Tax Articles

States have made many changes to their economic nexus thresholds in the wake of the landmark sales and use tax decision in South Dakota v. Wayfair from 2018.

A well-drafted partnership or LLC operating agreement should address key tax considerations, such as guaranteed payments, partner liabilities, and payments to retired partners. These provisions ensure tax compliance and help manage potential issues like partner exits or ownership transfers. Properly addressing these matters minimizes tax liabilities and protects the business.

A spendthrift trust is a useful tool for protecting assets and ensuring responsible management of an inheritance. It prevents beneficiaries from directly accessing or mismanaging funds, while also protecting against creditors. The trustee plays a crucial role in managing payments, providing financial security for the beneficiary in line with the trust’s terms.

As the year-end approaches, small businesses should focus on tax planning strategies like deferring income, accelerating deductions, and maximizing the QBI deduction to reduce their tax liabilities. It's also essential to stay updated on estimated tax payments, Section 179 expensing options, and potential changes to tax laws that could impact future filings. Consulting with a tax professional can help tailor these strategies to your business's needs.

A Qualified Personal Residence Trust (QPRT) allows homeowners to transfer their residence into a trust, reducing their taxable estate while continuing to live in the home for a specified term. After the term, the property passes to designated beneficiaries, though the homeowner may need to pay rent if they remain in the home. This estate planning tool can help minimize taxes and facilitate the transfer of assets to heirs.

An LLC offers business owners the liability protection of a corporation while allowing for the tax benefits of a partnership. Members can avoid personal liability for business debts and enjoy pass-through taxation, with the flexibility to allocate tax benefits and fewer restrictions compared to an S corporation. For small to mid-sized businesses, this structure can provide both legal and financial advantages.

When a spouse passes away, the surviving spouse must decide whether to file a joint or separate tax return for the year of death. Filing jointly can offer benefits such as lower tax rates and larger credits, but it's important to consider the potential impact on deductions and other factors. Consulting a tax professional can help determine the best filing option.

Partnerships and multi-member LLCs benefit from pass-through taxation, but they must adhere to complex federal tax rules. Properly drafted partnership and LLC operating agreements are essential for addressing key tax-related issues, including special tax allocations and distributions for covering tax liabilities. Seeking professional guidance can ensure compliance and optimize tax benefits.

Life insurance is a crucial component of estate planning, offering an immediate source of wealth and liquidity to address your family's financial needs after your passing.

A landmark decision by the Supreme Court in Connelly v. United States has significant implications for how shares in closely held corporations are valued for estate tax purposes. The Supreme Court upheld that redemption obligations do not reduce the value of a corporation’s shares, creating a precedent that will likely affect future litigation and estate planning for family-owned businesses.