In a business owned by more than one partner, the need for a buy-sell agreement may seem remote, especially while the business is still young and growing. Understandably, the owners are focused on the urgent and important matters of running and growing the business. Investing time into planning for the future exit of a partner [...]
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Section 2704 Proposed Changes: Much Ado About Nothing? A Different Kind and Level of Estate Taxation? A Golden Opportunity? All the Above? The December 1 IRS hearings on proposed changes to the Section 2704 Regulations demonstrated the significant opposition from taxpayers, advocacy groups and other interested parties. Thousands of comments, almost all against the proposals, [...]
This recent estate tax case is rife with valuation issues. And it is one of the few that the issues are clearly defined and resolved. The United States Court of Appeals for the Ninth Circuit (the “Ninth Circuit”) remanded the case to the Tax Court to reconsider its decision on the valuation of the Estate’s [...]
Valuations frequently assume a third party will purchase a business and primarily run it unchanged. This does not mean a buyer will continue to pay expenses or a level of expense not considered typical. Non-operating assets are typically excluded from a valuation, too. Normalizing adjustments take the atypical expenses or portion of expense (or income) [...]
The Financial Accounting Standards Board (“FASB”) released the Accounting Standards Codification Topic 805 (“ASC-805”) in July 2009. ASC-805, as amended, is the authoritative source for GAAP concerning business combinations. A business combination is the transfer of ownership rights of a business to another entity in exchange for consideration. Consideration is the sum of the assets [...]
Allocation of goodwill to personal goodwill can alter individual tax liability on the sale of a company. Personal goodwill should be valued by a third-party valuation firm. It should be clearly identified in the purchase price agreements and agreed to by the acquirer. Recent Tax Court decisions in Bross Trucking, Inc., T.C. Memo. 2014-107, and [...]
Owners of small businesses enter into buy/sell agreements with their partners to protect their interests in their largest investment, their business. The presence of such an agreement is essential to ensure a clean succession and to protect heirs. We applaud the efforts, but not always the process or results. Much time is spent agonizing over [...]
We continue our series of articles on compensation with this blog on IRS Section 83(b) elections. A section 83(b) election allows an employee or contractor to include in taxable income the fair market value of property they received for the performance of services before they are truly entitled to that property. With small businesses, this [...]
Stock options and stock ownership plans are a popular and effective method of incentivizing employees, often at a low cost to both the employer and the employee. Several types exist, including non-qualified stock options, incentive stock options, employee stock ownership plans, phantom stock, stock appreciation rights and more. In this second of a series of [...]
Stock options and stock ownership plans are a popular and effective method of incentivizing employees, often at a low cost to both the employer and the employee. Several types exist, including non-qualified stock options, incentive stock options, employee stock ownership plans, phantom stock, stock appreciation rights and more. In this first of a series of [...]