By month:April 2012
You might want your S corporation to own an S corporation of its own (QSub). Tax law treats the QSub as if it doesn’t exist for income tax purposes, but treats it as a separate entity for employment tax purposes. On the legal side of the equation, you have two separate corporations with two sets of legal protections.
Because you are in business, you likely have the opportunity to improve your tax deduction for long-term care insurance. In fact, you might achieve a 100 percent deduction. If you are married, the 100 percent deduction can include your spouse.
This subscriber owns a timeshare that he is not going to use this year. He wants to know how he can obtain business tax deductions if he lets his employees use it, assuming the employees do some good work. He learns that he has two possible ways to let an employee use the timeshare, one of which is tax-free to the employee. The second method is to call use of the timeshare “compensation” to the employee, which produces the unusual result of taxable income to the employee in an amount often different from the tax deduction for the business.
Learn how this IRS Revenue Procedure allows you to avoid taxes on the sale of a personal residence in which you had a home office or that you used as a rental property. The procedure lays out the methodology, which includes using the $250,000 ($500,000 if married) home-sale exclusion in unison with a 1031 tax-deferred exchange to avoid the taxes and enhance your deductions on the replacement home.
You likely hate tax-law surprises. Foreclosures, short sales, and mortgage modifications can both reward and punish you, sometimes during the same transaction. You may not have a problem with your home’s value or its mortgage, but you may have a relative, friend, or client who faces this situation. If so, you may want to know how tax law treats the principal residence foreclosure, short sale, or loan modification.
Beware of online continuing education courses that claim you can participate in them at any location of your choosing (such as a fancy resort in Cancun) and deduct airfare, meals, lodging, and other expenses for attending. The problem with these courses is that you fail tax law’s primary purpose test for deducting travel expenses. Thus, to deduct a videotape or online course, the course has to be offered at the site.
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