash at closing.  As a result, even if the seller rolls that cash over into a new property, subsequent payments received on the note…

Continue Reading Did you know you may be able to make a 1031 exchange of property that you sell on an installment note?

A common structure in the acquisition of the assets of a business is for the seller to receive equity from the acquirer in addition to cash. Receipt of a partnership or LLC interest in exchange for property is generally non-taxable. A seller can obtain substantial tax savings by deferring gain on the low-basis assets by specifying in the agreement that specific high-basis assets will be sold for cash and that certain low-basis assets will be exchanged for partnership interests. 

To…

Continue Reading Did you know in a sale of assets to a partnership for cash and partnership interests you can reduce tax by specifying which assets are sold and which are exchanged for partnership interests?

The Infrastructure Investment and Jobs Act (2021) and the Inflation Reduction Act (2022) provide ample opportunity for construction industry employers to win government contracts. For some employers, one hindrance to competing for government construction contracts is that under the Davis-Bacon Act, all government construction-related contracts require employers to pay their laborers and mechanics not less than the prevailing wage and fringe benefits. Often, employers who have chosen to provide self-funded benefits struggle to have such benefits credited toward the fringe…

Continue Reading Did you know there’s a straightforward way to have self-funded health and welfare benefits credited toward federal prevailing wage requirements?

In the recent case of ES NPA Holding LLC v. Commissioner, the IRS argued that a profits interest can only be received tax-free by a service provider when the service is rendered directly to or for the benefit of the entity issuing the interest. The facts of the case are complicated, but in short, in the ES NPA case, the person that received the profits interest had rendered services to a corporation which was a member in the LLC (taxed…

Continue Reading Did you know you can receive profits interest tax-free even when the services are not rendered directly to the partnership?

On February 7, 2024, the IRS announced it would continue its Pre-Examination Retirement Plan Compliance Program pilot with the Pre-Examination Compliance Pilot 2.0. The pilot program aims to enhance tax compliance for retirement plans by allowing plan sponsors to identify and address issues before their retirement plans are subject to a full-scale examination.

If selected for the pilot program, plan sponsors will receive a notice from the IRS that their retirement plan has been chosen for an examination and that…

Continue Reading Did you know the IRS has extended its Pre-Examination Retirement Plan Compliance Program pilot, allowing retirement plan sponsors to avoid costly penalties?

In a sale of the assets of a business (or a sale of stock that is treated as a sale of assets), the buyer and the seller must allocate the consideration paid among the business’s assets, including goodwill, and report it to the IRS on Form 8594. This allocation must be made using the residual method. Under the residual method, the business assets are allocated among seven classes in order of priority from Class I to Class VII. 

Consideration is…

Continue Reading Did you know you are not required to agree on allocating the purchase price among the assets in a business acquisition?

By making a Section “83(b) election,” an employee can defer until sale the tax associated with the receipt of restricted stock as well as convert ordinary income on the stock to capital gain. Consequently, the consequences of missing the deadline for the election are fairly dramatic. The Section 83(b) election must be filed with the IRS within 30 days of receipt of the stock. With such a short timeline, as you might expect, these elections sometimes are missed.

Simply canceling…

Continue Reading Did you know you may be able to mitigate the effects of a missed Section 83(b) election?

Section 1202 of the Code provides special benefits to certain stock in C corporations that meet the requirements. The gain from the sale of 1202 stock (acquired after September 27, 2010) is excluded from a non-corporate owner’s taxable income up to the greater of $10 million or 10 times their tax basis in the stock. With the reduction in corporate income tax rates in 2017, conducting business through a C corporation that qualifies as a qualified small business has gained…

Continue Reading Did you know if you transfer qualified small business stock ‘1202 stock’ to a partnership, the stock will lose its 1202 status?

Occasionally, parties to a transaction may determine after closing that they would have been better off not completing the transaction. This may result from a misunderstanding of the facts or the law, the failure of anticipated events to occur, or the occurrence of unanticipated events.

Under what has come to be known as the “rescission doctrine,“ parties to a completed transaction may be able to unwind that transaction and have it be disregarded for tax purposes. This principle was originally…

Continue Reading Did you know you may be able to treat a transaction as never happening if you unwind it in the same tax year?

Self-employment tax (“SE Tax”) applies to “net earnings from self-employment” which includes a partner’s distributive share of income from a business conducted by a partnership.  However, an exception provides that the share of income of a “limited partner, as such” (other than guaranteed payments for services to the partnership) are excluded from the definition of self-employment earnings.


On November 28, 2022, in Soroban Capital Partners, L.P. v. Commissioner, the Tax Court considered whether the sole fact that a…

Continue Reading Did you know a limited partner may be subject to self-employment tax on their share of partnership income if they actively participate in the business?