TaxAlmanac - User contributions [en]

User talk:Lalva

PVVCPA — Fri, 06 Jun 2014 16:12:46 GMT

PVVCPA: /* Depreciation/Change of business use */ new section

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- [[User:Tdoyle|Tim Doyle, TaxAlmanac Moderator]] 08:22, 9 February 2006 (CST)

== Last Tax Season ==

So how did it go last tax season? How many returns did you prepare? I started last tax season as well and I did ok but my fees were wayyyyyyyyyy too low. As far as marketing is concerned, what did you find to be the most effective method?[[User:Rudolphacctg|Rudolphacctg]] 22:15, 16 December 2006 (CST)

== Growing a Business ==

Well I have learned a lot during this past tax season. I started out by using a virtual office, where I paid $140/month for the use of an address, mailbox, voicemail, and answering service. If I needed to meet clients then the charge was $25 per hour to use the office space. Even using this method I found that some people would come into the office and be a little apprehensive because it was so barren! This year, because I am targeting small business clients, I decided to rent office space at the sam place for 6 months at $400/month. I still get everything I was getting before plus I my own full time office.

I too joined the Chamber, I have an ad in Yellow Pages, and I am also going to purchase a mailing list from usdata.com to target new homeowners in the area where my office is located. I also stumbled across a listing of newly formed corporations on my state's Secretary of State website. I am even able to download the information to Excel and merge the addresses into a letter. This has by far been the best marketing tool for me.

== mobile tax prep ==

I wouldn't even go to an appointment where the individual is already trying to cheat you out of your fee. This person is probably bad news.

I don't do mobile returns, but I do offer a 100% refund IF they give me all copies of their unfiled returns back. An e-filed return that has been filed doesn't qualify for a refund. [[User:Kevinh5|Kevinh5]]

Hello, Lalva:

We prepare an intial year filing of Form 3520 and Form 3520-A for a Fideicomiso so that a US Person's Tax Professional can "follow suit", and prepare subsequent returns.

Please see our blog: http://fideicomiso.wordpress.com/ and website: www.dillingercpa.com if you have additional questions.

Best regards,

Prior Agent

== Closing costs rental short-sale ==

Lalva, I've posted my response to your question in [[Discussion: Foreclosure vs Short Sale Tax Implications]] [[User:DaveFogel|DaveFogel]] 16:06, 19 April 2011 (UTC)

== Thanks! ==

Lalva, thanks for your kind words in your cofeemaker post. Glad I'm able to provide a laugh or two to make the day a litter better! Take care. [[User:CrowJD|CrowJD]] 01:55, 8 May 2011 (UTC)

== To change a discussion title ==

Hey, you said you couldn't figure out how to change a discussion title. In case you need to do that:
# Open the discussion
# Click the "move" tab top right-ish side of screen, to the left of "bookmark this page."
# In the "To new title" box, make the changes you want. Just be sure to keep "Discussion:" at the start - including the colon - as that's what sorts it into the forum.
# Add a reason, briefly (optional but recommended).
# Click the "move page" button.

That's it! There's more - or perhaps the same thing, basically - in the [[Discussion:Frequently Asked Questions|FAQ]] - FAQ #4 I think.

[[User:Trillium|Trillium]] 05:47, 9 May 2012 (UTC)

== Your Software question - ==

I've relocated your question about Intuit Online over to the Practice Management forum, since there are so many discussions going on there already about the various packages and forms available, and since you might get more input there from people interested in that "practice management" type of question. Some of the people on the PM/BG forum don't read the tax questions (and vice versa!). You can still get to the discussion via the "my contibutions" link in the upper right corner of your screen.

[[User:Trillium|Trillium]] 12:07, 17 May 2012 (UTC)

== Cancellation of student loan debt due to disability ==

Hi, just looking for an answer to the same question you posted in 2011. My client became disabled and unable to complete school. The US Dept of Education dismissed her debt and sent a 1099-C for the cancellation of the student loan debt. I've not been able to find anything saying that it is not taxable, although she insists it shouldn't be. While I explain that I agree, maybe it shouldn't be, but the tax law doesn't agree and I would try to find any information possible regarding this issue. Please tell me how you ended up handling your situation. Thank you!

== Cancellation of student loan debt due to disability ==

Signed:
cpaintheville

I researched it and determined that it had to be included in her tax return. In her case, she was disabled and had no income and no assets (old car, furnishing, clothing, etc, so she could take the insolvency exception for most of the cancellation of debt. At the end she didn't have to include much in her income, so it was all good.

== Cancellation of student loan debt due to disability ==

Thank you for your quick response!

''I am preparing the 2012 tax return so I know I have to use the 1040NR return, with 1040 "statement". My question to you is, in the 1040 statement, the tp will file MFS, right? His wife didn't have any income. I believe he can take his kids and foreign wife as dependents in the 1040 statement to calculate the tax due, and he can claim the Child tax credit for the two kids.''

By default you are a full year resident of the US if you were a resident the year before. You might choose to elect to be dual status, if you qualify. Pub 519 details this. It is frequently better to file on worldwide income for the full year to get the standard deduction and better tax rates filing jointly.

A 1040NR can only be MFS and the spouse's exemption cannot be claimed unless they are a resident of Canada or Mexico. The CTC will be available to him only if he qualifies under all regular rules which includes that the children must be residents of the US.

== New Forum ==

We hope you found the new forum at TaxProTalk.com

[[User:Spell Czech|Spell Czech]]

== Depreciation/Change of business use ==

Hi Lalva,

I just saw your message. Sorry for the late reply.

Wow! I am aging. That was 7 years ago, and I can't even remember the client name for this audit. Although, I doubt that would help anyhow. We have already shredded our 2007 records so all of our precious work has been reincarnated into another paper product today or sitting in a land fill somewhere.

--[[User:PVVCPA|PVVCPA]] 16:12, 6 June 2014 (UTC)

Discussion:Voiding stale dated payroll checks, punch, cookies, Jim Jones, china, coffee, cat food and unclaimed property

PVVCPA — Fri, 06 Jun 2014 15:58:30 GMT

PVVCPA:

{{General Chat}}


{{ForumNewPost|UserID=Actionbsns|Date=21 March 2007|Text=Where would you book stale dated payroll checks? My client has a total of about $1200 in old payroll checks that will most likely never clear the bank - some as old as two years, some more like six months. If I book them to payroll, then my numbers don't tie to the W-2's. Is that still the best place to go? I suspect that what has happened in some cases is that the checks were cashed by the restaurant, some of them are really small, less than a dollar as a result of tips and were most likely just lost. }}

{{ForumReplyPost|UserID=PVVCPA|Date=March 21, 2007|Text=That's funny, I was just discussing this with one of my staff today. We had reconciled the Wages to the W-3, and then she went in afterwards and voided stale-dated checks against Wages. So much for the reconciliation!

If Miscellaneous Expense is looking a little larger than "Miscellaneous", then you can stick them there.

In CA, what our clients are supposed to do is put a stop payment on those checks and then reissue them to the State as Unclaimed Property. Don't see this happen too often...in fact, never.

}}

{{ForumReplyPost|UserID=PVVCPA|Date=March 21, 2007|Text=Actionbsns, please move this thread to the Accounting Forum}}

{{ForumReplyPost|UserID=Kevinh5|Date=21 March 2007|Text=some states require you forward the money to their unclaimed property department - check your state laws - oops, PVV beat me to the punch on that one. What does that mean, beat me to the punch? did someone get punched? is there some punch to drink? Who knows?}}

{{ForumReplyPost|UserID=PVVCPA|Date=March 21, 2007|Text=someone is getting punchy, isn't he.

it's good thing we are preparing all of the late-March highly complex returns with no sleep and poor dieting. Who says man can't live on coffee and Girl Scout cookies, alone?}}

{{ForumReplyPost|UserID=Kevinh5|Date=21 March 2007|Text=oh, man, what I'd give for some girl scout cookies - thin mints and trefoils. Didn't have any girlscouts come by this year and I'm quite upset about the whole thing.}}

{{ForumReplyPost|UserID=PVVCPA|Date=March 21, 2007|Text=they are yummy, good for you, and 100% tax deductible to boot. :)}}

{{ForumReplyPost|UserID=PVVCPA|Date=March 21, 2007|Text=check this out! i figured researching where the phrase "beat me to the punch" came from was a much better use of my time than preparing the next tax return.

http://www.theanswerbank.co.uk/Phrases-and-Sayings/Question88850.html

it's kinda anti-climactic, though. i thought it would have something to do with Jim Jones.}}

{{ForumReplyPost|UserID=Kevinh5|Date=21 March 2007|Text=Let's change the saying to "He beat me to the grape kool-aid." Now that's something I wouldn't be in a hurry for.}}

{{ForumReplyPost|UserID=PVVCPA|Date=March 21, 2007|Text=LOL!!!}}

{{ForumReplyPost|UserID=Deback|Date=March 21, 2007|Text=Kevin - Exactly how much would you give for some Girl Scout cookies? }}

{{ForumReplyPost|UserID=Kevinh5|Date=21 March 2007|Text=18 free pulls at the slots at your favorite getaway spot.}}

{{ForumReplyPost|UserID=Kevinh5|Date=21 March 2007|Text=If you've got 'em better bolt the door shut cause I'm on a trefoil rampage right now. Only thing holding me back is a full box of Biscoff cookies (like they give you on Delta flights). We go through a box a month here - give them to clients along with their coffee or tea (served, of course, in Gorham china - can you believe I have clients that finish the coffee and actually turn the cup over to see what type of china I'm serving them out of?) Anyway, I have the clients fooled - they always say "OHHHH, that's GOOOOOOOD coffee." You know, kind of like Jackie Gleason used to say? They think it is good coffee because it is served in fine white china with a gold rim. I don't tell them it is just the free coffee they give you in hotels. On the road teaching tax updates all Fall I can accumulate some serious free coffee. Usually it's too nasty for me to drink, but not for my clients. LOL.

At the house I usually have Gevalia or - oh, I can't remember the name now, but it is 10 times better than Gevalia - comes in the mail and not cheap, but I'm worth it. }}

{{ForumReplyPost|UserID=Deback|Date=March 21, 2007|Text=Darn! I was hoping you'd make it worth my while to forfeit the next month doing taxes and bring you some Girl Scout cookies.

I had to quit offering coffee during the first tax season in this office in my home (after I quit driving to clients' homes and moved into town in late 1985), because (1) I didn't have time to make it and serve clients, (2) clients aren't really here long enough to mess with it, and (3) not too many clients were interested in coffee.

I've been living on banana nut bread and, of course, bologna sandwiches and potato chips. One of these days, I won't be able to bite into another bologna sandwich and will stay away from them for about five years.}}

{{ForumReplyPost|UserID=Actionbsns|Date=21 March 2007|Text=I don't know how the title of this got changed, but the discussion sure went south. As for Girl Scout Cookies, I haven't seen one of those since I moved here. In fact I don't think I've seen a Girl Scout since I moved here. I'd love one of those chocolate covered, rolled in nuts with coconut all over it kind. No idea what they are called, but they are good. As for coffee, if I had an office large enough to contain a coffee pot, we make our own blend here. Not hard to do at Safeway, but it's really good. As for the china, it's Lomonosov. I think I really need to toddle off and work on this tax return. I have two really hard things to do over the next two days and this return is one of them. I'm putting the journal entry to Miscellaneous. PW and Kevin, I don't think we'll be sending these checks anywhere. A lot of them are actually less than fifty cents. Principal of materialty and all that.}}

{{ForumReplyPost|UserID=Kevinh5|Date=21 March 2007|Text=Put those checks in the kitty toward Girl Scout cookies. Actually, the checks in the kitty would be better than the cat food out there being recalled right now.}}

{{ForumReplyPost|UserID=PVVCPA|Date=March 21, 2007|Text=ROTFLMBO. That Subject Line has to be the best one I have seen here at TA. In about 15 years, somebody is gonna put a certain Keyword Search in and this thread is gonna be the #1 hit. They are gonna say, "What the hell! These people were high that night!"

BTW, my name is P.V.V. not PW. PW is what they used to call me in high school.}}

{{ForumReplyPost|UserID=Natalie|Date=March 21, 2007|Text=Actionbsns, Hawaii does have an unclaimed property law, and those checks are required to be turned over to the state. Twice a year they release legal notices all of the unclaimed property. Even though this law covers just about all, if not all, businesses, generally only banks, credit unions and insurance companies follow it.}}

{{ForumReplyPost|UserID=Actionbsns|Date=21 March 2007|Text=Natalie, I appreciate the information and BTW, it's good to hear from you. I haven't seen you posting in awhile. But, in regards my old checks, I really don't think anyone is going to be checking with the state to see if they have a half a dollar's worth of funds sitting there or even $10. I think the highest check is $140 or so, that one I'm considering leaving as outstanding because I think the lady still works there and the client needs to talke to her. But I honestly think the restaurant cashed her check and it just got lost somehow. It's too expensive in Hawaii for someone not to cash a check that size.}}

{{ForumReplyPost|UserID=Natalie|Date=March 21, 2007|Text=I've seen payroll checks get cashed up to a year later -- even by people I thought couldn't afford to hold onto them. Good point about having the client check with current employees. I usually suggest that the old checks have stop payment put on them and new ones issued in that case. (Sometimes client does not do stop payment.)

By the way, I've been posting something several times a week.}}

{{ForumReplyPost|UserID=Moneric|Date=21 March 2007|Text=like it or not - they are escheated funds and should be turned over to Unclaimed Property. BTW, my mom did a property search & found an old payroll check for about $2 from 30 years ago & she is $2 richer today! I definitely would not void them - its such a mess in your payroll!

Going to get some GS cookies now - the choc covered w/ peanut butter ones...mmmmmm}}

{{ForumReplyPost|UserID=Kathyt|Date=22 March 2007|Text=My daughter is a girl scout, just place your orders here. }}

{{ForumReplyPost|UserID=Taocpa|Date=23 March 2007|Text=Moneric is right. I had an unclaimed property audit when I was a controller. Previous controller voided $20,000 worth of these suckers. Ouch!

As for the Girl Scout Cookies, I had 16 boxes, now I am down to 8 (no I have not eaten them all)! Sorry, Kevinh5, but the thin mints are mine. Also the Samoas, the Tagalongs, the Trefoils, the Cafe Cookies and the All Abouts (2 boxes) are all spoken for leaving just the sugar-free brownies. You can have those. :-)

Tom}}

{{ForumReplyPost|UserID=Kevinh5|Date=23 March 2007|Text=sugar free? I'd rather take my chances with the cat food. But thanks for thinking of me.}}

{{ForumReplyPost|UserID=Taocpa|Date=23 March 2007|Text=The sugar-free was my wife's idea. I won't go anywhere near them.

I do see Girl Scout's selling cookies at the mall. If they are there, I will grab you a box or two. }}

{{ForumReplyPost|UserID=Actionbsns|Date=23 March 2007|Text=Moneric, what about the 6 month stale dated rule? How can anyone cash a 30 year old check, even if the bank didn't catch the date, with all the mergers and acquisitions it would be a wonder the original bank was even around. Wish I had some GS cookies around now. I'm dying for some chocolate, but I better go to bed instead.}}

{{ForumReplyPost|UserID=Taocpa|Date=23 March 2007|Text=Actually Actionbsns, you remit the check to the state for the unclaimed property. Then they disperse it to the recipient, if they can find them. Hence the newspaper ads you see a couple of times a year. The most common unclaimed property items are old payroll checks and bank accounts from what I recall. In most states, unclaimed property statute of limitations starts after 7 years. In other words, if you don't cash your paycheck or a bank account is dormant for 7 years, you need to fill out a form (surprise) and submit the form with check to your state. At least, that's how MD does it.

I am on the prowl later for GS cookies.}}

{{ForumReplyPost|UserID=Natalie|Date=March 23, 2007|Text=Hawaii is similar, although the time frame may be different. And I think businesses in Nevada are required to turn over paychecks after just two years.

You know, GS cookies are okay, but homemade cookies are the best. And actually if you get down to it, M&Ms are really the best snack for these late-night hours.}}

{{ForumReplyPost|UserID=Taocpa|Date=23 March 2007|Text=Natalie - Thanks, now I have to go out at lunch time and get some M&M's, along with GS Cookies. }}

{{ForumReplyPost|UserID=Taocpa|Date=23 March 2007|Text=It's only 10AM and I am getting a junk food attack. AAAGGHHHH!}}

{{ForumReplyPost|UserID=Karen258|Date=23 March 2007|Text=My name was listed in the paper for unclaimed funds totalling $1255.88 in February. I don't know if it belongs to me or not but called anyway. I was told it takes a long time to claim. I have lived at the same address for 12 years so if it is mine they didn't look for me very hard! They wouldn't tell me the source of where the unclaimed fund came from.}}

{{ForumReplyPost|UserID=Actionbsns|Date=23 March 2007|Text=Natalie, how do you go about sending these checks to the state? There must be a form, and can we just do one form for all the checks or does each check need a form - most of these are under $10 and about 15 of them are under a dollar, so time spent is a consideration. Then what happens within the checking account? I guess that we would void them and issue a check to the state so it actually clears the bank. Now as to tax food and Girl Scout cookies, it's breakfast time and Peanut M&M's have the healthy advantage of peanuts, the cookies have flour, eggs, maybe some nuts and the last time I looked all those things were healthy daily requirements. Served with Kona coffee in my new Lomonosov cup that I just bought on E-Bay. What a start to the day. BTW, I have a client that makes chocolate, they advertise themselves as "The smallest chocolate factory in the world", they also have a coffee orchard and sell their own coffee. Could there be a better client? I love going down there. Kevin, have you tried Kona coffee?}}

{{ForumReplyPost|UserID=Kevinh5|Date=23 March 2007|Text=Yes, I like Kona coffee, and bought a bunch at Hilo Hattie's last time I was there, but to tell you the truth, it is no better than the stuff I drink regularly at home (still can't think of the name).}}

{{ForumReplyPost|UserID=Natalie|Date=March 25, 2007|Text=Action -- I'll check the forms later. As far as the treatment on the books goes, if you were to actually turn them over to the state, you would do the following.

Db. Cash Credit Liability account - to "void" the checks.

Then you would cut a check (I'm pretty sure it would be one check) to the state and debit the liability account.

I'm going to take my boys to the park. I'll get an answer to you by Monday on the forms/procedures.}}

{{ForumReplyPost|UserID=Dog Tired|Date=25 March 2007|Text=Does any client you know of send money for uncashed checks to the state? I know it's the rule but when I would tell clients that, they'd look at me like I'd lost my mind. My more talented Quickbooks clients just delete the one or two year old checks thus screwing up prior balance sheets and cash balances. I just repair the damage they do to miscellaneous and go down the road. }}

{{ForumReplyPost|UserID=Kevinh5|Date=25 March 2007|Text=In Georgia about 8 years ago they had a big crackdown on this. State audited lots of companies & fined lots of money. I would hope your E&O is up to date if you recommend that.}}

{{ForumReplyPost|UserID=Kevinh5|Date=25 March 2007|Text=The way they found it was just to ask for the last 3 year's bank reconciliations. When an uncleared check was out of sequence/stale, they asked questions.

Oh, and I guess they asked for year end journal entries prepared by the accountant or bookkeeper also.

Easy audit for them. Easy money for the state. State gets penalties now plus unclaimed property after so many years.}}

{{ForumReplyPost|UserID=Dog Tired|Date=25 March 2007|Text=I sure don't recommend the deletions--it's just what I see being done. I can't get people to comply. Not talking about a lot of money here but most clients seem to want to ignore the rule. What do you do? }}

{{ForumReplyPost|UserID=Kevinh5|Date=25 March 2007|Text=I don't do bookkeeping. Some people don't even require their clients reconcile their bank accounts [[Discussion:Bank reconcilations for tax returns]].}}

{{ForumReplyPost|UserID=Dog Tired|Date=25 March 2007|Text=Kevinh5--thanks for the insight on how other states catch folks. Maybe that might impress some clients. I don't do bookkeeping either--just see the after the fact books with last year's balance sheet no longer the same as it was when I worked on it last year. My partner just found this website tonight and it is nice to know there are lots of us out there having the same issues. Good luck for the rest of tax season. }}

{{ForumReplyPost|UserID=Actionbsns|Date=25 March 2007|Text=Kevin, you are alluding to, or maybe it's Dog Tired who is alluding to, the fact that possibly all void checks must go to the state. My original question had to do with payroll checks and I can see why these would need to be sent to the state for follow up. As soon as we get that part figure out with the forms and such, that's what I plan on telling my clien to do. But what about other checks, to vendors and such? You're not implying those go to the state are you? I do also do the bookkeeping for many of my clients, and I do require bank recs, at least the December 31 bank rec. When I see odd transactions by clients deleting old checks we have quite a discussion about them.

Anyway, even though this thread has taken a comedic and fun turn, I really learned something here that I didn't know and I appreciate the help and the information. Now if I could only find a girl scout somewhere to sell me some cookies.}}

{{ForumReplyPost|UserID=Taocpa|Date=25 March 2007|Text=Actionbsns,

If you are in the state listed on your profile, try this:

http://www.unclaimedproperty.hawaii.gov/

Now, off to church, after that coffee and GS Cookies! I am still looking.

Tom}}

{{ForumReplyPost|UserID=Moneric|Date=25 March 2007|Text=Action - the check was sent to escheated funds, she completed the paperwork (a real pain!) and got the $$$ She didn't cash the check.}}

{{ForumReplyPost|UserID=Kevinh5|Date=25 March 2007|Text=All stale checks are supposed to go to the state unclaimed property. Whether it is to a vendor or payroll. States have different rules as to when a check is "stale". Many states have websites - I just checked my name in North Carolina and Georgia to make sure I didn't forget something already.

Other things that are supposed to go there: stale bank accounts when they can't find the owner, stale brokerage accounts, uncashed refund checks. I'm surprised the states don't try to collect uncashed IRS refunds. Once they read this post (in search of GS cookies, no doubt), they will figure out a way.}}

{{ForumReplyPost|UserID=Woodstock|Date=25 March 2007|Text=You guys are killing me!

Don't cha know everything is on-line nowadays? www.girlscouts.org You can order a million boxes of whatever you like! Hopefully they aren't being shipped over from China...they say on the box "no trans fats" but there's nothing about "no trans rat poison"...
}}

{{ForumReplyPost|UserID=Actionbsns|Date=25 March 2007|Text=Thanks Tao for the link, I just went there and I'm shocked at the procedure that needs to be followed. I'm going to call the County of Hawaii on Monday and see what they have to say about what I need to be telling a client. It seems that once you start sending the forms in you have to continue reporting annually on the same set of checks. I hope I'm wrong on that one and it really means you should report new stuff annually. I just can't see a lot of people following this set of rules, not than I'm condoning it, I just don't think most people are aware of its existence. Take gift certificates for example, they are listed as something to go to the abandoned property guys. I have a couple of retail stores for clients and they issue gift certificates, they would be hard pressed to be able to track who they sold them to, where that person lived, and would not be able to provide information at all. They just keep the dollar amounts on the books and when someone comes in with a certificate, they honor them even if it says they are expired. As for other checks, we don't void them with wild abandon, and I always tell the client to check, if possible, with the payee and re-issue if necessary. This has been a very enlightening discussion, I have a little research to do on the topic and probably some re-adjusting of what I tell a client about voiding checks. Can I get CPE's with my cookies, please?}}

{{ForumReplyPost|UserID=Taocpa|Date=25 March 2007|Text=You're welcome, Action. Must be tough for you being out in Hawaii, but someone has to do it. :-)

As someone who experienced this audit in MD, it was an eye-opening experience. I have had to counsel my clients on how to treat the checks they issue that never get off the bank reconciliation. Like most of us, I used to write these checks off. Since my experience several years ago, I make sure they contact the vendor or employee to ask if they need a replacement. I absolutely detest the paperwork involved to file this return. What I find funny is that MD (and I believe most other states) don't send the return to businesses. Most clients find out when they are audited and by then, the penalties and expense isn't something they budgeted.

