Business Questions
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Have rules changed for determining when an expenditure can be expensed as opposed to capitalizing for 2017 acquisitions?

No.  Same as for 2016. However, there will be major changes in 2018

What is the maximum amount I may expense under Section 179 in 2017?

$500,000; however, limitations apply in some instances.  Higher limit coming for 2018.

Should I organize my new business as an LLC?

An LLC (Limited Liability Company) is a smart choice.  It creates a separate legal entity for conducting your business.  If used wisely, this practice helps to isolate your personal assets.  Much like a proprietorship, partnership or Sub S corporation, an LLC is a "pass through" organization, which means that the net income will be taxed on your personal return in the year it is earned, not necessarily in the year it is withdrawn.  Of course, in later years, previously taxed income can be withdrawn without paying additional tax. As of January, 2018, eligible pass through organizations will be entitled to a 20% deduction of taxable business income. A corporation or LLC may submit Form 8832 to elect to be treated as a corporation.  Form 2553 is required to elect S corporation status.  Ask for guidance.

I plan to buy the assets of a local business corporation, rather than buy the common stock because I wish to have a new depreciation basis in the equipment and I don't want to assume of problems related to debts or liabilities of the corporation.  Is this a smart move?

Yes, it is a good move for the buyer.  However, with the purchase of any business, it is good to obtain a tax clearance letter, as well.  Some states, including Pennsylvania, have a "bulk sales" provision.  If a substantial part of all the assets of a business are purchased, the new owner may be held liable for unpaid sales and payroll taxes.  Ask about Form 8954.  Important!

If I have unused passive losses from the operation of a rental property which I plan to sell, what happens to the unused losses?

When the property is sold, the unused losses are released and may be used to offset passive income resulting from the sale of the property at a gain.

When buying a business is it better to allocate a larger share of the purchase price to "goodwill" or  "covenant not to compete"?

Both are amortized over 15 years.  Therefore, it makes little difference from a tax view point.

Is the Treasury Department planning to discontinue the issuance of Series HH savings bonds?

Yes, it is true.  The U.S. Treasury has discontinued issuing HH bonds.  Current HH bonds will continue to pay interest for their 20 year life.  HH bonds were never sold.  They were obtained by exchanging eligible Series E or EE bonds.  In the future when E or EE bonds mature, you must take cash proceeds or purchase new EE or I bonds.

I co-signed a note for my friend who subsequently declared bankruptcy and I had to pay the bank.  Am I able to claim a tax deduction for the amount?

You have a non-business capital loss, but not an ordinary loss.  All unused loss carry forward amounts die with you.  They are not inherited.

I employ my minor children in my corporate business.  Can I claim an exemption from FICA employment taxes on the wages paid my children?

No.  You could claim the exemption if you were a sole proprietor employing your children, however.  And, in late 2011, the exemption became available to single member LLC owners treated as disregarded entities.

Should I attempt to borrow money from the Small Business Administration (SBA) to expand my small business?

The SBA does not lend money.  They guarantee loans made by conventional lenders, in some cases, when borrowers have been turned down for conventional loans.

Will I be required to give my personal guarantee if the SBA guarantees a loan for my small business?

Absolutely!  The SBA requires  personal guarantees.

Is it wise to convert my C corporation to S corporation status?

It may be.  Many issues must be considered.  Each case is different. As of January 1, 2018, C corporation tax rates have been reduced to a flat 21% from the first dollar.  Previously, there was a 15% rate on the initial $50,000 of C corporation taxable income.  

If my manufacturing business has retained earnings of more than $250,000, will the IRS assess the Accumulated Earnings tax against my regular C corporation?

Possibly.  If your business has accumulated earnings and profits locked in, the tax may be assessed unless you can prove a valid reason for exceeding the $250,000 threshold.  This situation may be addressed by converting a C corporation to S corporation status, since the tax is not assessed against S corporations.  However, eventually tax will be due on the locked in earnings and profits.

What is the lowest U.S. Corporation tax rate?

Taxable income up to $50,000 is taxed at 15% through December 31, 2017 - 21% after that date.

Is there an advantage to selling my investment property on the installment basis?

Yes - if selling at a gain, you may defer reporting some gain until the year in which you collect the installment payments.  However, depreciation previously claimed must be reported as recaptured income in the year of sale. Be sure your down payment is sufficient.

If I am required to give a personal guarantee in order to obtain a business loan or lease for my corporation or LLC, have I given up my right to limited personal liability?  In other words, are my personal assets now at Risk?

Unfortunately, yes.  A personal guarantee is a promise by a business owner to hand over his or her personal assets when business assets are insufficient to satisfy a business debt. 

If I personally guarantee a loan made to my S corporation, is my tax basis in the corporation increased?

No, it is not - sorry to say - although your personal assets are at risk for repaying the loan.  If you borrowed money and lent it to your S corporation entity, your basis would be increased and you would be able to write off more of the corporation's losses.  By contrast, LLC members and partners would receive a basis increase.

Can a partner or LLC member have a negative basis?

No, basis cannot be reduced below - 0-.  It is possible to have a negative capital account.