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The QOZ tax credits were enacted in 2017 and sunset on December 31, 2026. This credit allows taxpayers to defer until December 31, 2026, the taxation of gain that they reinvest in a QOZ. The amount of deferred gain that is taxable is reduced by 10% if the QOZ investment has been held for 5 years as December 31, 2026, and another 5% if it has been held for 7 years at that time. Any additional gain on the investment…

Continue Reading Did you know that the Qualified Opportunity Zone tax credit has been permanently extended and (at least arguably) enhanced?
Loans that have interest that is not currently paid each year are treated as having “original issue discount” or OID.  These types of loans are common in mezzanine financing which can have rates ranging from 13-18% with 11-15% payable currently (typically monthly or quarterly)and the remaining interest (referred to a PIK interest) paid at a later date or at maturity.  Borrowers can deduct the PIK interest ratably over the term of the note (even though not paid).
 
However, if the
… Continue Reading Did you know that if the rate of deferred interest (PIK interest) on a loan is too high that the interest may not be deductible?

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 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?

We are all familiar with common business structure in which the operating business is owned by the individual(s) through one entity, the real estate is owned by the same individual(s) through a separate entity and the operating business pays rent to the real estate entity. This is a great method of protecting the value of the real estate from the operating risks of the business. It does however create a self-rental situation under the Internal Revenue Code.

Under the self-rental…
Continue Reading Did you know under the ‘self-rental’ rule, income from rental activity is deemed active income and losses are deemed passive?