No cookies yet, still on the prowl. But I did get a nice big tenderloin at the store to carve up. I am going to take my frustrations out on it and make a nice bleu cheese stuffed tenderloin I saw Alton Brown prepare on the Food Network.}}

{{ForumReplyPost|UserID=Natalie|Date=March 26, 2007|Text=Action, I guess you got the information I was going to get for you. Yes, unfortunately it is just more than paychecks that get turned over. And yes, regular reporting is required. I thought it was semi-annual reporting, but maybe it's only annual.

As far as whether companies actually do turn over the funds, in my experience the compliance rate is low, low, low. (I would bet it's almost as low as the compliance rate for use tax paid on personal purchases in Hawaii.) I was all set to do the paperwork for one client when the treasurer said to just "write off" the checks.}}

{{ForumReplyPost|UserID=Kevinh5|Date=28 March 2007|Text=Veritas. The good coffee I buy is called Veritas. Organic. Better than Gevalia for you coffee afficianados out there.}}

{{ForumReplyPost|UserID=Actionbsns|Date=28 March 2007|Text=Better late than never, Kevin}}

{{ForumReplyPost|UserID=Kevinh5|Date=28 March 2007|Text=someone brought in a W-2 with that name , I knew I could find the truth.}}

{{ForumReplyPost|UserID=Kevinh5|Date=9 July 2007|Text=THANK YOU to [[User:BottomLine]] for bringing me a box of Thin Mints Girl Scout cookies today!!!! I laughed!!}}

{{ForumReplyPost|UserID=Bottom Line|Date=16 July 2007|Text=You're welcome Kevin. Great NATP class on 1040's and 1041's! I learned so much!}}

{{ForumReplyPost|UserID=Kevinh5|Date=24 January 2008|Text=I had already thanked Actionbsns for the Kona coffee personally last year, but I will post (9 months later) another THANK YOU because it was indeed so good.}}

{{ForumReplyPost|UserID=Actionbsns|Date=24 January 2008|Text=You are so very welcome, Kevin. Your help is always so appreciated. I love this thread BTW. It's funny, but if you really read through it there is some really good information on a couple of topics and I don't think there is even one slightly sarcastic or nasty comment. It sort of epitomizes what TA is and should continue to be.

BTW, my new office is finally up, running, fully debugged, and functional!!! We even have a break room of sorts, and I have a coffe pot and enjoy Kona coffee in my own office. My file room is doubling as a nursery part time since my assistant's three month old has joind the "staff". Some days his verbalizing seems far more intelligent than some who walk through the door.

Happy tax season all.}}

{{ForumReplyPost|UserID=Natalie|Date=January 24, 2008|Text=I'm glad to hear you are supporting your assistant by allowing her to bring her child to work, Action. It is so important for the mom to be with the baby at this stage in life.}}

{{ForumReplyPost|UserID=Taocpa|Date=24 January 2008|Text=Action,

Good for you. Glad to hear you are being supportive as well.

My sister and her family helped me get reorganized. She is really good at that. They spent several hours over a bunch of days helping me get it together over here. It's almost done. I am really glad for the help. It's almost looks like an office again.

I need some M&M's now.

Tom}}

{{ForumReplyPost|UserID=Joanmcq|Date=24 January 2008|Text=Wasabe peanuts!

I got interested in this because of the escheated funds problem. I had a state retirement account escheat, but it was easy to get back. But my boss had an Etrade account with some Harley stock in it which she was just holding. Etrade escheated the account and she can't find the stock or the cash. The state (CA) says they don't have it and Etrade says they do. And she wants the STOCK back since its gone up since they lost it.}}

{{ForumReplyPost|UserID=Belle|Date=January 24, 2008|Text=My office manager is pregnant :-), due in late May. We are already discussing how to convert the loft area into a nursery for the summer. Not sure what to do once she starts walking....}}

{{ForumReplyPost|UserID=Death&Taxes|Date=24 January 2008|Text=1995 or 96 we had the playpen in our office. }}

{{ForumReplyPost|UserID=Natalie|Date=January 25, 2008|Text=That's really great you guys (and gals) are so supportive of mothers! Yippee!

Tom, I need some help organizing. I've already had my M&Ms, though. I guess I should wait and use them as a reward to motivate myself a little more.}}

{{ForumReplyPost|UserID=Actionbsns|Date=25 January 2008|Text=Better than peanut M&M's are the Reese's Pieces - they are soooo getting in the way of my "Two Great shakes and a sensible meal" diet plan.}}

{{ForumReplyPost|UserID=Taocpa|Date=25 January 2008|Text=Heck, my diet plan is working well. 24+ pounds since late November and still going. And I can eat whatever I want including peanut M&M's, barbecue, you name it. The trick, I just don't eat as much.

Some great secret, heh?

Tom}}

{{ForumReplyPost|UserID=Natalie|Date=January 25, 2008|Text=I eat pretty much whatever I want, too. When I visit my mom, I usually lose a couple of pounds in about three weeks. My secret is riding bike ''every day.''}}

{{ForumReplyPost|UserID=Bottom Line|Date=26 January 2008|Text=New diet method. Bad gall bladder. Makes you afraid to eat anything. It's coming out on 2/6!

Oh by the way. It's girl scout cookie time!! I've already ordered 7 boxes of thin mints and 2 boxes of trefoils.}}

{{ForumReplyPost|UserID=Death&Taxes|Date=26 January 2008|Text=Just for you, BL: http://www.writing.com/main/view_item/item_id/323634

There are four other stories devoted to this onset of this problem, and now we find that Pam will need to have her gb taken out.}}

{{ForumReplyPost|UserID=Bottom Line|Date=26 January 2008|Text=Thanks D&T. Different genders but hopefully you're doing much better now and I won't have a similar problem. Surgeon says it will be day surgery and I'll be home that night. I've already moved a desktop computer into a spare room at home so hopefully won't lose TOO much time. I asked "when can I drive?" Dr said 1-2 day. I asked "when can I go back to work?" Dr said "You'll know." I said "That's real helpful." You know your belly pain is bad when your husband that's a paramedic suggests going to the emergency room. (We compromised by calling my brother who's a Dr.) Good luck to Pam. I'll let everyone know how it all comes out.}}

{{ForumReplyPost|UserID=Death&Taxes|Date=26 January 2008|Text=I did go to the ER, BL, the first night it hit: http://www.writing.com/main/view_item/item_id/296092 .....even has Steve Spurrier in it. But when I had mine removed, you must remember I worked from home, 250 miles from most clients, so only had to drive to the post office, supermarket and walk the dog, plus go up and down a flight of steps to my copier and file room. Surgeon is right, though, maybe a day or so for driving. That Foley bag came apart in the Grand Union one day.}}

{{ForumReplyPost|UserID=Taocpa|Date=26 January 2008|Text=I had my hip replaced right January 17, 2005. After my surgery, doctor tells my wife, "Your husband must have been in excruciating pain. We never saw these on x-ray, but we found bone fragments in between the hip and the ball socket." I can't tell you the difference in how much better I felt the next day.

And Bottom Line, if you feel that those Thin Mints are making you ill, I'll be happy to take a box or two off your hands.

Tom}}

{{ForumReplyPost|UserID=Actionbsns|Date=26 January 2008|Text=When I had breast cancer, a long time ago thankfully, it all started in about July, the following February or so, the surgeon said I could go back to work now. I looked at him really strange and he said "You didn't take any time off at all did you?" How could I do that and keep a business working? My office was in my house and the office was a few steps away from wherever I was - phone, fax, mail, it all worked really well and the clients were none the wiser. I did have to drive a bit some times, but no biggy.}}

{{ForumReplyPost|UserID=Bottom Line|Date=26 January 2008|Text=My office is about a mile from my house but I'm planning/hoping to work from home during the recovery. The surgery is on a Wednesday and I'm hoping to be back in the swing of things by the middle of the following week. (Wishful thinking perhaps) I drive to many of my clients but they know I'm having this done so should cut me some slack.

Thin Mints are an addiction. I've been known to go through a sleeve in a sitting.}}

{{ForumReplyPost|UserID=Taocpa|Date=2 February 2008|Text=I just ordered my Girl Scout cookies this week. Thin Mints, Do Si Dos, Samoas, Tagalongs. $28 bucks worth. There are for my clients. If you believe that, I also have a bridge to Hawaii (where I hear it's freezing this time of year) I will sell you.

This is also a thread bump, so others will get in on the joke.

Tom}}

{{ForumReplyPost|UserID=Kevinh5|Date=2 February 2008|Text=Joan - in your honor I bought some wasabi green peas. What a bite!! They are as addictive as potato chips - you can't stop until they're all gone.}}

{{ForumReplyPost|UserID=Sandysea|Date=2 February 2008|Text=Can I have some wasabi too Kevin? I like the wasabi peas...now THOSE you can't stop until they are gone either...

BL you will be in my thoughts....you won't miss that GB at all I hope :)}}

{{ForumReplyPost|UserID=Bottom Line|Date=2 February 2008|Text=Thanks Sandy. Keep your fingers crossed for my husband's job too. The recent property tax amendment has the city talking about laying off nine firefighters (14% of the staff). They say it's going to be the guys making the most money. If he can keep his job until 5/31/08, he retires and gets a pension check for 75% of pay starting the next month. If they lay him off, it will be 2014 before he can start drawing a pension check.}}

{{ForumReplyPost|UserID=Natalie|Date=February 2, 2008|Text=Geez, BL. Why is it the services that are needed most get cut first? I think generally these people are underpaid, so even the top guys are probably not making what they should. Are the state workers there under union?}}

{{ForumReplyPost|UserID=Bottom Line|Date=3 February 2008|Text=It's a small city in the most densely populated county in the state. The county collects the property tax money and then doles it out to the various cities. Unfortunately the only thing the union is good for is taking $50/month and it's highly unlikely that the union would fight this. The county hasn't decided if they're going to cut funding for the fire departments (has to go through budget, then legal, then risk, then legal, then risk....). Once that happens, the city then has to decide who to let go. As an "oh by the way", my husband is over 40 and there are federal laws to protect workers over 40. Just hoping the footdragging of the government drags out past 5/31/08.}}

{{ForumReplyPost|UserID=Natalie|Date=February 3, 2008|Text=The reason I asked about the union is that I just found out in our lovely state one department can afford to let go of 1/3 of its employees without losing any service to the public, but it is not allowed to let the employees go because of the union. Another department, however, is severely understaffed. I was just wondering if that is what's happening by you. If Florida is like Hawaii, it won't be resolved until summer time.}}

{{ForumReplyPost|UserID=Bottom Line|Date=3 February 2008|Text=The Florida constitution was just amended by the voters which changed property taxes and will lower taxes about $200/year. (As an FYI, I currently pay around $2,500.)}}

{{ForumReplyPost|UserID=Sandysea|Date=3 February 2008|Text=Yeah, BL the amendment will increase the homestead to double, but because the values of homes (from the property appraisers office) have increased so much in value, it will be less than it would have been if passed when homes were valued at reasonable figures.

I don't think the firefighters will be the ones cut as quickly...there is already one lawsuit in the works over the amendment. I certainly will be thinking of both of you!!

And where are my wasabi peas? It is Superbowl Sunday!!! hehe}}

{{ForumReplyPost|UserID=Belle|Date=February 3, 2008|Text=BL - If it really progresses to the point of cuts in the fire dept, I suggest you get the public involved/notified. I've dealt with similar stuff in CA (where we have Prop 13 limiting property tax increases), and it seems that with any budget issues, the first target is fire and police services. When the public finds out their safety may be compromised, they tend to let their representatives know that isn't a good idea :-). Plus, the public just LUVS the firemen (in general); so do I. IMO, I doubt any gov. agency is going to move fast enough to threaten your husband's job; but I'm sure there are others that are sweating it out. Good luck...gotta go do the appetizers for Super Bowl!}}

{{ForumReplyPost|UserID=Bottom Line|Date=3 February 2008|Text=There are LOTS of different avenues to pursue and neither my husband nor I are horribly worried. I believe a lot of this has to do with local politicians overeacting. The local newspapers have yet to run a story on the budget growth over the last five years showing how much the revenues grew when RE was overinflated.}}

{{ForumReplyPost|UserID=Taocpa|Date=13 February 2008|Text=My Girl Scout Cookies just arrived!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

http://www.getsmileyface.com/sm/happy/1219.gif

Tom}}

{{ForumReplyPost|UserID=Natalie|Date=February 13, 2008|Text=Tom, I can't figure out which smiley that is. It has to be uploaded to this website to be linked. (At least that's how I did the other ones.)}}

{{ForumReplyPost|UserID=Joanmcq|Date=13 February 2008|Text=Ahhh, the wasabe peas are even better than the peanuts. I found both at a store I dont' shop at much; the peanuts went to work whereas the peas went right upstairs to my home office desk. Not sharing those! The now empty can is reminding me to go back to that store...}}

{{ForumReplyPost|UserID=Natalie|Date=February 13, 2008|Text=Whew, I'm getting tired just watching that little guy go up and down!}}

{{ForumReplyPost|UserID=Taocpa|Date=13 February 2008|Text=Well, he's about to work overtime as the wife ordered.....

wait for it.........

more Girl Scout Cookies!!!!!!!!

http://www.getsmileyface.com/sm/happy/1219.gif http://www.getsmileyface.com/sm/happy/1219.gif

Tom}}

{{ForumReplyPost|UserID=Szptax|Date=13 February 2008|Text=Just got my GS cookies last night. I thought I had over ordered, now I don't think I ordered enough - only 8 boxes.}}

{{ForumReplyPost|UserID=Belle|Date=February 13, 2008|Text=OK, all this talk of GS cookies isn't fair. I order 6 boxes (I think) and haven't gotten them yet and I could reeeeaaaaalllllly use them! Guess it's cuz I live in the boonies...hope they show up before the weekend. Comfort food on the weekend always tastes a little bit better.}}

{{ForumReplyPost|UserID=Szptax|Date=13 February 2008|Text=ate one sleeve of thin mints for lunch today.. kids ate other (off school - snow day, argh!)}}

{{ForumReplyPost|UserID=Kevinh5|Date=25 February 2008|Text=Hey Bottom Line!!!! My assistant brought in some Girl Scout Thin Mint Cookies!!!!! You know how much I love these!!!}}

{{ForumReplyPost|UserID=TheTinCook|Date=25 February 2008|Text=Awww man...none of my coworkers have kids in the Girl Scouts. They're doing a See's Candy fundraiser though, so all is not lost!}}

{{ForumReplyPost|UserID=Bottom Line|Date=25 February 2008|Text=Kevin that's great! Hubby asked for some extra cash to take to work today because he thought they might be in. I think I've got a total of 7 boxes coming!

Tin - I usually see them around Wal-Mart and some groceries. Give that a try. Hopefully all is not lost.}}

{{ForumReplyPost|UserID=Kevinh5|Date=25 February 2008|Text=http://www.getsmileyface.com/sm/drink/trink33.gif}}

{{ForumReplyPost|UserID=TheTinCook|Date=25 February 2008|Text=Will do BL!

I'm ashamed to admit that I was hoping that some kind soul would take pity and escheat me some Tagalongs.}}

{{ForumReplyPost|UserID=Lancermc|Date=25 February 2008|Text=Refrigerated Samoas, pure heaven:) I'm on my last box:(

My grandaughter quit Girl Scouts, thank God for the neighborhood kids who went door to door.}}

{{ForumReplyPost|UserID=Belle|Date=February 25, 2008|Text=My 11:00 am appointment is the mother of the Girl Scout I ordered from....but still NO COOKIES
:-(}}

{{ForumReplyPost|UserID=Kevinh5|Date=2 March 2008|Text=My thanks to RoyDaleOne for forwarding the website for the GirlScoutCookies. I clicked on the link, put in my zip code and VOILA, found that these industrious young cookie vendadores would be appearing today from 1-5 in front of a grocery store only 3 miles from my office purveying their confectionary treasures.

You know my priorities, Girl Scout Cookies come before doing another tax return, so I just bought 3 boxes of Thin Mints, one box of Shortbread, one box of Caramel Delites (the ones with the toasted coconut) and one box of Thanks-A-Lot (crunchy fudge-coated treats).

Which should I open first, and how many will there be left for me to share tomorrow when my staff comes in?

LOL}}

{{ForumReplyPost|UserID=RoyDaleOne|Date=2 March 2008|Text=I just polished off my second box since Friday, yumm, yumm.}}

{{ForumReplyPost|UserID=Szptax|Date=3 March 2008|Text=I was reminded of the Girl Scout cookies I had hidden. well ha! MY STASH IS 2 BOXES SHORT! Seems my kids found them and they like them as much as I do.}}

{{ForumReplyPost|UserID=Taocpa|Date=4 March 2008|Text=I got some more Girl Scout Cookies today!!!!!! Woo hoo!!!!!!!!!!

That more than makes up for answering homework questions disguised as legit questions on the Accounting Questions forum!

Tom}}

{{ForumReplyPost|UserID=Taocpa|Date=4 March 2008|Text=I just met a great connection....

The area Girl Scout Cookie Mom!!!!!

Her daughters ride the bus with my daughter!!! I just placed a third order.

Can you overdose on Girl Scout Cookies?

Tom}}

{{ForumReplyPost|UserID=Bottom Line|Date=4 March 2008|Text=OK, I tried to be good but they kept calling my name. A sleeve of Thin Mints bites the dust.}}

{{ForumReplyPost|UserID=PostingFromWork|Date=4 March 2008|Text=I had a half sleeve of Trefoils with some homemade dulce de leche for breakfast this morning.

The Thin Mints in my freezer didn't survive hibernation.

And the last of the renegade Samosas are being hunted down and devoured as we speak.

}}

{{ForumReplyPost|UserID=Bottom Line|Date=4 March 2008|Text=UUUUUGGGGGGHHHHHH!!!! Frozen Thin Mints!!! (Picture of Homer Simpson saying "Donuts" with a glazed look in his eye and drool running down his chin)}}

{{ForumReplyPost|UserID=Belle|Date=March 4, 2008|Text=Tom, see previous thread(s) on gastric bypass surgery (wish I could do those dancing 'things' that you always do) ;-)}}

{{ForumReplyPost|UserID=Taocpa|Date=4 March 2008|Text=Belle,

Really, some boxes are not for me (it's true I tell you, it's true) and I have also shed 30+ pounds since December. I am actually pretty active as a soccer referee, so I try my best to keep in shape.

That said, (currently looking both ways and whispering) I just snuck a sleeve of Do-Si-Do's. It's all I've eaten all day.

Tom}}

{{ForumReplyPost|UserID=Lancermc|Date=4 March 2008|Text=Well, I was wrong, my granddaughter has not quit girl scouts. We just did not get the call for an order this year. Thats just wrong, I need to talk to my son!}}

{{ForumReplyPost|UserID=PostingFromWork|Date=5 March 2008|Text=Fear not tax professionals, for I have slain the fearsome Tagalong! It's chocolate covered peanutty foulness shall rot forever in the depths o' my gullet.

}}

{{ForumReplyPost|UserID=Bottom Line|Date=5 March 2008|Text=Time for another sleeve of Thin Mints to bite the dust.}}

{{ForumReplyPost|UserID=Kevinh5|Date=5 March 2008|Text=speaking of biting the dust, I put client's prep fee checks in the top left drawer of my desk. Some fell out behind the drawer, and went under the desk. Had to lift the desk and have assistant sweep everything out to retrieve the checks. Also found lots of wasabi peas which had been biting the dust on their own after they too fell behind the drawer. }}

{{ForumReplyPost|UserID=Lancermc|Date=5 March 2008|Text=Wazzzzop!Wazzzzop!Wasabi? }}

{{ForumReplyPost|UserID=Pierce|Date=5 March 2008|Text=Frozen cookie dough from the 4-H is also yummy!}}

{{ForumReplyPost|UserID=Joanmcq|Date=6 March 2008|Text=A coworker of mine found a place that sells wasabi peas by the POUND!!!! I cleaned out the container today. Our girl scout cookies are running low...no treats at home...but I need to lose 30 pounds (I think I have yours Taocpa)...wait, there's the last of the german chocolate on top of the fridge! gotta go!}}

{{ForumReplyPost|UserID=Taocpa|Date=7 March 2008|Text=Well folks, here's another place you can get Girl Scout Cookies (thanks to Belle for the heads up):

[http://shop.ebay.com/items/Girl-Scout-cookies_W0QQ_nkwZGirlQ20ScoutQ20cookies]

Tom}}

{{ForumReplyPost|UserID=Bottom Line|Date=7 March 2008|Text=What's the world coming to when people are selling Girl Scout cookies on E-Bay?}}

{{ForumReplyPost|UserID=Natalie|Date=March 7, 2008|Text=BL, you can get just about anything on e-Bay.}}

{{ForumReplyPost|UserID=Bottom Line|Date=7 March 2008|Text=Very true. Although I've hear that they will take kidneys off.}}

{{ForumReplyPost|UserID=Taocpa|Date=7 March 2008|Text=Heck, you can even bid on Scarlett Johansson:

http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&Item=250221082811&Category=16071&_trksid=p3907.m29

I wish I had that kind of $$$$ lying around. I told the wife. She told me I could not bid even if I had the money. [[Image:sad.jpg]]

(Just kidding)!!!!

Tom
}}

{{ForumReplyPost|UserID=Joanmcq|Date=17 March 2008|Text=Wasabe peas! I'm in heaven with wasabe peas! (and my roommates stuck some thin mints in the freezer....heh, heh, heh, and they're not home...)}}

{{ForumReplyPost|UserID=Kevinh5|Date=20 March 2008|Text=SAMOAS and THIN MINTS!!!!!!

What a surprise to receive a special tax season care package filled with Girl Scout Cookies from Taocpa in the mail today!!!!!

A dozen kittens have been pardoned and their lives saved.

Thank you, Tom!!!}}

{{ForumReplyPost|UserID=Kevinh5|Date=7 April 2009|Text=We're no longer serving the Biscoff cookies. Switched to individual packets of Famous Amos chocolate chip cookies in January. Two of my clients were outraged. They wanted the Biscoff cookies.

Also, no longer serving hotel coffee to guests. I broke down and bought coffee this tax season.}}

{{ForumReplyPost|UserID=Actionbsns|Date=8 April 2009|Text=Wow Kevin, I haven't seen this thread up in a really long time!! BTW I'm still waiting for the GS cookies my granddaughter is supposed to send to me. I'll bet you anything her parents have eaten them!!! This would be my son who I know for a fact is quite capable of such theiving behaviour - he ate a whole half gallon of ice cream once and replaced it with ice milk when I got cranky at him, then when I was cranky about that, he looked at me increduously and said "Do you KNOW how much ice cream costs!!!???"}}

{{ForumReplyPost|UserID=Natalie|Date=April 8, 2009|Text=Yeah, Mom, that stuff is ''expensive!'' Ya gotta laugh at what kids do sometimes.}}

{{ForumReplyPost|UserID=Szptax|Date=27 February 2011|Text=http://www.msnbc.msn.com/id/41812121/ns/business-consumer

The sale of GS Cookies is barred outside the founder's home.}}

{{ForumReplyPost|UserID=Joanmcq|Date=28 February 2011|Text=I guess this thread would have to be resurrected.

I ate half a box of GS cookies Friday night and another half box last night. The other parts of the boxes were eaten during the day.}}

{{ForumReplyPost|UserID=Belle|Date=February 28, 2011|Text=Great, just great....I've been sick (bad news), but that means I've lost a few pounds (good news). I hadn't realized that GS cookies will be appearing soon. Sigh, and of course, I have NO willpower during tax season. So, here come those 'lost' pounds again.}}

{{ForumReplyPost|UserID=EatonCPA|Date=9 May 2012|Text=I looked up this thread because someone in another thread indicated this would be humorous and I like humorous. Then darned if I didn't stumble into the world of "things I didn't know I didn't know." So let me see if I understand this correctly: a client writes a check (payroll or otherwise) and it never clears the bank - unless there is clearly a replacement check issued after the fact or the client presents something indicating a check was cashed out, after a certain period (mandated by state laws) goes by, the business is required to forward those monies to the state? And therefore in bookkeeping we should never ever "void" a check - either directly or via JE? And if never claimed, who keeps these monies??

Both of my daughters are in GS and this year I was one of the cookie moms (in tax season ... don't know what the heck I was thinking when I agreed to that, though it worked out well overall). Anyway, our troop sold over 4,000 boxes of GS cookies this year and pretty much every single one went through my house at some point. For months I literally had stacks of CASES of GS cookies in a room in my house (technically there are still two such stacks tucked in a corner). I sent the Girl Scouts into the black this year single-handedly I think, just swiping a box here or there .. and with help from my boss' wife, who gave birth during tax season and in the final stages of pregnancy was REALLY craving Tagalongs. }}

{{ForumReplyPost|UserID=Actionbsns|Date=9 May 2012|Text=Sara, this thread is just one of the best examples of what you can learn on TA. I think the monies go into that fund at the state level where everyone knows your name. The one that pops up in the news ever so often because someone's name was on such a list and their $10 paycheck is now worth a million dollars or so for some reason. I'm not sure how many people actually follow this mandate, but now we know.

Good job on the GS cookes BTW.}}

{{ForumReplyPost|UserID=EatonCPA|Date=9 May 2012|Text=> I'm not sure how many people actually follow this mandate, but now we know.

I hate knowing things.

> Good job on the GS cookes BTW.

The selling or the eating? :)}}

{{ForumReplyPost|UserID=Belle|Date=May 30, 2014|Text=Bump}}

{{ForumReplyPost|UserID=Belle|Date=May 30, 2014|Text=Bump}}

{{ForumReplyPost|UserID=PVVCPA|Date=June 6, 2014|Text=Dear Girl Scouts, Can you please bring back the Striped Chocolate Chip cookies? }}

Discussion:Perhaps an easy rental refi question . . .

PVVCPA — Wed, 02 Apr 2014 04:24:51 GMT

PVVCPA:

{{Basic Tax Questions}}


{{ForumNewPost|UserID=Kendrick|Date=1 April 2014|Text=3 bro's put $100K in apiece and then they buy a $300K rental property and own it jointly, each putting a third of the income and expenses on their respective Schedules E.

2 years later, they get a loan on the property for $150K, and pay each of themselves $50K of the original $100K back.

Now they expect to deduct the mortgage interest against rental income.

Seems they may have a problem here. Does the tax law construe this as personal interest, and not deductible?}}

{{ForumReplyPost|UserID=Terry Oraha|Date=1 April 2014|Text=Research "debt financed distribution"}}

{{ForumReplyPost|UserID=Ckenefick|Date=1 April 2014|Text=Don't know if we can go by those rules given the Sch E reporting...}}

{{ForumReplyPost|UserID=Terry Oraha|Date=1 April 2014|Text=yep, I missed that part! that Sch E part.}}

{{ForumReplyPost|UserID=PVVCPA|Date=April 1, 2014|Text=Suggest they go back into the market for a new tax preparer. There are [http://www.taxalmanac.org/index.php/Discussion:Do_taxpayers_prefer_incompetent_tax_preparers%3F plenty] out there that will not ask such ridiculous questions.}}

{{ForumReplyPost|UserID=Kendrick|Date=1 April 2014|Text=Hey PVVCPA. What is with your answer? You constipated or something? Just trying to get some help here.}}

{{ForumReplyPost|UserID=Ckenefick|Date=1 April 2014|Text=PVV was being sarcastic, implying that your question was a very good one, so good that a client/prospective client might not like the fact that you asked it, given the ramification of losing part of the deduction. As a result, client/prospective client might go find some chump accountant that will give him the full write-off, either because chump accountant doesn't know the rules or because chump accountant likes to bend the rules.

And yes, I think PVV has been in the bathroom all day long.}}

{{ForumReplyPost|UserID=Kevinh5|Date=1 April 2014|Text=PVV's response was taken tongue in cheek by me, clearly with the understanding that you are a good preparer and others not willing to ask such questions are not as good. Back off a little, please, Kendrick. It's all good. Under the tracing rules, interest on the 150K is not deductible.}}

{{ForumReplyPost|UserID=Spell Czech|Date=1 April 2014|Text=''"Under the tracing rules, interest on the 150K is not deductible."''
Do we know that yet? }}

{{ForumReplyPost|UserID=PVVCPA|Date=April 1, 2014|Text=Hey! I finished my last box of girl scout cookies 2 weeks ago. I am far more regular now. But thank you for your concern.

I agree with Ck & Kevin, except for the being in the bathroom all day part. I am glad somebody gets me.}}

{{ForumReplyPost|UserID=Kendrick|Date=2 April 2014|Text=Sorry to be so sensitive. Got a phone call this morning that a client/friend died from cancer last week, the second client/friend who has died from cancer within a month. The next call was that my best friend's mom died last night.

Well, I guess we all get to do it.

So, anyway, the comment sounded sort of nasty to me.

Regardless, it seems that everyone here thinks there is no way the interest could be deductible. Though Spell Czech sounded interested in a possibility. }}

{{ForumReplyPost|UserID=Ckenefick|Date=2 April 2014|Text=''Though Spell Czech sounded interested in a possibility.''

Me too. This was a rental and maybe that cash back @ re-fi went into some bank account used to hold the joint rental money. And maybe some expenditures were made out of that account that could be "traced" to the cash back...maybe...perhaps within a certain window of time.}}

{{ForumReplyPost|UserID=PVVCPA|Date=April 2, 2014|Text=Other ideas...

Where did the bro's get their original $100K from? Perhaps they borrowed this against their residence or another rental. Did they use the $50K to pay this back?

Maybe they each put $50K into an account at E*Trade...investment interest?

Anyhow, they each need to answer the question...what did you do with your $50K?}}

Discussion:Perhaps an easy rental refi question . . .

PVVCPA — Wed, 02 Apr 2014 04:22:03 GMT

PVVCPA:

{{Basic Tax Questions}}


{{ForumNewPost|UserID=Kendrick|Date=1 April 2014|Text=3 bro's put $100K in apiece and then they buy a $300K rental property and own it jointly, each putting a third of the income and expenses on their respective Schedules E.

2 years later, they get a loan on the property for $150K, and pay each of themselves $50K of the original $100K back.

Now they expect to deduct the mortgage interest against rental income.

Seems they may have a problem here. Does the tax law construe this as personal interest, and not deductible?}}

{{ForumReplyPost|UserID=Terry Oraha|Date=1 April 2014|Text=Research "debt financed distribution"}}

{{ForumReplyPost|UserID=Ckenefick|Date=1 April 2014|Text=Don't know if we can go by those rules given the Sch E reporting...}}

{{ForumReplyPost|UserID=Terry Oraha|Date=1 April 2014|Text=yep, I missed that part! that Sch E part.}}

{{ForumReplyPost|UserID=PVVCPA|Date=April 1, 2014|Text=Suggest they go back into the market for a new tax preparer. There are [http://www.taxalmanac.org/index.php/Discussion:Do_taxpayers_prefer_incompetent_tax_preparers%3F plenty] out there that will not ask such ridiculous questions.}}

{{ForumReplyPost|UserID=Kendrick|Date=1 April 2014|Text=Hey PVVCPA. What is with your answer? You constipated or something? Just trying to get some help here.}}

{{ForumReplyPost|UserID=Ckenefick|Date=1 April 2014|Text=PVV was being sarcastic, implying that your question was a very good one, so good that a client/prospective client might not like the fact that you asked it, given the ramification of losing part of the deduction. As a result, client/prospective client might go find some chump accountant that will give him the full write-off, either because chump accountant doesn't know the rules or because chump accountant likes to bend the rules.

And yes, I think PVV has been in the bathroom all day long.}}

{{ForumReplyPost|UserID=Kevinh5|Date=1 April 2014|Text=PVV's response was taken tongue in cheek by me, clearly with the understanding that you are a good preparer and others not willing to ask such questions are not as good. Back off a little, please, Kendrick. It's all good. Under the tracing rules, interest on the 150K is not deductible.}}

{{ForumReplyPost|UserID=Spell Czech|Date=1 April 2014|Text=''"Under the tracing rules, interest on the 150K is not deductible."''
Do we know that yet? }}

{{ForumReplyPost|UserID=PVVCPA|Date=April 1, 2014|Text=Hey! I finished my last box of girl scout cookies 2 weeks ago. I am far more regular now. But thank you for your concern.

I agree with Ck & Kevin, except for the part about being in the bathroom all day. I am glad somebody gets me.}}

{{ForumReplyPost|UserID=Kendrick|Date=2 April 2014|Text=Sorry to be so sensitive. Got a phone call this morning that a client/friend died from cancer last week, the second client/friend who has died from cancer within a month. The next call was that my best friend's mom died last night.

Well, I guess we all get to do it.

So, anyway, the comment sounded sort of nasty to me.

Regardless, it seems that everyone here thinks there is no way the interest could be deductible. Though Spell Czech sounded interested in a possibility. }}

{{ForumReplyPost|UserID=Ckenefick|Date=2 April 2014|Text=''Though Spell Czech sounded interested in a possibility.''

Me too. This was a rental and maybe that cash back @ re-fi went into some bank account used to hold the joint rental money. And maybe some expenditures were made out of that account that could be "traced" to the cash back...maybe...perhaps within a certain window of time.}}

{{ForumReplyPost|UserID=PVVCPA|Date=April 2, 2014|Text=Other ideas...

Where did the bro's get their original $100K from? Perhaps they borrowed this against their residence or another rental. Did they use the $50K to pay this back?

Maybe they each put $50K into an account at E*Trade...investment interest?

Anyhow, they each need to answer the question...what did you do with your $50K?}}

Discussion:Perhaps an easy rental refi question . . .

PVVCPA — Tue, 01 Apr 2014 23:27:12 GMT

PVVCPA:

Discussion:Perhaps an easy rental refi question . . .

PVVCPA — Tue, 01 Apr 2014 15:27:22 GMT

PVVCPA:

{{Basic Tax Questions}}


{{ForumNewPost|UserID=Kendrick|Date=1 April 2014|Text=3 bro's put $100K in apiece and by a $300K rental property and own it jointly, each putting a third of the income and expenses on their respective Schedules E.

2 years later, they get a loan on the property for $150K, and pay each of themselves $50K of the original $100K back.

Now they expect to deduct the mortgage interest against rental income.

Seems they may have a problem here. Does the tax law construe this as personal interest, and not deductible?}}

{{ForumReplyPost|UserID=Terry Oraha|Date=1 April 2014|Text=Research "debt financed distribution"}}

{{ForumReplyPost|UserID=Ckenefick|Date=1 April 2014|Text=Don't know if we can go by those rules given the Sch E reporting...}}

{{ForumReplyPost|UserID=Terry Oraha|Date=1 April 2014|Text=yep, I missed that part! that Sch E part.}}

{{ForumReplyPost|UserID=PVVCPA|Date=April 1, 2014|Text=Suggest they go back into the market for a new tax preparer. There are [[plenty http://www.taxalmanac.org/index.php/Discussion:Do_taxpayers_prefer_incompetent_tax_preparers%3F]] out there that will not ask such ridiculous questions.}}

Discussion:Perhaps an easy rental refi question . . .

PVVCPA — Tue, 01 Apr 2014 15:26:38 GMT

PVVCPA:

{{Basic Tax Questions}}


{{ForumNewPost|UserID=Kendrick|Date=1 April 2014|Text=3 bro's put $100K in apiece and by a $300K rental property and own it jointly, each putting a third of the income and expenses on their respective Schedules E.

2 years later, they get a loan on the property for $150K, and pay each of themselves $50K of the original $100K back.

Now they expect to deduct the mortgage interest against rental income.

Seems they may have a problem here. Does the tax law construe this as personal interest, and not deductible?}}

{{ForumReplyPost|UserID=Terry Oraha|Date=1 April 2014|Text=Research "debt financed distribution"}}

{{ForumReplyPost|UserID=Ckenefick|Date=1 April 2014|Text=Don't know if we can go by those rules given the Sch E reporting...}}

{{ForumReplyPost|UserID=Terry Oraha|Date=1 April 2014|Text=yep, I missed that part! that Sch E part.}}

{{ForumReplyPost|UserID=PVVCPA|Date=April 1, 2014|Text=Suggest that go back into the market for a new tax preparer. There are [plenty http://www.taxalmanac.org/index.php/Discussion:Do_taxpayers_prefer_incompetent_tax_preparers%3F] out there that will not ask such ridiculous questions.}}

Discussion:Perhaps an easy rental refi question . . .

PVVCPA — Tue, 01 Apr 2014 15:26:03 GMT

PVVCPA:

{{Basic Tax Questions}}


{{ForumNewPost|UserID=Kendrick|Date=1 April 2014|Text=3 bro's put $100K in apiece and by a $300K rental property and own it jointly, each putting a third of the income and expenses on their respective Schedules E.

2 years later, they get a loan on the property for $150K, and pay each of themselves $50K of the original $100K back.

Now they expect to deduct the mortgage interest against rental income.

Seems they may have a problem here. Does the tax law construe this as personal interest, and not deductible?}}

{{ForumReplyPost|UserID=Terry Oraha|Date=1 April 2014|Text=Research "debt financed distribution"}}

{{ForumReplyPost|UserID=Ckenefick|Date=1 April 2014|Text=Don't know if we can go by those rules given the Sch E reporting...}}

{{ForumReplyPost|UserID=Terry Oraha|Date=1 April 2014|Text=yep, I missed that part! that Sch E part.}}

{{ForumReplyPost|UserID=PVVCPA|Date=April 1, 2014|Text=Suggest they go back into the market for a new tax preparer. There are [http://www.taxalmanac.org/index.php/Discussion:Do_taxpayers_prefer_incompetent_tax_preparers%3F plenty] out there that will not ask such ridiculous questions.}}

Discussion:1031 Exchange land value

PVVCPA — Tue, 25 Mar 2014 11:50:48 GMT

PVVCPA:

{{Tax Questions}}


{{ForumNewPost|UserID=Actionbsns|Date=22 March 2014|Text=My client sold a condo and bought a rental home in a 1031 exchange. The adjusted basis for the new asset is $48,013. When I checked the property tax site, the land is valued at $155200 and the building is valued at $270800. How do I calculate the value of the land and the value of the building for depreciation?}}

{{ForumReplyPost|UserID=Ckenefick|Date=22 March 2014|Text=Check the yellow box.}}

{{ForumReplyPost|UserID=Nilodop|Date=22 March 2014|Text=Every time I see this advice given, I enter a check mark in the yellow box. But nothing happens. But I still do it. Maybe it will work one day.}}

{{ForumReplyPost|UserID=Actionbsns|Date=22 March 2014|Text=OK, that doesn't work, so are there any better suggestions?}}

{{ForumReplyPost|UserID=Nilodop|Date=23 March 2014|Text=I was being facetious. It works.}}

{{ForumReplyPost|UserID=Ckenefick|Date=23 March 2014|Text=I'm pretty sure it works, I've answered the same question at least three times.}}

{{ForumReplyPost|UserID=Actionbsns|Date=23 March 2014|Text=Whatever search terms you are using aren't the ones I'm using. Perhaps someone who hasn't answered the question three times has another suggestion. Or, possibly provide better search terms for the yellow box. I've never done a 1031 exchange so I've never needed to check on any issue related to it.}}

{{ForumReplyPost|UserID=Joan TB|Date=23 March 2014|Text=Paula, The whole purpose of the 1031 exchange is to not recognize gain when you relinquish the old property. The basis carries over to the new property. Assuming you have calculated the basis correctly (taking into account boot, etc.) firstly, you cannot depreciate more than your basis of $48,013. Of course, the trick is allocating that $48K between land and buildings. Even if you had an actual appraisal, it probably won't split the value between the land/buildings, and it certainly wouldn't have a total of $48K. In a lot of similar situations, I use the RATIO of land-to-building from the property tax value to allocate the total basis (in your case, $48K). Since your basis is actually quite small, maybe that is reasonable enough for you, too. So your answer would be 36% ($155,200/$426,000) to land, 64% ($270,800/$426,000) to building. The answer is $17,285 = land, $30,728 = building. This gives me an answer, and I can move on.}}

{{ForumReplyPost|UserID=Actionbsns|Date=23 March 2014|Text=Thanks Joan. I was doing some research on Google, and discovered I had a piece missing. There is also excess basis, and with that in the equation, the relationship between what I already had, the property tax ratios, and the excess basis makes more sense. I was worried about the huge discrepancy between the assessed values and the new adjusted basis.}}

{{ForumReplyPost|UserID=Ckenefick|Date=23 March 2014|Text=Not sure if "excess basis" really has anything to do with the land/structure allocation. That is more of a future depreciation issue. Not so sure the actual "discrepancy" which concerns you is the important thing here. The absolute dollars per the property appraiser's records will never jive with the basis to be allocated, even in an outright purchase. And in your case, not that it matters, you haven't told us what the "purchase price" was for the replacement property. But likely, it wasn't $426,000 exactly.

What Joan's methodology does is preserve the "built in gain" in each asset class as fairly as possible. Yes, you will wind up, for each asset class, with FMV far in excess of basis. But, that FMV/Basis difference isn't lop-sided in favor of one asset class. It is all relative.

}}

{{ForumReplyPost|UserID=Doug M|Date=23 March 2014|Text=I was thinking this thread is about the following:

Property given up has no land basis. Reg's say old basis remains on books and boot basis takes on new character.

But, replacement property has land. Under the 1031 reg's, what is the election needed to file so that the new property can allocate according to land/building ratio?}}

{{ForumReplyPost|UserID=Ckenefick|Date=23 March 2014|Text=The property given up should have land basis, absent the circumstance of the HOA not owing the common elements. And even if the relinquished property didn't have land, we have land now...}}

{{ForumReplyPost|UserID=Actionbsns|Date=23 March 2014|Text=I think it's something like 1.163, or thereabouts, I have some information on that at my office. You have to make an election on the 4562.}}

{{ForumReplyPost|UserID=Ckenefick|Date=23 March 2014|Text=163 is interest, 168 is depreciation. It's the -6 of 168(i). If you elect out of the Regs, you would attach a statement.

}}

{{ForumReplyPost|UserID=Doug M|Date=23 March 2014|Text=Laura: the reg's state that if this was a straight across trade, no exchange expense and no boot, your depreciation schedule would remain unchanged.

Your OP does not tell us if there is an increase to the basis of the replacement property. What I call the boot basis (increase in basis as a result of boot, exchange expenses, etc) takes on the character of the L/B ratio of the replacement property. }}

{{ForumReplyPost|UserID=Ckenefick|Date=23 March 2014|Text=I think Laura is calling that the "excess basis."}}

{{ForumReplyPost|UserID=Kevinh5|Date=23 March 2014|Text=Laura, if there will be net boot paid allocate it to the land in the same proportion as the FMV of the land to the total FMV of the property.

e.g. $15,000 net boot paid.

Replacement Land worth $250,000, building worth $100,000, total FMV of replacement property = $350,000

15000 x 250,000/350000}}

{{ForumReplyPost|UserID=Wiles|Date=23 March 2014|Text=''...even if the relinquished property didn't have land...''

Say what? Land-less real estate? Whoa! Trippy! ...I think I see a triple rainbow.}}

{{ForumReplyPost|UserID=Ckenefick|Date=23 March 2014|Text=It was a condo. No idea if Action booked up land or not.}}

{{ForumReplyPost|UserID=Nilodop|Date=23 March 2014|Text=''My client sold a condo and bought a rental home in a 1031 exchange.'' We are all assuming this condo was rented out, not the client's personal residence. Just askin'.}}

{{ForumReplyPost|UserID=Spell Czech|Date=23 March 2014|Text=In my few years of watching, I've never seen a condo with that kind of appreciation. Or had it been depreciated over many many many years? Is there possibly a new mortgage that's missing from the exchange and basis calculations? Is this where the "excess basis" fits in and makes things seem less unreasonable? We've got all the numbers except that one...}}

{{ForumReplyPost|UserID=Ckenefick|Date=23 March 2014|Text=Probably a combo. She said there's excess basis, so taxpayer paid some boot.}}

{{ForumReplyPost|UserID=Actionbsns|Date=23 March 2014|Text=My client bought the condo in about 1997, I'm not in my office but I've worked on these numbers so much in the last few days, these should be realistic. Anyway, they paid $122,000 for the condo, always a rental. They sold it for $445,000, received a check for $16,000 after the close of the new property, exchange costs are $30,000 and change, adjusted basis of the condo is about $52,000. The new property was purchased for $395,000. I have an exchange basis of right around $48,000, deferred gain is around $360,000 so, as I understand it, the excess basis is $360,000 plus boot of $16,000, less the exchange basis of $48,000, total excess basis is $328,000 and depreciable over 27.5 years. Assessed value of the land is 36.5% of the total assessed value. There are 11.5 more years left on the original depreciation of the property. There are no mortgages on either property.}}

{{ForumReplyPost|UserID=Doug M|Date=23 March 2014|Text=Your client purchased lesser value replacement property.

There is no excess basis. (boot basis)

Your client received boot of $50,000 reduced by exchange expenses of $30,000. Taxable cap gain of $20,000. You have $16,000. Could be "rounding" and/or R/E taxes, other non-basis issues on closing statements. Security deposits, rent pro-rates, etc.

Basis of property given up = basis of replacement property.

}}

{{ForumReplyPost|UserID=Actionbsns|Date=23 March 2014|Text=Doug, can you explain to me what Excess basis is then? From the articles that I read, it seemed that I understood it, but I don't think I do. It also sounds like prior to reading the articles on Excess Basis, I had it right, bottom line is Basis of property given up = basis of replacement property. The only depreciation we have available is the $48,000 which is split between land and building and has 11.5 years left to be depreciated. We cannot depreciate the $328,000.}}

{{ForumReplyPost|UserID=Belle|Date=March 23, 2014|Text=Paula - check your email.}}

{{ForumReplyPost|UserID=Ckenefick|Date=23 March 2014|Text=''We cannot depreciate the $328,000.''

Say what?}}

{{ForumReplyPost|UserID=Ckenefick|Date=23 March 2014|Text=''Doug, can you explain to me what Excess basis is then?''

It's above and beyond the exchanged basis. Let's say you have $0 basis property worth $10k. You exchange it for property costing $100k. You will have to come to the table with $90k in cash to complete the transaction.

Yeah, I agree with Doug. You have an issue with this transaction. You traded down.}}

{{ForumReplyPost|UserID=Doug M|Date=23 March 2014|Text=Excess basis, most commonly, will be created if your client:

1. Assumed more debt than the debt on the property given up
2. Came up with personal cash to close the transaction.

Your client came up with neither. Your client walked with $16,000 in cash at the end of the day.

On a simple basis, use the following idea in determining the basis in the new property:

Net book value of old, plus boot paid.

Your clients new basis is $48,000 (you mentioned $52,000 later on) + -0- = $48,000
}}

{{ForumReplyPost|UserID=Actionbsns|Date=24 March 2014|Text=''We cannot depreciate the $328,000.
Say what?''

Chris this is confusing. I think I'm using the wrong term for the $328,000, it's not excess basis, but your comment leads me to believe it is part of the depreciable basis. Is my comment about the $48,000 being depreciated over the remaining 11.5 years and the $328,00 over 27.5 right?

Thanks everyone for your help, I do appreciate it.}}

{{ForumReplyPost|UserID=Ckenefick|Date=24 March 2014|Text=Right, wrong term. Excess basis is "additional" basis that arises in a 1031 for the reasons outlined by DougM. If it's depreciable, you depreciate it. In your case, you traded down. Client put in $0 add'l cash and there no debts were involved.

You're generally gonna have a carryover basis, with maybe a few modifications. We don't have the details on the "exchange expenses," but surely, we have some pro-rations and maybe some prepaids, which will be boot. }}

{{ForumReplyPost|UserID=Nilodop|Date=24 March 2014|Text=''Probably a combo.'' Wow, my first combo condo.}}

{{ForumReplyPost|UserID=Doug M|Date=24 March 2014|Text=''Is my comment about the $48,000 being depreciated over the remaining 11.5 years" Yes

''$328,00 over 27.5 right?'' No. You have nothing here to depreciate. These is no boot paid or add'l debt incurred.

I don't think the exchange expenses play into this scenario. That would only be true if your exchange expenses exceeded the boot received. In your case, you received more out of the exchange than the exchange expenses.

Old basis = new basis}}

{{ForumReplyPost|UserID=PVVCPA|Date=March 25, 2014|Text=It should also be noted that the "old basis = new basis" presentation would include a change. Since there is gain recognition, this gain will be recognized as Sec 1250 recovery (most likely). Therefore, there should be both a reduction in the cost basis and reduction in the accumulated depreciation equal to the amount of gain that has been recognized.}}

{{ForumReplyPost|UserID=Actionbsns|Date=25 March 2014|Text=This property has been depreciated using straight line, does Paul's comment still apply?}}

{{ForumReplyPost|UserID=Ckenefick|Date=25 March 2014|Text=No, he meant unrecaptured Sec 1250 gain.}}

{{ForumReplyPost|UserID=Actionbsns|Date=25 March 2014|Text=Bless you Chris!!! I was just coming to that conclusion, but I now have about 12 more pages of stuff all over my desk. I really want this fricking return to be done.}}

{{ForumReplyPost|UserID=PVVCPA|Date=March 25, 2014|Text=Yes, replace "Sec 1250 recovery" with "unrecaptured Sec 1250 gain". Sorry, I thought I was talking to a client. The point of my post was to make sure you reduce the cost basis and accumulated depreciation by this amount.}}

Discussion:1031 Exchange land value

PVVCPA — Tue, 25 Mar 2014 00:04:18 GMT

PVVCPA:

Discussion:Need a cite to fire a client

PVVCPA — Wed, 15 Jan 2014 03:36:57 GMT

PVVCPA:

{{Advanced Tax Questions}}


{{ForumNewPost|UserID=EADave|Date=14 January 2014|Text=So I have been around and around with a client regarding his interpretation of the per diem deduction and I am finished providing tax prep services to him. But, I want to come across as a professional (big stretch for me!) so I would like to provide him with some definitive language that flatly denies his assertion that he is entitled to the deduction.

Facts: Client o' mine is an air traffic controller. Sometimes his duties at work are so demanding that occasionally he must work through his lunch hour and never leave his desk for the entire work day. HIs supervisors have told him, "Hey, you know you can claim the per diem deduction on your tax return for this day, because you are subject to the Hours of Service limits under DOT regulations." This, obviously, is an extremely loose interpretation of a partial section of page 12 of the Publication 463 that mentions this 80% deduction for M&E.

The part (main guts of the deduction) that is conveniently omitted is the fact that the taxpayer must be "traveling away from his tax home". You simply can't deduct the meal allowance simply because you can't leave your desk for a meal. Madness. Does anyone have a cite/court case where this can be illustrated so there is no confusion?

Client o' mine says he "thinks he is missing out on the deduction and he wants to take this deduction this year." Plus, his supervisors have been "audited and nothing happened to them." Last year when he brought it up, I told him absolutely not. This time he is insisting. Hep me buddies!}}

{{ForumReplyPost|UserID=Ckenefick|Date=14 January 2014|Text=From Rev. Proc. 2011-47:

.01. The term “per diem allowance” means a payment under a reimbursement or other expense allowance arrangement that is —

(1) Paid for ordinary and necessary business expenses incurred, or that the payor reasonably anticipates will be incurred, by an employee for lodging, meal, and incidental expenses, or for meal and incidental expenses, for travel away from home performing services as an employee of the employer,

But also see:

http://www.taxalmanac.org/index.php/Discussion:Firefighter_--_Meals_while_on_24_hr_shift}}

{{ForumReplyPost|UserID=EADave|Date=14 January 2014|Text=Thank you kindly sir, that seems pretty straight forward to me. Now I just have to explain it to a Govt worker....oh boy.}}

{{ForumReplyPost|UserID=Ckenefick|Date=14 January 2014|Text=Be sure to read the linked discussion, which gets into Sec 119.}}

{{ForumReplyPost|UserID=EADave|Date=14 January 2014|Text=Will do, I appreciate it.}}

{{ForumReplyPost|UserID=Frankly|Date=14 January 2014|Text=You might quote parts of Circular 230 e.g. sec 10.34 - A practitioner may not willfully, recklessly, or through gross incompetence sign a tax return that lacks a reasonable basis; is an unreasonable position; is a willful attempt by the practioner to understate the liability for tax or a reckless or intentional disregard of rules or regulation, advise a client to take a position on a tax return... }}

{{ForumReplyPost|UserID=EADave|Date=14 January 2014|Text=Thank you Frankly, my plan was to also mention the fact that I can't knowingly prepare a fraudulent return; similar to the language you have mentioned in the 230. Thank you for the advice.

Thanks Chris, for the discussion; I will try to yellow box it next time. Man I do miss Riley2; always helpful and humble, never condescending. Great discussion, even mentions air traffic controllers in that crazy long thread. I like the fact that real firemen (and their wives apparently) chimed in.}}

{{ForumReplyPost|UserID=Death&Taxes|Date=14 January 2014|Text=A good boss, like the tax lawyer I worked for, would buy the lunch during tax season when the employees couldn't leave their desk.}}

{{ForumReplyPost|UserID=Fsteincpa|Date=14 January 2014|Text=How about telling him ok, as long as there is form 8275 included.}}

{{ForumReplyPost|UserID=EZTAX|Date=14 January 2014|Text=DT - and then the boss could deduct it 100% and if there was a few slices of pizza left over.....}}

{{ForumReplyPost|UserID=Belle|Date=January 15, 2014|Text=''and their wives apparently''
That describes me <w>}}

{{ForumReplyPost|UserID=PVVCPA|Date=January 15, 2014|Text=If you send this guy packing, then I am sure he will have no problem finding another [http://www.taxalmanac.org/index.php/Discussion:Do_taxpayers_prefer_incompetent_tax_preparers%3F preparer] that will suit him.}}

Discussion:Health Insurance Reimbursement Post-ACA

PVVCPA — Wed, 15 Jan 2014 00:46:21 GMT

PVVCPA:

{{Tax Questions}}


{{ForumNewPost|UserID=EatonCPA|Date=8 January 2014|Text=I tried a yellow box search but I couldn't turn up a good recent discussion, so I figured I'd start one. Trying to wrap my head around the ACA and want to get the community's input on clarifying how these new rules affect how many of our small businesses handled health insurance. I think most of us know employers previously could reimburse employees for their individually purchased health insurance premiums and take a full deduction on the corporate return without the employee having to recognize the premiums as taxable compensation. Additionally, S-Corp shareholders previously would record *their* company-paid premiums in Boxes 1 and 16 of their W-2s and get a Page 1 deduction on the 1040, but not subject to FICA taxes. Now, these are the new rules as *I* have come to understand them - agree or disagree?

If a company reimburses anyone - employee, officer, shareholder - for health insurance, those reimbursements must all be considered taxable compensation to be included in Boxes 1, 3, 5, AND 16 and subject to all applicable income and FICA taxes. Company then takes a write-off.

I think I'm clear on that. I am so not clear on what happens on the 1040s for these people. Do S-Corp shareholders still get a Page 1 deduction? Does everyone get to deduct the premiums on Schedule A? What about contributions to an HSA, both for regular employees and S-Corp shareholders?

And do all of these new ways of reporting/handling matters apply only to insurance plans adopted/renewed after January 1, 2014? If someone is currently in month 8 of their 12 month annual policy, can they continue to get tax-free reimbursements until such time as they renew?

Chatter away ...}}

{{ForumReplyPost|UserID=Ckenefick|Date=8 January 2014|Text=If you're saying that the Company "reimburses" employees...on their own personal policies...policies that are not part of the employer's group policy...you're looking at a penalty of $100 per day for violating this Obamacare rule. Yes, $36,500 per year. that is my take on this provision.

However, I also believe that you can reimburse for 1 person, but no more than one.}}

{{ForumReplyPost|UserID=Belle|Date=January 8, 2014|Text=I agree with Chris. The class I attended on Monday confirmed that position, although the instructor "felt" that there might be future guidance on the situation for 2% shareholders. IMHO, that would require a revision in the ACA by Congress and isn't likely to happen soon.}}

{{ForumReplyPost|UserID=Captcook|Date=8 January 2014|Text=I'm in agreement as well. Although, Belle, haven't you noticed that the Executive Branch can modify the effect of any law through enforcement? I expect guidance without statutory support...again.}}

{{ForumReplyPost|UserID=JAD|Date=8 January 2014|Text=Company cannot reimburse the individual for the cost of his individual insurance without incurring a penalty even if the reimbursement is treated as wage income? }}

{{ForumReplyPost|UserID=Ckenefick|Date=8 January 2014|Text=I'm not sure if we're splitting hairs here, but I tend to think if the "reimbursement" is included as taxable compensation, then it would lose its character as a problematic health insurance reimbursement and instead represent taxable compensation. I believe this is Eaton's position and I "tend" to agree with it, but with some reservation. You just never know.

I'm not sure if there is enough of a connection for the Service to argue that it's still a (problematic) health insurance reimbursement, albeit a taxable one, that still violates the ACA. I think we need to remember here that we're diving into a non-tax law, that speaks to limitation of benefits, and we're trying to move it into the tax arena. For all we know, if we continue to call it a reimbursement, and if we base the reimbursement on a premium payment made by an employee on his or her personal policy, and we base it on documentation submitted by an employee that references an insurance policy...we just might be in trouble. In other words, IRS might not care that we taxed it - IRS may still argue that we've violated the limitation of benefits rule.

In my view, if we intend on line item-ing this out on the guy's pay-stub, we might not want to make any reference to "health insurance" or "medical expense reimbursement" as the case may be. Maybe we just call it "Additional Compensation" or "Monthly Bonus" or something along those lines. Ideally, it wouldn't even be a separate line item, but maybe just lumped in with regular compensation. Again, I may be splitting hairs here...but then again, maybe I'm not, in light of the fact that the ACA speaks to limitation of benefits and the ACA might not care if we, as the employer, specifically tax the thing.}}

{{ForumReplyPost|UserID=JAD|Date=9 January 2014|Text=Scary stuff. Where is the $100 per day fine for reimbursing? I am aware of a $100 per day fine for not notifying employees re exchanges if the business has at least 1 employee and $500k in revenue, but the govt said that it was not going to assess that fine. }}

{{ForumReplyPost|UserID=Captcook|Date=9 January 2014|Text=Jessica, that fine actually never existed. See the DOL's announcement on October 3.

Interesting points, Chris. I've advised a couple of clients to show the additional payments as "medical stipend" fully taxable on the W-2. I hadn't considered whether that would continue to be in violation of the non-tax provisions.}}

{{ForumReplyPost|UserID=DebP|Date=9 January 2014|Text=Ckenefick - where do you see that employees can reimburse for one person but not more than 1? }}

{{ForumReplyPost|UserID=Ckenefick|Date=9 January 2014|Text=A pretty good synopsis is here...and is consistent with all my research on this issue:

http://www.cliftonlarsonallen.com/Employee-Benefit-Plans/New-Restrictions-Employer-Provided-Medical-Expense-Reimbursement-Plans.aspx

...and, I believe if you trace things through the Code, you end up at Sec 4980D(b)(1).}}

{{ForumReplyPost|UserID=JAD|Date=9 January 2014|Text=Captcook, I did a quick look - the fine exists, but is not being assessed, per the sept notice.}}

{{ForumReplyPost|UserID=CathysTaxes|Date=9 January 2014|Text=Excellent discussion. This is similar to a client's problem. His employer is not renewing their health insurance (less than 50 people). Instead, each employee, who can provide proof of single coverage, will get an additional $300 per month and family coverage will get $900 per month. Last year, his W2 showed about $8,000 being deducted from his taxable wages for his portion of the health insurance.

So, it looks like not only will he pay income, social security, and medicare, and state tax on the $8,000, he now has additional taxable income of $10,800 ($900 * 12). He can itemize the cost of the insurance, but at 10% of adjustable gross income (his W2 taxable wages were $90,000, add $8000 and $10,800), he probably won't be able to deduct any of it.}}

{{ForumReplyPost|UserID=JAD|Date=9 January 2014|Text=Thanks for the link, Chris. That's a good summary. That $100 per day per person fine is ridiculous. The Code seems to include more and more absurd penalties that seem like onerous traps rather than penalties intended to encourage compliance.

The article does not address whether the Sec 105 plan is ACA compliant if there is no limit on the amount that may be reimbursed through the plan. A couple of benefits specialists who I work with both think that this is an option.}}

{{ForumReplyPost|UserID=Captcook|Date=9 January 2014|Text=Where did you find the cite for the penalty for not providing notice? }}

{{ForumReplyPost|UserID=Taxalmancer|Date=January 9, 2014|Text=Does the garden-variety Section 125 plan (POP) administered by payroll processing companies (ADP, PAYCHEX), violate the rule and trigger the $100/day per employee?}}

{{ForumReplyPost|UserID=Ckenefick|Date=9 January 2014|Text=Are we talking about a group plan, maintained by the employer, or individual personal policies?}}

{{ForumReplyPost|UserID=Taxalmancer|Date=January 9, 2014|Text=Group plan maintained by employer. Employer is billed by insurance company(s) and employee's portion of the health insurance premium reduces their taxable earnings.}}

{{ForumReplyPost|UserID=WIBadgerCPA|Date=9 January 2014|Text=Publication 15-b still has the exception for FICA tax for 2% shareholders. }}

{{ForumReplyPost|UserID=JAD|Date=9 January 2014|Text=''Where did you find the cite for the penalty for not providing notice?''

I didn't. Just lots of discussion in the news etc. I thought that that penalty was per law outside of the IRC, and I didn't look for it. I assumed - perhaps naively - that businesses would not have been threatened with that penalty if it didn't exist in the USC somewhere.}}

{{ForumReplyPost|UserID=Ckenefick|Date=9 January 2014|Text=''Publication 15-b still has the exception for FICA tax for 2% shareholders.''

I'm sure it does, seeing that there's a possiblity that the S-corp might maintain a group plan, of which the 2%-Shareholders are participants. Might also be the case where the reimbursement to the 2%-shareholder isn't prohibited, because a group plan is not required (i.e. the only employee is the shareholder and perhaps the shareholder's spouse).

I think what Eaton is getting at is the situation where S-corp reimburses on the personal policies of the shareholders. If this is not permitted any longer (except in the case of 1-employee S-corp's), I don't see how the reimbursement would escape FICA. In other words, the reimbursement isn't taxable as a fringe, it's taxable because it is regular compensation. In which case, no deduction on the 1040 either.

This law, or at the least the IRS' interpretation of it, is a real piece of crap. Might even be struck down if challenged, but whose willing to risk that, given a $36,500 penalty...for each participant. I would say the deck is stacked, quite unfairly, in favor of the government here. If there were no penalty, but only the possibility of paying add'l taxes on the add'l income and lost deduction...I'd be telling people to ignore the Notice.}}

{{ForumReplyPost|UserID=Taxalmancer|Date=January 9, 2014|Text=Chris,

Do you have any thoughts about whether a Section 125 POP plan where the health insurance premiums maintained by the employer triggers the $100/day penalty? By the way, this would be for small employers below the 50-employee threshold.}}

{{ForumReplyPost|UserID=Ckenefick|Date=9 January 2014|Text=You'd be okay if we're talking about a group plan...but if, for example, we're talking about a 125 Plan whereby employee can pre-tax some of the earnings towards coverage on an individual personal policy, we'd have a problem...just like we have with a more-than-1-employee S-corp reimbursing personal premiums for the shareholders.

More good info is here:

http://www.groom.com/media/publication/1304_Individual_Health_Policies.pdf

Back to Eaton's question and to WI's last post...In thinking more about the S-corp situation, I tend to think we'd have a 162(l) deduction if the insurance is "paid" by the shareholder/employee, after-tax, via an after-tax payroll deduction with respect to personal policy premiums. }}

{{ForumReplyPost|UserID=Wiles|Date=9 January 2014|Text=Wait! Wait! I thought the reimbursement was only prohibited if the individual plan was purchased via the Exchange. All other reimbursement for individual plans are still allowable.

I really wish they would have phased this law in over a 4-year period or something so that our education providers could have got something out to us about all these changes.}}

{{ForumReplyPost|UserID=Captcook|Date=9 January 2014|Text=Jessica, here's [http://www.taxalmanac.org/index.php/Discussion:Obamacare_Exchange_Notice_Requirement]a discussion on the topic with a couple of links.

In August, I did some research on any potential penalties relating to this notice and found none. There was a lot of press on it, but the DOL (relatively) quickly came out and clarified there is no penalty for noncompliance.}}

{{ForumReplyPost|UserID=Ckenefick|Date=9 January 2014|Text=''All other reimbursement for individual plans are still allowable.''

Don't think so...unfortunately. }}

{{ForumReplyPost|UserID=Ckenefick|Date=9 January 2014|Text=''I really wish they would have phased this law in over a 4-year period or something so that our education providers could have got something out to us about all these changes.''

With respect to the reimbursement issue, I tend to think Congress didn't actually intend for it to work as the way the IRS is interpreting it. In other words, an unintended consequence, much like other aspects of the ACA.

Seriously, isn't the whole point of ACA for people to have health insurance? I really don't see how any type of premium reimbursement arrangement - on an existing policy - violates this notion.

}}

{{ForumReplyPost|UserID=DAJCPA|Date=9 January 2014|Text=So, what if you have a husband owned S-Corp which employs his wife. S-Corp reimburses husband's Medicare premiums and also reimburses the wife's separate policy. No way for the S-Corp to get a group plan, the separate policies are the "group plan". Can the S-Corp only reimburse one of the two policies now?}}

{{ForumReplyPost|UserID=Ckenefick|Date=9 January 2014|Text=No, I tend to think the S-corp can reimburse both without any problems.}}

{{ForumReplyPost|UserID=JAD|Date=9 January 2014|Text=Captcook, thanks, I stand corrected. Unbelievable that there was nothing in the law that was the basis for all of that hysteria.}}

{{ForumReplyPost|UserID=Captcook|Date=9 January 2014|Text=Indeed, Jessica. }}

{{ForumReplyPost|UserID=Ckenefick|Date=9 January 2014|Text=http://www.bashaw-atherton.com/acapenalty.html

I didn't check the list, but I wouldn't jump to the conclusion that it was just hysteria.}}

{{ForumReplyPost|UserID=Harry Boscoe|Date=9 January 2014|Text=I like the use of the term "Post-ACA" in the title of this discussion. And I'm a cynic.

It's clearly anticipating a time *after* the ACA, like when it's been repealed, right? Right?}}

{{ForumReplyPost|UserID=EADave|Date=10 January 2014|Text=This legislation has been rushed and thrown together with no one smart enough to realize the unintended results. Typical handy work of our Government. I really think this mandate should at least be postponed another year. The last seminar I attended was filled with 65+ year old preparers who all had the same response to this madness, "I think it's time to retire!!"

I think I have this right, people are signing up and applying for the subsidized plans by estimating their 2014 MAGI when most people don't even know their 2013 MAGI yet. And, if you understated your MAGI on the application then you have overstated the eligibility of the subsidy. You will be one of the lucky ones that must repay this subsidy on your 2014 tax return; in 2015.

This is the biggest cluster. Imagine this nightmare scenario: Taxpayer that qualifies for the EIC by claiming certain deductions (Section 179/etc) on their Schedule C; the taxpayer also qualifies for subsidized premiums due to the low level of income. All is good until the taxpayer receives an IDR for an audit on the same tax year 18 months later. Taxpayer kept poor records or maybe doesn't respond to the audit letter. IRS disallows expenses, income increases, EIC is wiped out AND the taxpayer must repay the subsidy he didn't qualify for.

This new law may be a boon for Collection Representation, a few years down the road anyway.}}

{{ForumReplyPost|UserID=Captcook|Date=10 January 2014|Text=Chris, it is not on the list. This link [http://www.shrm.org/hrdisciplines/benefits/articles/pages/state-exchange-notifications.aspx] has a pretty good summary of the issue.}}

{{ForumReplyPost|UserID=Ckenefick|Date=10 January 2014|Text=http://www.shrm.org/hrdisciplines/benefits/Articles/Pages/Exchange-marketplace-notice-penalty.aspx

Here's another link, which is a link inside your last link...I'm not all that familiar with the nuances here, and didn't read hte list, but it sounds like it's saying the ACA, unless otherwise specified in a specific ACA provision, carries an "in general" $100/day penalty. I don't really know what this means or where this "in general" penalty provision specifically resides, statutorily, but I guess the interpretation was that any single violation of even the smallest provision (including the notice provision, which went into the Labor Code and not the Tax Code) invokes the penalty. But then in the Q&A, they go on to say, "Just kidding." Anyway, water under the bridge I suppose. I guess the real question is, "Where is this 'in general' $100/day penalty...I suppose it's the part of the ACA that went into the Labor Code, but I could be wrong.}}

{{ForumReplyPost|UserID=DebP|Date=12 January 2014|Text=Back to the 1 person reimbursement since I needed a chance to look a few things up:

1. Employer 1 is 100% owned S-Corp, but she has insurance through her husband's work. She just hired first employee last week and plans to pay his health insurance directly. That is OK for penalty purposes, but once she hires employee #2, then she either has to stop reimbursing the insurance or get a group health plan through S-Corp - correct? And no matter what, the reimbursement is taxable for income and FICA purposes. Correct?

2. Employer 2 is husband-wife S-Corp. S-Corp pays health insurance directly, and gets added to W-2. No penalty, but now subject to FICA vs. prior year. Correct? If they hire any other employee, then they can't reimburse or pay insurance directly, but they could just give a higher pay. And husband-wife still have get to deduct premiums above the line - that doesn't change to address EatonCPA's original question.

3. 100% owned S-Corp with several employees and group plan. S-Corp pays 100% owner insurance, 50% of one other individual, and two other individuals have coverage from other places. Only NEW issue here is FICA add-back I believe. What about any HSA payments in this circumstance? FICA as well?

Good stuff.

}}

{{ForumReplyPost|UserID=DebP|Date=13 January 2014|Text=Any takers on item #1 from above? That's the one that is my most time-pressing one. Thanks.

1. Employer 1 is 100% owned S-Corp, but she has insurance through her husband's work. She just hired first employee last week and plans to pay his health insurance directly. That is OK for penalty purposes, but once she hires employee #2, then she either has to stop reimbursing the insurance or get a group health plan through S-Corp - correct? And no matter what, the reimbursement is taxable for income and FICA purposes. Correct?}}

{{ForumReplyPost|UserID=Ckenefick|Date=13 January 2014|Text=I think you have a problem. If the one employee was the 100% shareholder, I don't think there'd be any problems and you could reimburse that employee's/100% shareholder's premiums since the owner is excepted from the rules in such a case. But as things stand, you have a non-owner employee, which seems to me, to be problematic.}}

{{ForumReplyPost|UserID=EatonCPA|Date=13 January 2014|Text=
----
DebP, based on what Chris has posted, with only one employee, the company can still reimburse the premiums without having to include it in compensation but once you have more than one employee, the reimbursements must be included in compensation and fully taxed UNLESS a group plan through the company is established. *edited* Well, given Chris' response to your post, perhaps not.

On number two, also based on Chris' posts, the reimbursements for the H + W are NOT subject to payroll taxes as long as they are the only employees of the company. As long as the pay is going through the old Box 1/Box 16 reporting rules, there is an above-the-line deduction but once the premiums go into compensation, the deduction falls back to Schedule A.

Number 3 - honestly not sure about that situation ... discrimination issues maybe? I'm still waiting on clarification from someone on handling the HSA contributions. I'd presume it goes about like everything else - one employee, keep it in Box 1 for 2%, otherwise Box 12 code W?

Ugh ... this mess is almost enough to make payroll not even worth it anymore as a service to offer.}}

{{ForumReplyPost|UserID=Terry Oraha|Date=13 January 2014|Text=If anyone is interested I just saw this article in the Tax Advisor.

'''PPACA Guidance Clarifies Rules for HRAs, Health FSAs, and Other Accountable Plans
TAX CLINIC '''
by Catherine Creech, J.D., and Helen Morrison, J.D., Washington, D.C.
Published January 01, 2014
Editor: Michael Dell, CPA
[http://www.aicpa.org/publications/taxadviser/2014/january/pages/clinic-story-04.aspx]}}

{{ForumReplyPost|UserID=Ckenefick|Date=13 January 2014|Text=''*edited* Well, given Chris' response to your post, perhaps not.''

I'm not 100% sure about this. I think we're in agreement that when the "one employee" is the sole-shareholder who has his or her personal premiums reimbursed, we're okay. I believe this is because such a situation falls outside of the group rules...and I think these group rules are in the DOL stuff, not in the tax code. This is similar to the ERISA rules we have for, say, a 100%-owned S-corp with no rank-and-file employees. In this case, if the S-corp sets up a 401k and the only participant is the sole shareholder (and/or his spouse), this Plan falls outside of ERISA. So, I think it's the same type of rule at play here with the welfare benefits. The real question is: Is it based on participation or just based on a head count?

Take my 401k example above. Let's say sole shareholder takes $0 W2 pay, but the rank-and-file employee does. As such, only the rank-and-file employee has a 401k account balance. It would seem inequitable, to the rank-and-file employee, that the Plan would fall outside of ERISA in such a case, even though it only has one participant.

Where's Marty?}}

{{ForumReplyPost|UserID=Ckenefick|Date=13 January 2014|Text=''If anyone is interested I just saw this article in the Tax Advisor.''

I think we are way past that article...I don't think the authors have come close to getting into some of the real world issues we have...}}

{{ForumReplyPost|UserID=EatonCPA|Date=13 January 2014|Text=Chris you bring up a good point and now that I look at the whole situation again, technically in Deb's #1, she has *two* employees here (presuming the S/H is reporting reasonable comp on a W-2), with only one participating in health insurance. More than one employee = insurance premiums are taxable compensation unless provided via a group plan, at least as I'm understanding all the rules.}}

{{ForumReplyPost|UserID=Ckenefick|Date=13 January 2014|Text=Exactly, but with one qualification: I don't think it matters if the sole shareholder takes as W2 compensation or not. I think no matter how we slice it, we have 2 common law employees. Does this mean we have violated the rule? Or, have we not violated the rule since we have only one *participant?*

}}

{{ForumReplyPost|UserID=Terry Oraha|Date=13 January 2014|Text=''If anyone is interested I just saw this article in the Tax Advisor.
I think we are way past that article...I don't think the authors have come close to getting into some of the real world issues we have...''

I figured as much. Sounds like when I get a second I'm going to have to actually read this thread!!}}

{{ForumReplyPost|UserID=Ckenefick|Date=13 January 2014|Text=Mary's mother has four children: April, May, June and …? }}

{{ForumReplyPost|UserID=AKCCPA|Date=January 13, 2014|Text=Poor Mary.}}

{{ForumReplyPost|UserID=Terry Oraha|Date=13 January 2014|Text=Dude Chris that is a good one! My nephew is going to like it!}}

{{ForumReplyPost|UserID=Ckenefick|Date=13 January 2014|Text=Good work AKC...you have my permission to take the rest of the day off...}}

{{ForumReplyPost|UserID=AKCCPA|Date=January 13, 2014|Text=I need to spend the week figuring out what is going on with all this ACA stuff to be able to advise my clients it seems. It didn't help that Tax Almanac was down for so long.}}

{{ForumReplyPost|UserID=DebP|Date=13 January 2014|Text=Well just as an FYI - my particular S-Corp owner IS taking a salary, but I think we are trying to figure out these rules in general. So, I have two employees, and one is the 100% S-Corp owner NOT getting medical and the other is an brand new employee who IS getting medical. So, to convince my client that the employee health insurance needs to be taxed for income tax and FICA purposes, I need to tell her about the $100 per day penalty. The employee will not be happy, and an trying to find out some exact rule. I have a webinar on Friday, so I might be able to ask a question then. Ckenefick - I don't know the answer to the one "participant" question, but it is a very good point.}}

{{ForumReplyPost|UserID=Ckenefick|Date=13 January 2014|Text=I don't think it matters that the S-corp shareholder is or is not taking W2 pay. The issue here is that we have an employee head count of 2, but only 1 "plan participant," who is not the S-corp owner.}}

{{ForumReplyPost|UserID=DebP|Date=13 January 2014|Text=And so the answer is - ummm not sure. That sucks. I hate this. I am more nervous about the penalty than anything else.....
Thanks for the discussions!
}}

{{ForumReplyPost|UserID=Ckenefick|Date=13 January 2014|Text=http://www.law.cornell.edu/cfr/text/29/2510.3-3

Here's the ERISA reg...

Again, I tend to think your Situation #1 is problematic. If I can summarize: If a Plan only covers the owner (and the owner's spouse), the Plan is not a Plan. The Plan is deemed to have no employees, so it fails as an Employee Plan. The minute we add a rank-and-file employee, we now have a valid Employee Plan. And my take is that if we have a valid Employee Plan, we need to go the Group route on the insurance. And if we don't go the group route, the personal premiums that are reimbursed are taxable to the rank-and-file employee. From Employer's standpoint, not much of a difference...Employer still gets the deduction. Of course, employer has added employment tax costs. In addition, maybe added retirement benefit costs if retirement plan contribution is based on wages paid.

I tend to think we haven't heard the last on this issue. Once your client's employee realizes that he or she will have to pay tax on this benefit, which has heretofore been tax free, employee will be pissed. And so will every other employee across the Land that is adversely affected by this stupid-ass new rule.

I'm just giving my opinion here. Others can be free to agree or disagree. Marty is the in-house expert on this stuff...}}

{{ForumReplyPost|UserID=DebP|Date=13 January 2014|Text=So let's get Marty on board.. how do we do that? :).

Yes - pissed is the word that comes to mind as well. I am going to delve a lot more into this - it's no quick - or even painfully slow - find.}}

{{ForumReplyPost|UserID=Ckenefick|Date=13 January 2014|Text=I tend to think we're looking in the right place...}}

{{ForumReplyPost|UserID=Fsteincpa|Date=13 January 2014|Text=In the above scenarios, what kind of salary are we talking about for the employees?

It is my understanding, and I am often wrong, but it is my understanding that if employees have health insurance through an employer, then they are not eligible for any subsidization. This becomes an issue for smaller corps where they may not be contributing much towards the employees cost, they are simply offering insurance.

In some cases it might make sense to eliminate the group health insurance plan and allow the employees to go through the exchange.

In addition, I believe that if the employers plan is not chosen through the exchange that the associated credit for paying 50% or more of the premium is not allowed.

The certified navigators may know the plans but I am wondering if they understand all the consequences.

}}

{{ForumReplyPost|UserID=Captcook|Date=13 January 2014|Text=They don't. Even here in WA (a "pace car" state apparently), there is some serious confusion about who qualifies and when they can begin coverage.

I serve on the finance committee of a local nonprofit. We explored a group plan, but found it would jeopardize coverage for three low income employees. It would also increase our costs from about $4K a year to $19K a year. One of the employees in management is now pissed because he, essentially, received a pay decrease of $1,300 annually. }}

{{ForumReplyPost|UserID=Ckenefick|Date=13 January 2014|Text=''It is my understanding, and I am often wrong, but it is my understanding that if employees have health insurance through an employer, then they are not eligible for any subsidization''

Not sure what you mean by "through an employer." Didn't we have a post wherein 100% S-corp owner DID go to the exchange and DID get a personal policy...and DID get a subsidy...and now the S-corp will reimburse the entire cost of the policy?

Didn't we conclude that this was totally allowable, based on a strict reading of Sec 5000A.}}

{{ForumReplyPost|UserID=JAD|Date=13 January 2014|Text=It's not just the taxpayers who are royally pissed. How about us professionals? I do not want to deal with this. Why are we several years into this law and we still don't know what the law is? I've spoken to several benefit specialists who have done a lot of work to learn the law, and there's a lot that they don't know. This goes way beyond the normal bellyaching about the need for tax reform.}}

{{ForumReplyPost|UserID=Fsteincpa|Date=13 January 2014|Text=Chris, I am talking of Corps with employees. A corp with 4 employees let's say.

Corp has group insurance plan, employees are not eligible for subsidy then, correct?

}}

{{ForumReplyPost|UserID=Ckenefick|Date=13 January 2014|Text=I don't know. Who are the 4 employees? Husband, wife, and 2 dependents?}}

{{ForumReplyPost|UserID=JackTraffic|Date=13 January 2014|Text=Eaton said:

>... is going through the old Box 1/Box 16 reporting rules,

Minor point of clarification... Eaton (I think) means Box 14 here... not Box 16...

Either that, or I've been doing my W-2s wrong.

BTW, my take on all this (much helped by this discussion) is practically speaking that $100 a day penalty means that small S corporations lose the self-employed health insurance deduction, FICA/Medicare tax savings, when hiring that second employee... or at least they do if the new employee doesn't get onto the same plan as the shareholder-employee.}}

{{ForumReplyPost|UserID=Fsteincpa|Date=13 January 2014|Text=All non-related.

I understand the discussion as it relates to Corps with only family, but I have small businesses and they don't need to be a corp, Schedule C businesses with employees may have issues.

If health insurance is offered through a company an individual works for, then they are not eligible for a subsidy. }}

{{ForumReplyPost|UserID=EatonCPA|Date=14 January 2014|Text=''Eaton said:

>... is going through the old Box 1/Box 16 reporting rules,

Minor point of clarification... Eaton (I think) means Box 14 here... not Box 16... ''

Nope, I meant Box 16 - State Taxable Wages - although frequently there is a notation in Box 14.

Fred, you are correct on your understanding. The subsidies are to help individuals purchase plans on the exchange - one would presume having a group plan at work would eliminate that need. That said, if only the TP is covered under a plan at work and still has to go to the exchange to get a plan to cover a spouse and/or dependents, couldn't they then qualify for a subsidy on *that* plan?

Ahhh, good ol' ACA - the gift that keeps on giving.}}

{{ForumReplyPost|UserID=JackTraffic|Date=14 January 2014|Text=Ah, okay. I'm in state without state income tax. And, yup, I meant thought you meant the notation...}}

{{ForumReplyPost|UserID=Umk395|Date=14 January 2014|Text=Just so I'm clear, I have a client who is an S Corp. The employees consist of the 100% owner/shareholder + 4 employees. The company has been reimbursing all employees for mecial expenses they incur throughout the year. At the end of each year, we add up all of the medical expense reimbursements and add those costs to each employee's respective W-2 -- subject to all Fed, FICA taxes. Is this type of arrangement not allowed any longer???}}

{{ForumReplyPost|UserID=Fsteincpa|Date=14 January 2014|Text=Sara, thank you, coincidentally, as I was reading this, an exchange navigator sitting with my client called with some questions. I was able to get an answer from her.

9.5% of pay is the affordable benchmark. So, the company can offer a plan, and if the employee cost of the plan is less than 9.5% then they can get no subsidy. If the plan cost to the employee is more than that, then it's deemed not affordable and the employee is eligible for a subsidy.

What she also said is that if a company offers a and pays enough for individual coverage that the individual plan is deemed affordable based on the 9.5% threshold and nothing towards family, it may make sense to not offer the family plan as the subsidy becomes lost for the other members.

I have a formal appointment with her next Wednesday to learn more and see how she can assist my clients. }}

{{ForumReplyPost|UserID=Umk395|Date=14 January 2014|Text=My thought is that if the employees are having those reimbursements fully taxed, then their type of arrangement does not result in a violation of the ACA. }}

{{ForumReplyPost|UserID=Captcook|Date=14 January 2014|Text=I agree, Umk. At that point, the company does not have a medical plan, but has increased their deduction for employee's wages.

Fred, the other dynamic in your scenario is that when ''it may make sense to not offer the family plan'' this treatment must be consistent throughout the company. If the owner wants to cover his dependents, then he must offer the same to the rest of his employees. He is not required to contribute anything toward the premiums for the rest of the family, just the portion covering the employee to be deemed affordable.}}

{{ForumReplyPost|UserID=Fsteincpa|Date=14 January 2014|Text=Capt, yes, there can be no discrimination. What the navigator told me on the phone was that something to consider.

If the group plan offered by an employer is deemed affordable, then the employee is not allowed a subsidy. So, if the employer offers an individual plan that is deemed affordable and also offers family coverage, then by extension, the family is deemed to be offered an affordable plan and then would not qualify for a subsidy.

She indicated that in those situations, it may help the employees out by completely eliminating family coverage. By only providing individual coverage, then the rest of the family are still eligible for subsidies.

}}

{{ForumReplyPost|UserID=PVVCPA|Date=January 15, 2014|Text=These folks seem to believe that an employer can reimburse an employee's individual policy with a properly structured Sec 105 plan:

http://www.zanebenefits.com/blog/can-employers-reimburse-employees-individual-health-insurance-in-2014

Can Nancy Pelosi now please tell us what is in this bill?}}

{{ForumReplyPost|UserID=JAD|Date=15 January 2014|Text=Paul, we haven't seen you in ages. Where have you been?}}

{{ForumReplyPost|UserID=JAD|Date=15 January 2014|Text=I think that Notice 2013-54 is pretty clear that the HRA cannot reimburse the individual policy premiums. 105 may not have changed, but other side of the transaction - the business's side - has changed, and there are substantial penalties. Your article doesn't seem to address those penalties.}}

{{ForumReplyPost|UserID=JAD|Date=15 January 2014|Text=I think that Q&A 1 shoots it down pretty clearly.}}

{{ForumReplyPost|UserID=PVVCPA|Date=January 15, 2014|Text=Hi Jessica, I have been hanging around. Just not as much posting as before. It seems like this restriction would be big news for our industry. I can't understand why my research providers and the CE classes I take have not even discussed this.}}

Discussion:Health Insurance Reimbursement Post-ACA

PVVCPA — Wed, 15 Jan 2014 00:19:34 GMT

PVVCPA:

Discussion:Health Insurance Reimbursement Post-ACA

PVVCPA — Wed, 15 Jan 2014 00:18:28 GMT

PVVCPA:

Discussion:Test Discussion

PVVCPA — Mon, 06 Jan 2014 18:25:23 GMT

PVVCPA:

{{ForumThreadHeading|Test_Area|Test Area}}


{{ForumNewPost|UserID=Tdoyle|Date=February 16, 2007|Text=This is a test discussion

[[Sec. 123]]
[[Reg. 1.123-1]]
[[Publication 17]]
12345

hj<s>kfdh</s>ks}}

{{ForumReplyPost|UserID=Tdoyle|Date=March 7, 2007|Text=This is another test.

1 2 3
4 5 6
7 8 9

Done.}}

{{ForumReplyPost|UserID=TaxNerd|Date=7 March 2007|Text=You passed. You got a 65.}}

{{ForumReplyPost|UserID=Lnt|Date=7 March 2007|Text=this is the test
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{{ForumReplyPost|UserID=Midtenntax|Date=16 November 2012|Text=*Test line one
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{{ForumReplyPost|UserID=Midtenntax|Date=16 November 2012|Text=I think it should look like this.

Scenario 1 - Bonus Thru the Corp
*Corp saves 25% x $10,000 = $2500 (Employer deducts $10k for comp expense)
*Corp saves 25% x 765 = $191 (Employer deducts 7.65% ER portion of payroll taxes)
*Shareholder/EE pays 28% x $10,000 = <$2800> (personal income tax)
*Shareholder/EE pays 5.65% x 10,000= <$565> (EE FICA taxes withheld)
NET ADDITIONAL TAX TO SHAREHOLDER IS $674

Scenario 2 - Dividend
*No Effect on Corp
*Shareholder pays 15% x $10,000 = <$1500>
NET ADDITIONAL TAX TO SHAREHOLDER IS $1500

So, as you can see, it is better to bonus it as comp rather than paying dividend because it results in a smaller additional tax owed when viewing the two entities as one.}}

{{ForumReplyPost|UserID=JohnwCPA|Date=2 February 2013|Text=This is a test:

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{{ForumReplyPost|UserID=Spell Czech|Date=26 August 2013|Text=*****}}

{{ForumReplyPost|UserID=PVVCPA|Date=January 6, 2014|Text=This is a sentence.}}

Discussion:What is nexus?

PVVCPA — Sat, 14 Sep 2013 17:04:08 GMT

PVVCPA:

{{ForumThreadHeading|Tax_Questions|Tax Questions}}


{{ForumNewPost|UserID=Actionbsns|Date=25 July 2007|Text=I have to ask this question because all through college, teachers were referring to "empirical data" and I never really new what THAT was, always intended to look it up, never had the time or thought of it at the wrong time, so I always just took it in context.

But I keep hearing about NEXUS, first heard it from the CPA I worked with here, but I don't know what it is and when it comes up in a discussion, I don't really understand it. Sounds like a new hair gel to me, so I'm pretty sure that's wrong.}}

{{ForumReplyPost|UserID=JR1|Date=July 25, 2007|Text=Too much to tell. Use the yellow search box to the left there...and read all you like. But it's how states determine when you have to file tax returns in their state.}}

{{ForumReplyPost|UserID=Jdugancpa|Date=25 July 2007|Text=http://www.thefreedictionary.com/nexus

http://m-w.com/dictionary/nexus

Nexus = connection. If you have nexus with a state, they can grab you and tax you. If you don't, they can't. Think of it like an electric socket. If you have no nexus it can't shock you, but stick your finger in it and watch your hair curl.}}

{{ForumReplyPost|UserID=Actionbsns|Date=25 July 2007|Text=Thanks JR and JD - reading some of the things that relate to IRS using the term nexus, I can see where substituting "connection" works well. From the one post I read this morning Washington state must have some stringent rules regarding how Nexus or a connection of business income relates to their state. I'm not clear how a state really makes that decision and it seems to vary with the state. One of the discussions that popped up on the yellow search relates to the use of Nevada corporations, I've seen a few of them here in Hawaii, no income earned in Nevada, no physical presence in Nevada, so no Nexus and no taxes (even though Nevada has no state tax, if you substituted another state, still, no Nexus). Am I right? and the issue would be whether or not the state agreed. }}

{{ForumReplyPost|UserID=Michaelstar|Date=25 July 2007|Text=Think of Nexus as a connection through physical presence. Without a physical presence - it is hard to have Nexus connected to a state as I understand the concept.}}

{{ForumReplyPost|UserID=Jdugancpa|Date=25 July 2007|Text=Nexus can be established by an agent, as well as an employee. So a manufacturer in WA hiring a manufacturer's rep in Ohio who travels to IL, IO & IN may well have nexus in all four states due to the activities of the agent (assuming the agent is repping the WA company's products in all four states).}}

{{ForumReplyPost|UserID=Chautauqua|Date=25 July 2007|Text=I've been using Nexus on my hair for years....is this wrong?}}

{{ForumReplyPost|UserID=Bottom Line|Date=25 July 2007|Text=I've always understood Nexus as: when the Tampa Bay Buccaneers play the Seattle Seahawks in Seattle, they have to pay income tax in Washington State because they earned income there. }}

{{ForumReplyPost|UserID=Jdugancpa|Date=26 July 2007|Text=Luckily for the Buccaneers (my HS mascot, BTW) WA has no income tax. Too bad for our Seahawks, however, because when they go to FL its just like they stuck that finger into the electric socket. Connection gets made, hair gets curled, wallet gets fleeced!}}

{{ForumReplyPost|UserID=Bottom Line|Date=26 July 2007|Text=Bad example. Should have used Cincinnati Bengals. Must be a special tax since FL doesn't have income tax either.}}

{{ForumReplyPost|UserID=Www.cpa1.biz|Date=26 July 2007|Text=Going further on Nexus. I see the situation about the bucaneers playing in seattle. What about if my office in in one state people from all over the country buy stuff from me. Is there nexus there. I mean if someone sells stuff over the Internet from people all over the country, do they have nexus in each state?}}

{{ForumReplyPost|UserID=Bottom Line|Date=26 July 2007|Text=My understanding is that if your office is in one state and your only contact with other states is to sell product to be shipped to those states (you never physically enter the other states), you are not considered to be doing business in those states.}}

{{ForumReplyPost|UserID=Natalie|Date=July 26, 2007|Text=Action, there are some companies that get bad advice and set up corporations in Nevada thinking they'll be sheltered from taxes in Hawaii. If they operate out of Hawaii, they pay tax in Hawaii. In addition, although Nevada doesn't have income taxes, they do have things like payroll excise tax, live entertainment tax and of course sales tax.}}

{{ForumReplyPost|UserID=Taxref|Date=26 July 2007|Text=Nexus has become a much more complex issue due to the internet. Not all that long ago NY won a court case in which a TN resident who telecommuted to his job in NY was found to have NY nexus. The TN resident was ruled to be liable for NY income tax. I think we will be seeing many more of these kinds of disputes.}}

{{ForumReplyPost|UserID=Death&Taxes|Date=26 July 2007|Text=Has NY taken a similar position on alimony paid from NY income earned by a non-resident? Or do I have it backwards, and the State challenged a non-resident's deduction of alimony based on his earnings in NY.....in other words, another form of nexus.}}

{{ForumReplyPost|UserID=Taxref|Date=26 July 2007|Text=I'm afraid I don't know the answer to that one D&T.

I think you and I (along with many other NJ practitioners) will be hearing more about the telecommuting issues in the next few years. Much like the IT-203 days-working-outside-NY tax notices which went out a few years ago, I suspect NY will try to see how much potential tax is out there from NJ telecommuters. }}

{{ForumReplyPost|UserID=Sandysea|Date=26 July 2007|Text=BJ; you do not have nexus in the other states (generally speaking of course) if you have no PE or physical presence in that state. If they are buying over the internet, and you don't have any agents or employees or have any leased tangible or intellectual property in another state, the state should not require you to file returns. You should however indicate on your invoices (if you are selling taxable goods or services) that the individual in that state is responsible for "use taxes"....protects you a bit from the burden of proof analogy that some states seem to equate.

I.E. Client of mine may NOT have had nexus in a state...sold taxable goods in that state. Initially the revenue agencies will look to the purchaser of the product for the use taxes, but most states indicate that the burden of collection then falls on the seller if the buyer does not pay.....I dealt with this and it is not equitable, but I had 3 states in the US which shifted the burden to the client who did not establish nexus....}}

{{ForumReplyPost|UserID=Waynecpa|Date=26 July 2007|Text=Things will be changing though. Check out the following link at the WA Department of Revenue website:

[http://dor.wa.gov/Content/GetAFormOrPublication/PublicationBySubject/TaxTopics/MoreSST.aspx]}}

{{ForumReplyPost|UserID=Jdugancpa|Date=26 July 2007|Text=Wayne, this is going to be a reporting nightmare for a lot of small businesses who will now have to track shipping destinations rather than just reporting by point of origin.}}

{{ForumReplyPost|UserID=CTurner555|Date=27 July 2007|Text=Also check out the OH website for the CAT tax - specifically question #31. Sales of $150,000 in a year nexus to Ohio are taxable. This will be a major nightmare for all states.

[http://tax.ohio.gov/faqs/content/commercial_activities/qa.asp]}}

{{ForumReplyPost|UserID=Donniecastleman|Date=27 July 2007|Text=Nexus or no nexus, this thread got a smile and a chuckle out of me! From this moment on, I hate the Titans!}}

{{ForumReplyPost|UserID=TheTinCook|Date=27 July 2007|Text=Just wanted to add a little bit about the TN/NY nexus case.

In that case, the TN resident actually spent ~25% of his time physically present in NY.

The opinion [http://decisions.courts.state.ny.us/ad3/Decisions/2004/92539.pdf here].}}

{{ForumReplyPost|UserID=Death&Taxes|Date=27 July 2007|Text=The Tennessee case turns on him being in Tennessee for his own convenience, not for the convenience of the employer. He had paid NY tax on the days he worked there, but that was not good enough for Albany. Of course, the worse blow is that he has no state tax in Tennessee to take credit against.}}

{{ForumReplyPost|UserID=TheTinCook|Date=27 July 2007|Text=So the lesson here is to never take a job from a NY company?}}

{{ForumReplyPost|UserID=Death&Taxes|Date=27 July 2007|Text=Nexus can be particularly vexing for creative people. Where is a story written that is sold to a magazine published in NY, or if the check is given to the person's agent in New York? We are seeing more expansive interpretations of nexus. Does an artist or sculptor consigning work to a gallery in SOHO create a NYC presence for Nexus. While artists and writers are given special dispensation from IRS regarding inventories, is nexus created here?}}

{{ForumReplyPost|UserID=Bottom Line|Date=29 July 2007|Text=And how about this - my husband writes an article in our home in FL. He e-mails it to his publisher in NY who then posts the article on the internet which is read worldwide (KFFL.com). He's never been in NY. The publisher mails a check to our house in FL. As of now, there's no Nexus. But depending upon court cases, this could get out of hand very easily.}}

{{ForumReplyPost|UserID=KatieJ|Date=30 July 2007|Text="Nexus" is the connection between the state and the entity or activity that allows the state to impose a tax under the due process and commerce clauses of the U.S. Constitution. Until 1992 most of us thought that there was no difference in the nexus standards under due process and commerce. However, in 1992, in the _Quill_ decision, the U.S. Supreme Court made a distinction. Purposeful availment of the market in a state is generally sufficient to create nexus for due process purposes. Under the due process clause, nexus may be considered a proxy for notice -- if your activities with respect to the state are sufficient to put you on notice that you may be subject to the jurisdiction of the state's courts, you have nexus. So, for example, a mail order seller that has no connection with the state other than mailing in catalogs, accepting orders by mail and telephone, and filling the orders by shipping the product from outside the state does have nexus for due process purposes.

However, the Court set a higher standard under the commerce clause. While some earlier cases referred to a "minimal connection" for due process purposes, the 1977 _Complete Auto Transit_ case uses the term "substantial nexus" for commerce clause purposes. The _Quill_ case had to do with use tax collection responsibility, and the Court followed its 1966 _National Bellas Hess_ decision, holding that for use tax collection purposes the commerce clause requires that there be a physical presence in the state in order to have the requisite "substantial nexus."

The distinction between due process and commerce clause nexus throws the issue into the lap of Congress. Before _Quill_, it was unclear whether Congress could legislate authority for the states to require remote sellers to collect sales and use taxes on sales shipped into the state. Congress has the power to regulate interstate commerce, but Congress cannot legislate away due process. Since systematic exploitation of the market has been held to constitute due process nexus, Congress may, if it wishes, enact legislation authorizing states to require remote sellers to collect use taxes. So far it shows no inclination to do so, however.

Whether the physical presence requirement applies to other business activity taxes is an unresolved question. The U.S. Supreme Court recently denied certiorari in two state supreme court cases, one holding that a physical presence IS required, and another holding that it IS NOT required. In every business activity tax case the Court has decided over the years where commerce clause nexus was found to exist, there was a physical presence. However, those are all pre-_Quill_ decisions. Relying on language such as that in the U.S. Supreme Court decision in _Tyler Pipe_ and _National Can_, state courts have held that engaging in activities that help to maintain and exploit the market in a state is enough to create commerce clause nexus even when there is no physical presence. For example, the South Carolina Supreme Court found in _Geoffrey_ (1992, post-Quill) that a Delaware intangible holding company (IHC) that owns the trademarks, trade names, etc. of Toys R Us was subject to South Carolina tax because the use of the intangibles was licensed to TRU stores in South Carolina. Geoffrey had no physical presence in the state. The U.S. Supreme Court denied certiorari in that case.

Legislation pending in Congress (the Business Activity Tax Simplification Act, or BATSA) would provide a physical presence requirement for all business activity taxes.

Federal legislation (Public Law 86-272, 1959) limits states' authority to impose taxes ON OR MEASURED BY INCOME on out-of-state companies whose activities in the state are limited to solicitation of sales of tangible personal property. Obviously if you have sales personnel located or regularly traveling into the state, you have a physical presence there, and you have due process/commerce clause nexus. However, Public Law 86-272 protects you from net income taxes as long as your personnel in the state don't do anything other than soliciting sales, which are approved outside the state and shipped from outside the state. P.L. 86-272 does not protect a seller from other state taxes, such as use tax collection responsibility, franchise taxes measured by capital stock or net worth, gross receipts taxes (e.g., Washington B&O or Ohio CAT), or employer taxes. Whether the new Texas "margin tax" is subject to 86-272 protection is questionable, although the Texas statute itself says that it is not.

A note on New York's screwy "convenience of the employer" rule, at issue in the _Huckaby_ case referred to by Taxref and TinCook: The issue here is not exactly the same as the business "nexus" issue. The rules for individuals are a little bit different, arising from a different line of U.S. Supreme Court jurisprudence. In general, states have the power to tax all of the income of a resident, and all income of nonresidents arising from sources within the state. Generally, states take the position that the source of income from the personal services of an individual is the state where the services are performed. New York takes this a step farther and says, if you work for a NY employer, and you spend ANY time at your NY employer's premises, ALL of your earnings from that employment are from a NY source, unless your services were performed outside NY out of necessity (i.e., they could not, by their nature, have been performed elsewhere) and not for the convenience of either the employer or the employee. (This is colloquially known as the "convenience of the employer" rule.) So Mr. Huckaby, who lived in Tennessee and spent about 25% of his time working at his employer's location in NY and the rest working at his home in Tennessee, was subject to NY tax on 100% of his salary. This was especially painful for Mr. Huckaby because Tennessee does not have a comprehensive individual income tax -- TN only taxes interest and dividend income of residents. He'd have been even worse off, though, if he had lived and worked at home in an income tax state, e.g., California, because while California would have given him credit for the tax he paid to NY on the 25% of his salary that he earned working in NY, he would have received no credit for the tax paid to NY on the other 75% that he earned working in California. So he'd have paid tax to both states on the same income, with no credit relief. The same would be true in many other states.

We had high hopes for _Huckaby_ -- the NY regulation has been on the books for many years and was upheld by the NY Court of Appeals (the high court in NY) in the 1970's, but the world has turned a few times since then. However, the Court of Appeals upheld the regulation again, and the U.S. Supreme Court denied cert. So there you are.

NY has made some changes in the "convenience of the employer" rule, effective in 2006. Now a day working in a home office can be considered a day working outside NY if the home office is a "bona fide employer office." Determining whether the home office qualifies requires going through a Byzantine series of tests. For details, look at New York Technical Service Bureau Memorandum TSB-M-06(5)I, 05/15/2006.

As for creative people: So far, I think the place where the work (writing, painting, sculpting, whatever) takes place is the source of the income. However, if an artist consigns a painting to a dealer in NY, and the NY dealer sells it, it's pretty clear the artist has sold tangible personal property in NY and has NY source income. This is a source issue, not really a nexus issue, although the two are intertwined.
}}

{{ForumReplyPost|UserID=JAD|Date=30 July 2007|Text=I just read the Huckaby case and am again appalled at the insane laws that taxpayers (and we) must navigate. That New York could arbitrarily come up with a justification for taxing income that, as I understand it, most other states would not tax and should not tax is another example of why I believe the federal government should standardize general, broad brush laws among the states. Make some limits on what they can do, as they did, to some extent, w PL 86-272. I remember a frustrated mid-level practitioner making that statement many years ago when I was fresh out of college, and I have come to agree with him. }}

{{ForumReplyPost|UserID=KatieJ|Date=31 July 2007|Text=BATSA (I could look up the H.R. number if anybody really cares) would extend P.L. 86-272 protection to solicitation of all kinds of sales, not just sales of TPP. It would also require a physical presence to create nexus for all business activity tax purposes, and set fairly high thresholds for what constitutes physical presence. The states are vehemently opposed to it, as well they might be. Coupled with the repeal (or nonexistence, in many states) of sales throwback rules, which business interests have succeeded in enacting in some states and are championing in others, BATSA would create huge amounts of "nowhere" income, i.e., income assigned to states that would be prevented by federal law from taxing it.

The corporate income tax has already eroded as a source of state revenue (due in large part to the activities of folks like me, who have gone around for 25 years restructuring businesses to take advantage of differences in state laws that create planning opportunities) to such an extent that some states have enacted new (actually archaic) kinds of taxes to replace it -- such as the Texas "margin tax" and the Ohio Commercial Activity Tax. However, BATSA would invalidate the broad statutory nexus standards in the Ohio CAT -- which are probably unconstitutional anyway.

As far as I know, though, nothing has been proposed that would affect the validity of the New York "convenience of the employer" rule. Sad to say.

}}

{{ForumReplyPost|UserID=CorpTaxPro|Date=29 August 2007|Text=From everything here, you can gather there is no simple definition, except to say it is a point at which a company (or person) is deemed to have enough connection with a jurisdicition to become subject to their laws for tax on income. Since 1986 the findings of PL 86-272 were held to mean that basically there had to be a physical precense material enough to justify being taxed. Basically, own or rent some property there.

Thats been challenged and worked arounf a lot....and now...some States are straightfowardly asking the Supreme Court to revisit the issue and rule taht a financial presence would be enough to give rise to nexus....calling it financial nexus. The lead case has to do with a credit card company, who owns nothing, only solicits business through very broad ads, etc., but has many customers carrying their cards in any State....they argue that the fact the CC biz gets $ from the residents of the State is enough to give it nexus. They very well may win.}}

{{ForumReplyPost|UserID=KatieJ|Date=30 August 2007|Text=P.L. 86-272 really has nothing to do with the "physical presence" issue. A business that has employees or independent contractors regularly soliciting sales of tangible personal property in the state already has a phyiscal presence. P.L. 86-272 bars the state from imposing a net income tax on such a business as long as the activities of the sales personnel are limited to solicitation, as further defined by the U.S. Supreme Court in the 1992 Wrigley case.

Many states are asserting jurisdiction to tax out-of-state businesses on an "economic presence" basis, and so far the U.S. Supreme Court has not been willing to stop them. The credit card company case to which CorpTaxPro refers is MBNA National Bank NA v. West Virginia, 640 SE 2d 226 (2006), in which the West Virginia Supreme Court held that the bank that solicited West Virginia residents and issued credit cards to them had due process/commerce clause nexus and is subject to the corporate income tax. The U.S. Supreme Court denied certiorari in that case (Dkt No 06-1228, 6/18/2007).

In a very similar case, the Tennessee Supreme Court in 1999 held that an out-of-state credit card issuer did not have nexus because it had no physical presence in the state. J.C. Penney National Bank, 19 SW 3d 831 (1999). The U.S. Supreme Court denied certiorari in that one too (Dkt No 00-2005, 8/3/2000).

So, go figure. The Court seems unwillling to tackle the issue. I don't know what they are waiting for; surely they couldn't have found a case with cleaner facts than MBNA. No legal inference can be drawn from the denial of certiorari; it does not imply that the Court approved of the result in the state court. It only means the Court decided, for whatever reasons, not to take the case. So the credit card companies DO have nexus in West Virginia, and DO NOT in Tennessee. Other states will doubtless follow one or the other, but neither decision is controlling in any other state.}}

{{ForumReplyPost|UserID=Cyclops|Date=30 August 2007|Text=It was Toyota's first luxury car. }}

{{ForumReplyPost|UserID=Wwtaxes|Date=9 May 2008|Text=A slight variation on the question of nexus: ACME, Inc, an S Corp in state A, has contracts in several states. They hire local (ie, in state A) subcontractors to work these contracts. These contractors work part-time in state A on the projects, and part-time in the destination states. Acme obviously has nexus in all of the states. Would the subcontractor S Corps also have nexus in the other states, even though they are paid all income through ACME? Meaning, does the intermediary step affect nexus? I would think that they still have nexus in any of the states that they work in (physical presence), even though their income is not directly from those states.

Further twist: ACME also hires local contractors to work these out-of-state contracts, but they never leave state A (let's say they are writing software remotely, and communicating it via the internet). Do these subcontractor S Corps have nexus in the states that the software is written for, even though there is no physical presence?

}}

{{ForumReplyPost|UserID=RoyDaleOne|Date=9 May 2008|Text=Because, each State's definition of nexus can vary, you need to ask an attorney who has such knowledge, after all nexus is a legal question. Or, Wwtaxes, you could refine your question to specific states.}}

{{ForumReplyPost|UserID=Wwtaxes|Date=9 May 2008|Text=RDO - The answer was somewhat hypothetical, but I'll get as close as I can with an example. ACME is in MN. They have contracts in lots of states, including CA, IA, KS, TX, and NY. The IA and KS ones are of particular interest, bc they are the ones where the sub works a substantial amount, both in KS or IA, and remotely from MN. The work in the other states is anywhere from 1-8 days in the state (very short seminars). This is just one of the examples, and I don't do ACME's taxes, but I worked for ACME on an unrelated project, and this question has always nagged at me, and a similar situation may come up soon as I have software consultant clients that very well can work remotely. I would have guessed I'd have to find a tax specialist for the specific states, but I'll take your suggestion and look for an attorney as well.}}

{{ForumReplyPost|UserID=Sandysea|Date=10 May 2008|Text=Also, WW try the multi state tax commission in WA. I used this to determine nexus and they have attorney's (paid by our tax dollars) to assist in these areas.

Most states DO have nexus questionnaires and you can remain anonymous when filling them out to make sure you understand the different state requirements.

Some states would consider seminars nexus and others will not. Depends on how aggressive they are.

}}

{{ForumReplyPost|UserID=KatieJ|Date=11 May 2008|Text=Joyce, I don't think your question is all that complicated, nor do I think you will find any significant variation among states in their interpretation of it. The performance of personal services in a state universally creates nexus there, unless it is below a ''de minimis'' threshold established by the state. The subcontractors, as I understand it, are performing services in the "destination" states; as a result, they are universally taxable there, unless protected by a ''de minimis'' rule. The "intermediary" step is generally meaningless; as long as the entity itself as a physical presence in the state, it's taxable. It doesn't matter who benefits, directly or indirectly, from the service (except as noted below).

As a practical matter, many contractors work in other states for short periods of time and escape notice. The legal ability of the state to impose the tax is not really in question; it's more a matter of the resources the state devotes to enforcement and the luck of the draw.

Also, although the subcontractor clearly has nexus in every state where it performs services, the operation of the apportionment formula may result in little or no taxable income or tax liability. Most states use a variation of the UDITPA three-factor formula of property, payroll and sales. Movable property generally is assigned to the numerator of the property factor on a time basis. Payroll generally goes to the state where the employee is covered for unemployment insurance purposes -- it isn't broken up on the basis of time. Sales of services are generally assigned to the place where the greatest proportion of the income-producing activity occurs; some states would prorate sales of services performed in more than one state on the basis of time. There are a few states that assign sales of services, not to the location where the income-producing activity takes place, but to the place where the benefit of the service is enjoyed -- i.e., not where the work is done, but where the customer is located. Georgia, Ohio, Minnesota and Iowa are states that use this market-based approach to sales of services.

The State A subcontractor that performs all of its services in State A generally wouldn't have nexus in any other states; however, the states are getting more aggressive in that area. Ohio, for example, asserts jurisdiction to impose its Commercial Activity Tax (CAT) on any entity that has more than $500,000 of "Ohio taxable sales" in a calendar quarter, or that has more than 25% of its property, payroll OR sales during the year in Ohio. The catch here is that Ohio assigns sales of services, not to the place where the services are performed (or the place where the greatest proportion of the income-producing activity occurs), but to the place where the benefit of the service is enjoyed. Thus a Minnesota contractor, performing all of its services in Minnesota, would be subject to the CAT if more than 25% of its revenue was earned by performing services for Ohio customers, even if it never set foot in Ohio. This statutory provision may not withstand constitutional scrutiny in that extreme case, but a taxpayer may have to go to court to get out of it. Now, if the subcontractor performs its services on behalf of the contractor, who is in Minnesota, and the contractor's customer is in Ohio, I'm not sure where Ohio would source the contractor's receipt ... but you see the issue. }}

{{ForumReplyPost|UserID=PVVCPA|Date=September 11, 2013|Text=KatieJ says the following:

''...Public Law 86-272 protects you from net income taxes as long as your personnel in the state don't do anything other than soliciting sales, which are approved outside the state and shipped from outside the state.''

'' A business that has employees or independent contractors regularly soliciting sales of tangible personal property in the state already has a phyiscal presence. P.L. 86-272 bars the state from imposing a net income tax on such a business as long as the activities of the sales personnel are limited to solicitation...''

I am having trouble reconciling KatieJ's statements with the requirements by many of the states that a foreign corporation register and pay income tax if their in-state payroll exceeds $50,000. If a CA corporation hires a team of sales people in Ohio, and the sales people only solicit orders that are approved and distributed out of California, '''does the CA corporation need to apportion income to Ohio'''?}}

{{ForumReplyPost|UserID=Marcilio|Date=12 September 2013|Text=Nexus is such a thorny problem because each state has its own definitions. There is physical nexus, which most people are aware of, and also business nexus which is trickier. Say, for example, an Illinois manufacturer sells goods to a wholesale distributor in WA. The IL company has a business nexus, but not a physical nexus, and therefore has an excise tax liability (WA has no corporation income tax). MI says that if someone is physically present in that state for less than 10 days, they don't have nexus, but more than 10 days, they do. And so the story goes.

Shipped to and shipped from are common issues. If you ship out of the home state and into another state in which you have nexus, then income is reported to the 2nd state, otherwise the sale typically belongs to home state. When the number of locations increases, so does the complexity. In the above case, since orders are approved and processed in CA, only sales to Ohio customers are taxable in Ohio. I don't know off the top of my head if Ohio apportions only sales, or whether payroll & property are also included in the apportionment.}}

{{ForumReplyPost|UserID=Ckenefick|Date=12 September 2013|Text=''does the CA corporation need to apportion income to Ohio?''

It's debatable because the PL pertains to income taxes. So, if the state taxing regime involves a gross receipts tax, arguably, the protection afforded by the PL won't apply.

http://mcgladrey.com/Tax-Services/The-emergence-of-factor-presence-nexus-standards}}

{{ForumReplyPost|UserID=KatieJ|Date=14 September 2013|Text=The McGladrey article that Chris linked to provides a useful description and analysis of the "factor presence" nexus test, which was invented by economist Charles McLure and proposed by the MTC in 2002. As noted in that article, several states, including Ohio and California, have adopted that standard, Ohio in 2005 for purposes of its Commercial Activity Tax (CAT), measured by gross receipts, and California for purposes of the corporation franchise tax (measured by net income) effective in 2011. So a company with more than 50,000 of property or payroll, or 500,000 of sales, or more than 25% of its total property, payroll or sales within the state is a taxpayer under the statutory law. Of course, states cannot override federal statutory law; therefore, no matter how much of the factors a company has in a state, that state cannot impose a net income tax if its activities are within the bounds of Public Law 86-272 protection.

So to answer PVV's question: a California corporation that has more than $50,000 of payroll in Ohio is subject to the CAT, under Ohio law. P.L. 86-272 does not protect a taxpayer from gross receipts taxes. Ohio no longer imposes a corporate tax measured by income. However, if the facts are reversed, i.e. an Ohio corporation has more than $50,000 of payroll (or more than $500,000 of sales) in California, it would not be subject to the California franchise tax as long as its representatives' activities did not go beyond the bounds of P.L. 86-272.

}}

{{ForumReplyPost|UserID=Ckenefick|Date=14 September 2013|Text=KatieJ, where you been? The place hasn't been the same...We've been guessing at all these state tax questions, hopefully the FTB won't mind. }}

{{ForumReplyPost|UserID=PVVCPA|Date=September 14, 2013|Text=Thank you, Marcilio, Chris & KatieJ. Great information.

I guess it should also be mentioned, in my example, above, that if the "team of sales people" were working out of office space owned or leased by the foreign corporation, then their activities would no longer be protected by P.L. 86-272. However, if all of the sales people are working out of their in-home offices, then the protection remains.

When KatieJ flipped around my example, and made it an Ohio corporation employing sales people in California, she stated that the Ohio corporation would not be subject to the CA Franchise Tax since this is a net income tax. However, they would still be required to register with CA and pay the $800 minimum tax. Is that correct?}}

{{ForumReplyPost|UserID=Ckenefick|Date=14 September 2013|Text=It's very possible. The PL only covers income taxes.

}}

Discussion:What is nexus?

PVVCPA — Sat, 14 Sep 2013 17:03:23 GMT

PVVCPA:

{{ForumThreadHeading|Tax_Questions|Tax Questions}}


{{ForumNewPost|UserID=Actionbsns|Date=25 July 2007|Text=I have to ask this question because all through college, teachers were referring to "empirical data" and I never really new what THAT was, always intended to look it up, never had the time or thought of it at the wrong time, so I always just took it in context.

But I keep hearing about NEXUS, first heard it from the CPA I worked with here, but I don't know what it is and when it comes up in a discussion, I don't really understand it. Sounds like a new hair gel to me, so I'm pretty sure that's wrong.}}

{{ForumReplyPost|UserID=JR1|Date=July 25, 2007|Text=Too much to tell. Use the yellow search box to the left there...and read all you like. But it's how states determine when you have to file tax returns in their state.}}

{{ForumReplyPost|UserID=Jdugancpa|Date=25 July 2007|Text=http://www.thefreedictionary.com/nexus

http://m-w.com/dictionary/nexus

Nexus = connection. If you have nexus with a state, they can grab you and tax you. If you don't, they can't. Think of it like an electric socket. If you have no nexus it can't shock you, but stick your finger in it and watch your hair curl.}}

{{ForumReplyPost|UserID=Actionbsns|Date=25 July 2007|Text=Thanks JR and JD - reading some of the things that relate to IRS using the term nexus, I can see where substituting "connection" works well. From the one post I read this morning Washington state must have some stringent rules regarding how Nexus or a connection of business income relates to their state. I'm not clear how a state really makes that decision and it seems to vary with the state. One of the discussions that popped up on the yellow search relates to the use of Nevada corporations, I've seen a few of them here in Hawaii, no income earned in Nevada, no physical presence in Nevada, so no Nexus and no taxes (even though Nevada has no state tax, if you substituted another state, still, no Nexus). Am I right? and the issue would be whether or not the state agreed. }}

{{ForumReplyPost|UserID=Michaelstar|Date=25 July 2007|Text=Think of Nexus as a connection through physical presence. Without a physical presence - it is hard to have Nexus connected to a state as I understand the concept.}}

{{ForumReplyPost|UserID=Jdugancpa|Date=25 July 2007|Text=Nexus can be established by an agent, as well as an employee. So a manufacturer in WA hiring a manufacturer's rep in Ohio who travels to IL, IO & IN may well have nexus in all four states due to the activities of the agent (assuming the agent is repping the WA company's products in all four states).}}

{{ForumReplyPost|UserID=Chautauqua|Date=25 July 2007|Text=I've been using Nexus on my hair for years....is this wrong?}}

{{ForumReplyPost|UserID=Bottom Line|Date=25 July 2007|Text=I've always understood Nexus as: when the Tampa Bay Buccaneers play the Seattle Seahawks in Seattle, they have to pay income tax in Washington State because they earned income there. }}

{{ForumReplyPost|UserID=Jdugancpa|Date=26 July 2007|Text=Luckily for the Buccaneers (my HS mascot, BTW) WA has no income tax. Too bad for our Seahawks, however, because when they go to FL its just like they stuck that finger into the electric socket. Connection gets made, hair gets curled, wallet gets fleeced!}}

{{ForumReplyPost|UserID=Bottom Line|Date=26 July 2007|Text=Bad example. Should have used Cincinnati Bengals. Must be a special tax since FL doesn't have income tax either.}}

{{ForumReplyPost|UserID=Www.cpa1.biz|Date=26 July 2007|Text=Going further on Nexus. I see the situation about the bucaneers playing in seattle. What about if my office in in one state people from all over the country buy stuff from me. Is there nexus there. I mean if someone sells stuff over the Internet from people all over the country, do they have nexus in each state?}}

{{ForumReplyPost|UserID=Bottom Line|Date=26 July 2007|Text=My understanding is that if your office is in one state and your only contact with other states is to sell product to be shipped to those states (you never physically enter the other states), you are not considered to be doing business in those states.}}

{{ForumReplyPost|UserID=Natalie|Date=July 26, 2007|Text=Action, there are some companies that get bad advice and set up corporations in Nevada thinking they'll be sheltered from taxes in Hawaii. If they operate out of Hawaii, they pay tax in Hawaii. In addition, although Nevada doesn't have income taxes, they do have things like payroll excise tax, live entertainment tax and of course sales tax.}}

{{ForumReplyPost|UserID=Taxref|Date=26 July 2007|Text=Nexus has become a much more complex issue due to the internet. Not all that long ago NY won a court case in which a TN resident who telecommuted to his job in NY was found to have NY nexus. The TN resident was ruled to be liable for NY income tax. I think we will be seeing many more of these kinds of disputes.}}

{{ForumReplyPost|UserID=Death&Taxes|Date=26 July 2007|Text=Has NY taken a similar position on alimony paid from NY income earned by a non-resident? Or do I have it backwards, and the State challenged a non-resident's deduction of alimony based on his earnings in NY.....in other words, another form of nexus.}}

{{ForumReplyPost|UserID=Taxref|Date=26 July 2007|Text=I'm afraid I don't know the answer to that one D&T.

I think you and I (along with many other NJ practitioners) will be hearing more about the telecommuting issues in the next few years. Much like the IT-203 days-working-outside-NY tax notices which went out a few years ago, I suspect NY will try to see how much potential tax is out there from NJ telecommuters. }}

{{ForumReplyPost|UserID=Sandysea|Date=26 July 2007|Text=BJ; you do not have nexus in the other states (generally speaking of course) if you have no PE or physical presence in that state. If they are buying over the internet, and you don't have any agents or employees or have any leased tangible or intellectual property in another state, the state should not require you to file returns. You should however indicate on your invoices (if you are selling taxable goods or services) that the individual in that state is responsible for "use taxes"....protects you a bit from the burden of proof analogy that some states seem to equate.

I.E. Client of mine may NOT have had nexus in a state...sold taxable goods in that state. Initially the revenue agencies will look to the purchaser of the product for the use taxes, but most states indicate that the burden of collection then falls on the seller if the buyer does not pay.....I dealt with this and it is not equitable, but I had 3 states in the US which shifted the burden to the client who did not establish nexus....}}

{{ForumReplyPost|UserID=Waynecpa|Date=26 July 2007|Text=Things will be changing though. Check out the following link at the WA Department of Revenue website:

[http://dor.wa.gov/Content/GetAFormOrPublication/PublicationBySubject/TaxTopics/MoreSST.aspx]}}

{{ForumReplyPost|UserID=Jdugancpa|Date=26 July 2007|Text=Wayne, this is going to be a reporting nightmare for a lot of small businesses who will now have to track shipping destinations rather than just reporting by point of origin.}}

{{ForumReplyPost|UserID=CTurner555|Date=27 July 2007|Text=Also check out the OH website for the CAT tax - specifically question #31. Sales of $150,000 in a year nexus to Ohio are taxable. This will be a major nightmare for all states.

[http://tax.ohio.gov/faqs/content/commercial_activities/qa.asp]}}

{{ForumReplyPost|UserID=Donniecastleman|Date=27 July 2007|Text=Nexus or no nexus, this thread got a smile and a chuckle out of me! From this moment on, I hate the Titans!}}

{{ForumReplyPost|UserID=TheTinCook|Date=27 July 2007|Text=Just wanted to add a little bit about the TN/NY nexus case.

In that case, the TN resident actually spent ~25% of his time physically present in NY.

The opinion [http://decisions.courts.state.ny.us/ad3/Decisions/2004/92539.pdf here].}}

{{ForumReplyPost|UserID=Death&Taxes|Date=27 July 2007|Text=The Tennessee case turns on him being in Tennessee for his own convenience, not for the convenience of the employer. He had paid NY tax on the days he worked there, but that was not good enough for Albany. Of course, the worse blow is that he has no state tax in Tennessee to take credit against.}}

{{ForumReplyPost|UserID=TheTinCook|Date=27 July 2007|Text=So the lesson here is to never take a job from a NY company?}}

{{ForumReplyPost|UserID=Death&Taxes|Date=27 July 2007|Text=Nexus can be particularly vexing for creative people. Where is a story written that is sold to a magazine published in NY, or if the check is given to the person's agent in New York? We are seeing more expansive interpretations of nexus. Does an artist or sculptor consigning work to a gallery in SOHO create a NYC presence for Nexus. While artists and writers are given special dispensation from IRS regarding inventories, is nexus created here?}}

{{ForumReplyPost|UserID=Bottom Line|Date=29 July 2007|Text=And how about this - my husband writes an article in our home in FL. He e-mails it to his publisher in NY who then posts the article on the internet which is read worldwide (KFFL.com). He's never been in NY. The publisher mails a check to our house in FL. As of now, there's no Nexus. But depending upon court cases, this could get out of hand very easily.}}

{{ForumReplyPost|UserID=KatieJ|Date=30 July 2007|Text="Nexus" is the connection between the state and the entity or activity that allows the state to impose a tax under the due process and commerce clauses of the U.S. Constitution. Until 1992 most of us thought that there was no difference in the nexus standards under due process and commerce. However, in 1992, in the _Quill_ decision, the U.S. Supreme Court made a distinction. Purposeful availment of the market in a state is generally sufficient to create nexus for due process purposes. Under the due process clause, nexus may be considered a proxy for notice -- if your activities with respect to the state are sufficient to put you on notice that you may be subject to the jurisdiction of the state's courts, you have nexus. So, for example, a mail order seller that has no connection with the state other than mailing in catalogs, accepting orders by mail and telephone, and filling the orders by shipping the product from outside the state does have nexus for due process purposes.

However, the Court set a higher standard under the commerce clause. While some earlier cases referred to a "minimal connection" for due process purposes, the 1977 _Complete Auto Transit_ case uses the term "substantial nexus" for commerce clause purposes. The _Quill_ case had to do with use tax collection responsibility, and the Court followed its 1966 _National Bellas Hess_ decision, holding that for use tax collection purposes the commerce clause requires that there be a physical presence in the state in order to have the requisite "substantial nexus."

The distinction between due process and commerce clause nexus throws the issue into the lap of Congress. Before _Quill_, it was unclear whether Congress could legislate authority for the states to require remote sellers to collect sales and use taxes on sales shipped into the state. Congress has the power to regulate interstate commerce, but Congress cannot legislate away due process. Since systematic exploitation of the market has been held to constitute due process nexus, Congress may, if it wishes, enact legislation authorizing states to require remote sellers to collect use taxes. So far it shows no inclination to do so, however.

Whether the physical presence requirement applies to other business activity taxes is an unresolved question. The U.S. Supreme Court recently denied certiorari in two state supreme court cases, one holding that a physical presence IS required, and another holding that it IS NOT required. In every business activity tax case the Court has decided over the years where commerce clause nexus was found to exist, there was a physical presence. However, those are all pre-_Quill_ decisions. Relying on language such as that in the U.S. Supreme Court decision in _Tyler Pipe_ and _National Can_, state courts have held that engaging in activities that help to maintain and exploit the market in a state is enough to create commerce clause nexus even when there is no physical presence. For example, the South Carolina Supreme Court found in _Geoffrey_ (1992, post-Quill) that a Delaware intangible holding company (IHC) that owns the trademarks, trade names, etc. of Toys R Us was subject to South Carolina tax because the use of the intangibles was licensed to TRU stores in South Carolina. Geoffrey had no physical presence in the state. The U.S. Supreme Court denied certiorari in that case.

Legislation pending in Congress (the Business Activity Tax Simplification Act, or BATSA) would provide a physical presence requirement for all business activity taxes.

Federal legislation (Public Law 86-272, 1959) limits states' authority to impose taxes ON OR MEASURED BY INCOME on out-of-state companies whose activities in the state are limited to solicitation of sales of tangible personal property. Obviously if you have sales personnel located or regularly traveling into the state, you have a physical presence there, and you have due process/commerce clause nexus. However, Public Law 86-272 protects you from net income taxes as long as your personnel in the state don't do anything other than soliciting sales, which are approved outside the state and shipped from outside the state. P.L. 86-272 does not protect a seller from other state taxes, such as use tax collection responsibility, franchise taxes measured by capital stock or net worth, gross receipts taxes (e.g., Washington B&O or Ohio CAT), or employer taxes. Whether the new Texas "margin tax" is subject to 86-272 protection is questionable, although the Texas statute itself says that it is not.

A note on New York's screwy "convenience of the employer" rule, at issue in the _Huckaby_ case referred to by Taxref and TinCook: The issue here is not exactly the same as the business "nexus" issue. The rules for individuals are a little bit different, arising from a different line of U.S. Supreme Court jurisprudence. In general, states have the power to tax all of the income of a resident, and all income of nonresidents arising from sources within the state. Generally, states take the position that the source of income from the personal services of an individual is the state where the services are performed. New York takes this a step farther and says, if you work for a NY employer, and you spend ANY time at your NY employer's premises, ALL of your earnings from that employment are from a NY source, unless your services were performed outside NY out of necessity (i.e., they could not, by their nature, have been performed elsewhere) and not for the convenience of either the employer or the employee. (This is colloquially known as the "convenience of the employer" rule.) So Mr. Huckaby, who lived in Tennessee and spent about 25% of his time working at his employer's location in NY and the rest working at his home in Tennessee, was subject to NY tax on 100% of his salary. This was especially painful for Mr. Huckaby because Tennessee does not have a comprehensive individual income tax -- TN only taxes interest and dividend income of residents. He'd have been even worse off, though, if he had lived and worked at home in an income tax state, e.g., California, because while California would have given him credit for the tax he paid to NY on the 25% of his salary that he earned working in NY, he would have received no credit for the tax paid to NY on the other 75% that he earned working in California. So he'd have paid tax to both states on the same income, with no credit relief. The same would be true in many other states.

We had high hopes for _Huckaby_ -- the NY regulation has been on the books for many years and was upheld by the NY Court of Appeals (the high court in NY) in the 1970's, but the world has turned a few times since then. However, the Court of Appeals upheld the regulation again, and the U.S. Supreme Court denied cert. So there you are.

NY has made some changes in the "convenience of the employer" rule, effective in 2006. Now a day working in a home office can be considered a day working outside NY if the home office is a "bona fide employer office." Determining whether the home office qualifies requires going through a Byzantine series of tests. For details, look at New York Technical Service Bureau Memorandum TSB-M-06(5)I, 05/15/2006.

As for creative people: So far, I think the place where the work (writing, painting, sculpting, whatever) takes place is the source of the income. However, if an artist consigns a painting to a dealer in NY, and the NY dealer sells it, it's pretty clear the artist has sold tangible personal property in NY and has NY source income. This is a source issue, not really a nexus issue, although the two are intertwined.
}}

{{ForumReplyPost|UserID=JAD|Date=30 July 2007|Text=I just read the Huckaby case and am again appalled at the insane laws that taxpayers (and we) must navigate. That New York could arbitrarily come up with a justification for taxing income that, as I understand it, most other states would not tax and should not tax is another example of why I believe the federal government should standardize general, broad brush laws among the states. Make some limits on what they can do, as they did, to some extent, w PL 86-272. I remember a frustrated mid-level practitioner making that statement many years ago when I was fresh out of college, and I have come to agree with him. }}

{{ForumReplyPost|UserID=KatieJ|Date=31 July 2007|Text=BATSA (I could look up the H.R. number if anybody really cares) would extend P.L. 86-272 protection to solicitation of all kinds of sales, not just sales of TPP. It would also require a physical presence to create nexus for all business activity tax purposes, and set fairly high thresholds for what constitutes physical presence. The states are vehemently opposed to it, as well they might be. Coupled with the repeal (or nonexistence, in many states) of sales throwback rules, which business interests have succeeded in enacting in some states and are championing in others, BATSA would create huge amounts of "nowhere" income, i.e., income assigned to states that would be prevented by federal law from taxing it.

The corporate income tax has already eroded as a source of state revenue (due in large part to the activities of folks like me, who have gone around for 25 years restructuring businesses to take advantage of differences in state laws that create planning opportunities) to such an extent that some states have enacted new (actually archaic) kinds of taxes to replace it -- such as the Texas "margin tax" and the Ohio Commercial Activity Tax. However, BATSA would invalidate the broad statutory nexus standards in the Ohio CAT -- which are probably unconstitutional anyway.

As far as I know, though, nothing has been proposed that would affect the validity of the New York "convenience of the employer" rule. Sad to say.

}}

{{ForumReplyPost|UserID=CorpTaxPro|Date=29 August 2007|Text=From everything here, you can gather there is no simple definition, except to say it is a point at which a company (or person) is deemed to have enough connection with a jurisdicition to become subject to their laws for tax on income. Since 1986 the findings of PL 86-272 were held to mean that basically there had to be a physical precense material enough to justify being taxed. Basically, own or rent some property there.

Thats been challenged and worked arounf a lot....and now...some States are straightfowardly asking the Supreme Court to revisit the issue and rule taht a financial presence would be enough to give rise to nexus....calling it financial nexus. The lead case has to do with a credit card company, who owns nothing, only solicits business through very broad ads, etc., but has many customers carrying their cards in any State....they argue that the fact the CC biz gets $ from the residents of the State is enough to give it nexus. They very well may win.}}

{{ForumReplyPost|UserID=KatieJ|Date=30 August 2007|Text=P.L. 86-272 really has nothing to do with the "physical presence" issue. A business that has employees or independent contractors regularly soliciting sales of tangible personal property in the state already has a phyiscal presence. P.L. 86-272 bars the state from imposing a net income tax on such a business as long as the activities of the sales personnel are limited to solicitation, as further defined by the U.S. Supreme Court in the 1992 Wrigley case.

Many states are asserting jurisdiction to tax out-of-state businesses on an "economic presence" basis, and so far the U.S. Supreme Court has not been willing to stop them. The credit card company case to which CorpTaxPro refers is MBNA National Bank NA v. West Virginia, 640 SE 2d 226 (2006), in which the West Virginia Supreme Court held that the bank that solicited West Virginia residents and issued credit cards to them had due process/commerce clause nexus and is subject to the corporate income tax. The U.S. Supreme Court denied certiorari in that case (Dkt No 06-1228, 6/18/2007).

In a very similar case, the Tennessee Supreme Court in 1999 held that an out-of-state credit card issuer did not have nexus because it had no physical presence in the state. J.C. Penney National Bank, 19 SW 3d 831 (1999). The U.S. Supreme Court denied certiorari in that one too (Dkt No 00-2005, 8/3/2000).

So, go figure. The Court seems unwillling to tackle the issue. I don't know what they are waiting for; surely they couldn't have found a case with cleaner facts than MBNA. No legal inference can be drawn from the denial of certiorari; it does not imply that the Court approved of the result in the state court. It only means the Court decided, for whatever reasons, not to take the case. So the credit card companies DO have nexus in West Virginia, and DO NOT in Tennessee. Other states will doubtless follow one or the other, but neither decision is controlling in any other state.}}

{{ForumReplyPost|UserID=Cyclops|Date=30 August 2007|Text=It was Toyota's first luxury car. }}

{{ForumReplyPost|UserID=Wwtaxes|Date=9 May 2008|Text=A slight variation on the question of nexus: ACME, Inc, an S Corp in state A, has contracts in several states. They hire local (ie, in state A) subcontractors to work these contracts. These contractors work part-time in state A on the projects, and part-time in the destination states. Acme obviously has nexus in all of the states. Would the subcontractor S Corps also have nexus in the other states, even though they are paid all income through ACME? Meaning, does the intermediary step affect nexus? I would think that they still have nexus in any of the states that they work in (physical presence), even though their income is not directly from those states.

Further twist: ACME also hires local contractors to work these out-of-state contracts, but they never leave state A (let's say they are writing software remotely, and communicating it via the internet). Do these subcontractor S Corps have nexus in the states that the software is written for, even though there is no physical presence?

}}

{{ForumReplyPost|UserID=RoyDaleOne|Date=9 May 2008|Text=Because, each State's definition of nexus can vary, you need to ask an attorney who has such knowledge, after all nexus is a legal question. Or, Wwtaxes, you could refine your question to specific states.}}

{{ForumReplyPost|UserID=Wwtaxes|Date=9 May 2008|Text=RDO - The answer was somewhat hypothetical, but I'll get as close as I can with an example. ACME is in MN. They have contracts in lots of states, including CA, IA, KS, TX, and NY. The IA and KS ones are of particular interest, bc they are the ones where the sub works a substantial amount, both in KS or IA, and remotely from MN. The work in the other states is anywhere from 1-8 days in the state (very short seminars). This is just one of the examples, and I don't do ACME's taxes, but I worked for ACME on an unrelated project, and this question has always nagged at me, and a similar situation may come up soon as I have software consultant clients that very well can work remotely. I would have guessed I'd have to find a tax specialist for the specific states, but I'll take your suggestion and look for an attorney as well.}}

{{ForumReplyPost|UserID=Sandysea|Date=10 May 2008|Text=Also, WW try the multi state tax commission in WA. I used this to determine nexus and they have attorney's (paid by our tax dollars) to assist in these areas.

Most states DO have nexus questionnaires and you can remain anonymous when filling them out to make sure you understand the different state requirements.

Some states would consider seminars nexus and others will not. Depends on how aggressive they are.

}}

{{ForumReplyPost|UserID=KatieJ|Date=11 May 2008|Text=Joyce, I don't think your question is all that complicated, nor do I think you will find any significant variation among states in their interpretation of it. The performance of personal services in a state universally creates nexus there, unless it is below a ''de minimis'' threshold established by the state. The subcontractors, as I understand it, are performing services in the "destination" states; as a result, they are universally taxable there, unless protected by a ''de minimis'' rule. The "intermediary" step is generally meaningless; as long as the entity itself as a physical presence in the state, it's taxable. It doesn't matter who benefits, directly or indirectly, from the service (except as noted below).

As a practical matter, many contractors work in other states for short periods of time and escape notice. The legal ability of the state to impose the tax is not really in question; it's more a matter of the resources the state devotes to enforcement and the luck of the draw.

Also, although the subcontractor clearly has nexus in every state where it performs services, the operation of the apportionment formula may result in little or no taxable income or tax liability. Most states use a variation of the UDITPA three-factor formula of property, payroll and sales. Movable property generally is assigned to the numerator of the property factor on a time basis. Payroll generally goes to the state where the employee is covered for unemployment insurance purposes -- it isn't broken up on the basis of time. Sales of services are generally assigned to the place where the greatest proportion of the income-producing activity occurs; some states would prorate sales of services performed in more than one state on the basis of time. There are a few states that assign sales of services, not to the location where the income-producing activity takes place, but to the place where the benefit of the service is enjoyed -- i.e., not where the work is done, but where the customer is located. Georgia, Ohio, Minnesota and Iowa are states that use this market-based approach to sales of services.

The State A subcontractor that performs all of its services in State A generally wouldn't have nexus in any other states; however, the states are getting more aggressive in that area. Ohio, for example, asserts jurisdiction to impose its Commercial Activity Tax (CAT) on any entity that has more than $500,000 of "Ohio taxable sales" in a calendar quarter, or that has more than 25% of its property, payroll OR sales during the year in Ohio. The catch here is that Ohio assigns sales of services, not to the place where the services are performed (or the place where the greatest proportion of the income-producing activity occurs), but to the place where the benefit of the service is enjoyed. Thus a Minnesota contractor, performing all of its services in Minnesota, would be subject to the CAT if more than 25% of its revenue was earned by performing services for Ohio customers, even if it never set foot in Ohio. This statutory provision may not withstand constitutional scrutiny in that extreme case, but a taxpayer may have to go to court to get out of it. Now, if the subcontractor performs its services on behalf of the contractor, who is in Minnesota, and the contractor's customer is in Ohio, I'm not sure where Ohio would source the contractor's receipt ... but you see the issue. }}

{{ForumReplyPost|UserID=PVVCPA|Date=September 11, 2013|Text=KatieJ says the following:

''...Public Law 86-272 protects you from net income taxes as long as your personnel in the state don't do anything other than soliciting sales, which are approved outside the state and shipped from outside the state.''

'' A business that has employees or independent contractors regularly soliciting sales of tangible personal property in the state already has a phyiscal presence. P.L. 86-272 bars the state from imposing a net income tax on such a business as long as the activities of the sales personnel are limited to solicitation...''

I am having trouble reconciling KatieJ's statements with the requirements by many of the states that a foreign corporation register and pay income tax if their in-state payroll exceeds $50,000. If a CA corporation hires a team of sales people in Ohio, and the sales people only solicit orders that are approved and distributed out of California, '''does the CA corporation need to apportion income to Ohio'''?}}

{{ForumReplyPost|UserID=Marcilio|Date=12 September 2013|Text=Nexus is such a thorny problem because each state has its own definitions. There is physical nexus, which most people are aware of, and also business nexus which is trickier. Say, for example, an Illinois manufacturer sells goods to a wholesale distributor in WA. The IL company has a business nexus, but not a physical nexus, and therefore has an excise tax liability (WA has no corporation income tax). MI says that if someone is physically present in that state for less than 10 days, they don't have nexus, but more than 10 days, they do. And so the story goes.

Shipped to and shipped from are common issues. If you ship out of the home state and into another state in which you have nexus, then income is reported to the 2nd state, otherwise the sale typically belongs to home state. When the number of locations increases, so does the complexity. In the above case, since orders are approved and processed in CA, only sales to Ohio customers are taxable in Ohio. I don't know off the top of my head if Ohio apportions only sales, or whether payroll & property are also included in the apportionment.}}

{{ForumReplyPost|UserID=Ckenefick|Date=12 September 2013|Text=''does the CA corporation need to apportion income to Ohio?''

It's debatable because the PL pertains to income taxes. So, if the state taxing regime involves a gross receipts tax, arguably, the protection afforded by the PL won't apply.

http://mcgladrey.com/Tax-Services/The-emergence-of-factor-presence-nexus-standards}}

{{ForumReplyPost|UserID=KatieJ|Date=14 September 2013|Text=The McGladrey article that Chris linked to provides a useful description and analysis of the "factor presence" nexus test, which was invented by economist Charles McLure and proposed by the MTC in 2002. As noted in that article, several states, including Ohio and California, have adopted that standard, Ohio in 2005 for purposes of its Commercial Activity Tax (CAT), measured by gross receipts, and California for purposes of the corporation franchise tax (measured by net income) effective in 2011. So a company with more than 50,000 of property or payroll, or 500,000 of sales, or more than 25% of its total property, payroll or sales within the state is a taxpayer under the statutory law. Of course, states cannot override federal statutory law; therefore, no matter how much of the factors a company has in a state, that state cannot impose a net income tax if its activities are within the bounds of Public Law 86-272 protection.

So to answer PVV's question: a California corporation that has more than $50,000 of payroll in Ohio is subject to the CAT, under Ohio law. P.L. 86-272 does not protect a taxpayer from gross receipts taxes. Ohio no longer imposes a corporate tax measured by income. However, if the facts are reversed, i.e. an Ohio corporation has more than $50,000 of payroll (or more than $500,000 of sales) in California, it would not be subject to the California franchise tax as long as its representatives' activities did not go beyond the bounds of P.L. 86-272.

}}

{{ForumReplyPost|UserID=Ckenefick|Date=14 September 2013|Text=KatieJ, where you been? The place hasn't been the same...We've been guessing at all these state tax questions, hopefully the FTB won't mind. }}

{{ForumReplyPost|UserID=PVVCPA|Date=September 14, 2013|Text=Thank you, KatieJ & Chris. Great information.

I guess it should also be mentioned, in my example, above, that if the "team of sales people" were working out of office space owned or leased by the foreign corporation, then their activities would no longer be protected by P.L. 86-272. However, if all of the sales people are working out of their in-home offices, then the protection remains.

When KatieJ flipped around my example, and made it an Ohio corporation employing sales people in California, she stated that the Ohio corporation would not be subject to the CA Franchise Tax since this is a net income tax. However, they would still be required to register with CA and pay the $800 minimum tax. Is that correct?}}

{{ForumReplyPost|UserID=Ckenefick|Date=14 September 2013|Text=It's very possible. The PL only covers income taxes.

}}

Discussion:What is nexus?

PVVCPA — Sat, 14 Sep 2013 15:01:34 GMT

PVVCPA:

{{ForumThreadHeading|Tax_Questions|Tax Questions}}


{{ForumNewPost|UserID=Actionbsns|Date=25 July 2007|Text=I have to ask this question because all through college, teachers were referring to "empirical data" and I never really new what THAT was, always intended to look it up, never had the time or thought of it at the wrong time, so I always just took it in context.

But I keep hearing about NEXUS, first heard it from the CPA I worked with here, but I don't know what it is and when it comes up in a discussion, I don't really understand it. Sounds like a new hair gel to me, so I'm pretty sure that's wrong.}}

{{ForumReplyPost|UserID=JR1|Date=July 25, 2007|Text=Too much to tell. Use the yellow search box to the left there...and read all you like. But it's how states determine when you have to file tax returns in their state.}}

{{ForumReplyPost|UserID=Jdugancpa|Date=25 July 2007|Text=http://www.thefreedictionary.com/nexus

http://m-w.com/dictionary/nexus

Nexus = connection. If you have nexus with a state, they can grab you and tax you. If you don't, they can't. Think of it like an electric socket. If you have no nexus it can't shock you, but stick your finger in it and watch your hair curl.}}

{{ForumReplyPost|UserID=Actionbsns|Date=25 July 2007|Text=Thanks JR and JD - reading some of the things that relate to IRS using the term nexus, I can see where substituting "connection" works well. From the one post I read this morning Washington state must have some stringent rules regarding how Nexus or a connection of business income relates to their state. I'm not clear how a state really makes that decision and it seems to vary with the state. One of the discussions that popped up on the yellow search relates to the use of Nevada corporations, I've seen a few of them here in Hawaii, no income earned in Nevada, no physical presence in Nevada, so no Nexus and no taxes (even though Nevada has no state tax, if you substituted another state, still, no Nexus). Am I right? and the issue would be whether or not the state agreed. }}

{{ForumReplyPost|UserID=Michaelstar|Date=25 July 2007|Text=Think of Nexus as a connection through physical presence. Without a physical presence - it is hard to have Nexus connected to a state as I understand the concept.}}

{{ForumReplyPost|UserID=Jdugancpa|Date=25 July 2007|Text=Nexus can be established by an agent, as well as an employee. So a manufacturer in WA hiring a manufacturer's rep in Ohio who travels to IL, IO & IN may well have nexus in all four states due to the activities of the agent (assuming the agent is repping the WA company's products in all four states).}}

{{ForumReplyPost|UserID=Chautauqua|Date=25 July 2007|Text=I've been using Nexus on my hair for years....is this wrong?}}

{{ForumReplyPost|UserID=Bottom Line|Date=25 July 2007|Text=I've always understood Nexus as: when the Tampa Bay Buccaneers play the Seattle Seahawks in Seattle, they have to pay income tax in Washington State because they earned income there. }}

{{ForumReplyPost|UserID=Jdugancpa|Date=26 July 2007|Text=Luckily for the Buccaneers (my HS mascot, BTW) WA has no income tax. Too bad for our Seahawks, however, because when they go to FL its just like they stuck that finger into the electric socket. Connection gets made, hair gets curled, wallet gets fleeced!}}

{{ForumReplyPost|UserID=Bottom Line|Date=26 July 2007|Text=Bad example. Should have used Cincinnati Bengals. Must be a special tax since FL doesn't have income tax either.}}

{{ForumReplyPost|UserID=Www.cpa1.biz|Date=26 July 2007|Text=Going further on Nexus. I see the situation about the bucaneers playing in seattle. What about if my office in in one state people from all over the country buy stuff from me. Is there nexus there. I mean if someone sells stuff over the Internet from people all over the country, do they have nexus in each state?}}

{{ForumReplyPost|UserID=Bottom Line|Date=26 July 2007|Text=My understanding is that if your office is in one state and your only contact with other states is to sell product to be shipped to those states (you never physically enter the other states), you are not considered to be doing business in those states.}}

{{ForumReplyPost|UserID=Natalie|Date=July 26, 2007|Text=Action, there are some companies that get bad advice and set up corporations in Nevada thinking they'll be sheltered from taxes in Hawaii. If they operate out of Hawaii, they pay tax in Hawaii. In addition, although Nevada doesn't have income taxes, they do have things like payroll excise tax, live entertainment tax and of course sales tax.}}

{{ForumReplyPost|UserID=Taxref|Date=26 July 2007|Text=Nexus has become a much more complex issue due to the internet. Not all that long ago NY won a court case in which a TN resident who telecommuted to his job in NY was found to have NY nexus. The TN resident was ruled to be liable for NY income tax. I think we will be seeing many more of these kinds of disputes.}}

{{ForumReplyPost|UserID=Death&Taxes|Date=26 July 2007|Text=Has NY taken a similar position on alimony paid from NY income earned by a non-resident? Or do I have it backwards, and the State challenged a non-resident's deduction of alimony based on his earnings in NY.....in other words, another form of nexus.}}

{{ForumReplyPost|UserID=Taxref|Date=26 July 2007|Text=I'm afraid I don't know the answer to that one D&T.

I think you and I (along with many other NJ practitioners) will be hearing more about the telecommuting issues in the next few years. Much like the IT-203 days-working-outside-NY tax notices which went out a few years ago, I suspect NY will try to see how much potential tax is out there from NJ telecommuters. }}

{{ForumReplyPost|UserID=Sandysea|Date=26 July 2007|Text=BJ; you do not have nexus in the other states (generally speaking of course) if you have no PE or physical presence in that state. If they are buying over the internet, and you don't have any agents or employees or have any leased tangible or intellectual property in another state, the state should not require you to file returns. You should however indicate on your invoices (if you are selling taxable goods or services) that the individual in that state is responsible for "use taxes"....protects you a bit from the burden of proof analogy that some states seem to equate.

I.E. Client of mine may NOT have had nexus in a state...sold taxable goods in that state. Initially the revenue agencies will look to the purchaser of the product for the use taxes, but most states indicate that the burden of collection then falls on the seller if the buyer does not pay.....I dealt with this and it is not equitable, but I had 3 states in the US which shifted the burden to the client who did not establish nexus....}}

{{ForumReplyPost|UserID=Waynecpa|Date=26 July 2007|Text=Things will be changing though. Check out the following link at the WA Department of Revenue website:

[http://dor.wa.gov/Content/GetAFormOrPublication/PublicationBySubject/TaxTopics/MoreSST.aspx]}}

{{ForumReplyPost|UserID=Jdugancpa|Date=26 July 2007|Text=Wayne, this is going to be a reporting nightmare for a lot of small businesses who will now have to track shipping destinations rather than just reporting by point of origin.}}

{{ForumReplyPost|UserID=CTurner555|Date=27 July 2007|Text=Also check out the OH website for the CAT tax - specifically question #31. Sales of $150,000 in a year nexus to Ohio are taxable. This will be a major nightmare for all states.

[http://tax.ohio.gov/faqs/content/commercial_activities/qa.asp]}}

{{ForumReplyPost|UserID=Donniecastleman|Date=27 July 2007|Text=Nexus or no nexus, this thread got a smile and a chuckle out of me! From this moment on, I hate the Titans!}}

{{ForumReplyPost|UserID=TheTinCook|Date=27 July 2007|Text=Just wanted to add a little bit about the TN/NY nexus case.

In that case, the TN resident actually spent ~25% of his time physically present in NY.

The opinion [http://decisions.courts.state.ny.us/ad3/Decisions/2004/92539.pdf here].}}

{{ForumReplyPost|UserID=Death&Taxes|Date=27 July 2007|Text=The Tennessee case turns on him being in Tennessee for his own convenience, not for the convenience of the employer. He had paid NY tax on the days he worked there, but that was not good enough for Albany. Of course, the worse blow is that he has no state tax in Tennessee to take credit against.}}

{{ForumReplyPost|UserID=TheTinCook|Date=27 July 2007|Text=So the lesson here is to never take a job from a NY company?}}

{{ForumReplyPost|UserID=Death&Taxes|Date=27 July 2007|Text=Nexus can be particularly vexing for creative people. Where is a story written that is sold to a magazine published in NY, or if the check is given to the person's agent in New York? We are seeing more expansive interpretations of nexus. Does an artist or sculptor consigning work to a gallery in SOHO create a NYC presence for Nexus. While artists and writers are given special dispensation from IRS regarding inventories, is nexus created here?}}

{{ForumReplyPost|UserID=Bottom Line|Date=29 July 2007|Text=And how about this - my husband writes an article in our home in FL. He e-mails it to his publisher in NY who then posts the article on the internet which is read worldwide (KFFL.com). He's never been in NY. The publisher mails a check to our house in FL. As of now, there's no Nexus. But depending upon court cases, this could get out of hand very easily.}}

{{ForumReplyPost|UserID=KatieJ|Date=30 July 2007|Text="Nexus" is the connection between the state and the entity or activity that allows the state to impose a tax under the due process and commerce clauses of the U.S. Constitution. Until 1992 most of us thought that there was no difference in the nexus standards under due process and commerce. However, in 1992, in the _Quill_ decision, the U.S. Supreme Court made a distinction. Purposeful availment of the market in a state is generally sufficient to create nexus for due process purposes. Under the due process clause, nexus may be considered a proxy for notice -- if your activities with respect to the state are sufficient to put you on notice that you may be subject to the jurisdiction of the state's courts, you have nexus. So, for example, a mail order seller that has no connection with the state other than mailing in catalogs, accepting orders by mail and telephone, and filling the orders by shipping the product from outside the state does have nexus for due process purposes.

However, the Court set a higher standard under the commerce clause. While some earlier cases referred to a "minimal connection" for due process purposes, the 1977 _Complete Auto Transit_ case uses the term "substantial nexus" for commerce clause purposes. The _Quill_ case had to do with use tax collection responsibility, and the Court followed its 1966 _National Bellas Hess_ decision, holding that for use tax collection purposes the commerce clause requires that there be a physical presence in the state in order to have the requisite "substantial nexus."

The distinction between due process and commerce clause nexus throws the issue into the lap of Congress. Before _Quill_, it was unclear whether Congress could legislate authority for the states to require remote sellers to collect sales and use taxes on sales shipped into the state. Congress has the power to regulate interstate commerce, but Congress cannot legislate away due process. Since systematic exploitation of the market has been held to constitute due process nexus, Congress may, if it wishes, enact legislation authorizing states to require remote sellers to collect use taxes. So far it shows no inclination to do so, however.

Whether the physical presence requirement applies to other business activity taxes is an unresolved question. The U.S. Supreme Court recently denied certiorari in two state supreme court cases, one holding that a physical presence IS required, and another holding that it IS NOT required. In every business activity tax case the Court has decided over the years where commerce clause nexus was found to exist, there was a physical presence. However, those are all pre-_Quill_ decisions. Relying on language such as that in the U.S. Supreme Court decision in _Tyler Pipe_ and _National Can_, state courts have held that engaging in activities that help to maintain and exploit the market in a state is enough to create commerce clause nexus even when there is no physical presence. For example, the South Carolina Supreme Court found in _Geoffrey_ (1992, post-Quill) that a Delaware intangible holding company (IHC) that owns the trademarks, trade names, etc. of Toys R Us was subject to South Carolina tax because the use of the intangibles was licensed to TRU stores in South Carolina. Geoffrey had no physical presence in the state. The U.S. Supreme Court denied certiorari in that case.

Legislation pending in Congress (the Business Activity Tax Simplification Act, or BATSA) would provide a physical presence requirement for all business activity taxes.

Federal legislation (Public Law 86-272, 1959) limits states' authority to impose taxes ON OR MEASURED BY INCOME on out-of-state companies whose activities in the state are limited to solicitation of sales of tangible personal property. Obviously if you have sales personnel located or regularly traveling into the state, you have a physical presence there, and you have due process/commerce clause nexus. However, Public Law 86-272 protects you from net income taxes as long as your personnel in the state don't do anything other than soliciting sales, which are approved outside the state and shipped from outside the state. P.L. 86-272 does not protect a seller from other state taxes, such as use tax collection responsibility, franchise taxes measured by capital stock or net worth, gross receipts taxes (e.g., Washington B&O or Ohio CAT), or employer taxes. Whether the new Texas "margin tax" is subject to 86-272 protection is questionable, although the Texas statute itself says that it is not.

A note on New York's screwy "convenience of the employer" rule, at issue in the _Huckaby_ case referred to by Taxref and TinCook: The issue here is not exactly the same as the business "nexus" issue. The rules for individuals are a little bit different, arising from a different line of U.S. Supreme Court jurisprudence. In general, states have the power to tax all of the income of a resident, and all income of nonresidents arising from sources within the state. Generally, states take the position that the source of income from the personal services of an individual is the state where the services are performed. New York takes this a step farther and says, if you work for a NY employer, and you spend ANY time at your NY employer's premises, ALL of your earnings from that employment are from a NY source, unless your services were performed outside NY out of necessity (i.e., they could not, by their nature, have been performed elsewhere) and not for the convenience of either the employer or the employee. (This is colloquially known as the "convenience of the employer" rule.) So Mr. Huckaby, who lived in Tennessee and spent about 25% of his time working at his employer's location in NY and the rest working at his home in Tennessee, was subject to NY tax on 100% of his salary. This was especially painful for Mr. Huckaby because Tennessee does not have a comprehensive individual income tax -- TN only taxes interest and dividend income of residents. He'd have been even worse off, though, if he had lived and worked at home in an income tax state, e.g., California, because while California would have given him credit for the tax he paid to NY on the 25% of his salary that he earned working in NY, he would have received no credit for the tax paid to NY on the other 75% that he earned working in California. So he'd have paid tax to both states on the same income, with no credit relief. The same would be true in many other states.

We had high hopes for _Huckaby_ -- the NY regulation has been on the books for many years and was upheld by the NY Court of Appeals (the high court in NY) in the 1970's, but the world has turned a few times since then. However, the Court of Appeals upheld the regulation again, and the U.S. Supreme Court denied cert. So there you are.

NY has made some changes in the "convenience of the employer" rule, effective in 2006. Now a day working in a home office can be considered a day working outside NY if the home office is a "bona fide employer office." Determining whether the home office qualifies requires going through a Byzantine series of tests. For details, look at New York Technical Service Bureau Memorandum TSB-M-06(5)I, 05/15/2006.

As for creative people: So far, I think the place where the work (writing, painting, sculpting, whatever) takes place is the source of the income. However, if an artist consigns a painting to a dealer in NY, and the NY dealer sells it, it's pretty clear the artist has sold tangible personal property in NY and has NY source income. This is a source issue, not really a nexus issue, although the two are intertwined.
}}

{{ForumReplyPost|UserID=JAD|Date=30 July 2007|Text=I just read the Huckaby case and am again appalled at the insane laws that taxpayers (and we) must navigate. That New York could arbitrarily come up with a justification for taxing income that, as I understand it, most other states would not tax and should not tax is another example of why I believe the federal government should standardize general, broad brush laws among the states. Make some limits on what they can do, as they did, to some extent, w PL 86-272. I remember a frustrated mid-level practitioner making that statement many years ago when I was fresh out of college, and I have come to agree with him. }}

{{ForumReplyPost|UserID=KatieJ|Date=31 July 2007|Text=BATSA (I could look up the H.R. number if anybody really cares) would extend P.L. 86-272 protection to solicitation of all kinds of sales, not just sales of TPP. It would also require a physical presence to create nexus for all business activity tax purposes, and set fairly high thresholds for what constitutes physical presence. The states are vehemently opposed to it, as well they might be. Coupled with the repeal (or nonexistence, in many states) of sales throwback rules, which business interests have succeeded in enacting in some states and are championing in others, BATSA would create huge amounts of "nowhere" income, i.e., income assigned to states that would be prevented by federal law from taxing it.

The corporate income tax has already eroded as a source of state revenue (due in large part to the activities of folks like me, who have gone around for 25 years restructuring businesses to take advantage of differences in state laws that create planning opportunities) to such an extent that some states have enacted new (actually archaic) kinds of taxes to replace it -- such as the Texas "margin tax" and the Ohio Commercial Activity Tax. However, BATSA would invalidate the broad statutory nexus standards in the Ohio CAT -- which are probably unconstitutional anyway.

As far as I know, though, nothing has been proposed that would affect the validity of the New York "convenience of the employer" rule. Sad to say.

}}

{{ForumReplyPost|UserID=CorpTaxPro|Date=29 August 2007|Text=From everything here, you can gather there is no simple definition, except to say it is a point at which a company (or person) is deemed to have enough connection with a jurisdicition to become subject to their laws for tax on income. Since 1986 the findings of PL 86-272 were held to mean that basically there had to be a physical precense material enough to justify being taxed. Basically, own or rent some property there.

Thats been challenged and worked arounf a lot....and now...some States are straightfowardly asking the Supreme Court to revisit the issue and rule taht a financial presence would be enough to give rise to nexus....calling it financial nexus. The lead case has to do with a credit card company, who owns nothing, only solicits business through very broad ads, etc., but has many customers carrying their cards in any State....they argue that the fact the CC biz gets $ from the residents of the State is enough to give it nexus. They very well may win.}}

{{ForumReplyPost|UserID=KatieJ|Date=30 August 2007|Text=P.L. 86-272 really has nothing to do with the "physical presence" issue. A business that has employees or independent contractors regularly soliciting sales of tangible personal property in the state already has a phyiscal presence. P.L. 86-272 bars the state from imposing a net income tax on such a business as long as the activities of the sales personnel are limited to solicitation, as further defined by the U.S. Supreme Court in the 1992 Wrigley case.

Many states are asserting jurisdiction to tax out-of-state businesses on an "economic presence" basis, and so far the U.S. Supreme Court has not been willing to stop them. The credit card company case to which CorpTaxPro refers is MBNA National Bank NA v. West Virginia, 640 SE 2d 226 (2006), in which the West Virginia Supreme Court held that the bank that solicited West Virginia residents and issued credit cards to them had due process/commerce clause nexus and is subject to the corporate income tax. The U.S. Supreme Court denied certiorari in that case (Dkt No 06-1228, 6/18/2007).

In a very similar case, the Tennessee Supreme Court in 1999 held that an out-of-state credit card issuer did not have nexus because it had no physical presence in the state. J.C. Penney National Bank, 19 SW 3d 831 (1999). The U.S. Supreme Court denied certiorari in that one too (Dkt No 00-2005, 8/3/2000).

So, go figure. The Court seems unwillling to tackle the issue. I don't know what they are waiting for; surely they couldn't have found a case with cleaner facts than MBNA. No legal inference can be drawn from the denial of certiorari; it does not imply that the Court approved of the result in the state court. It only means the Court decided, for whatever reasons, not to take the case. So the credit card companies DO have nexus in West Virginia, and DO NOT in Tennessee. Other states will doubtless follow one or the other, but neither decision is controlling in any other state.}}

{{ForumReplyPost|UserID=Cyclops|Date=30 August 2007|Text=It was Toyota's first luxury car. }}

{{ForumReplyPost|UserID=Wwtaxes|Date=9 May 2008|Text=A slight variation on the question of nexus: ACME, Inc, an S Corp in state A, has contracts in several states. They hire local (ie, in state A) subcontractors to work these contracts. These contractors work part-time in state A on the projects, and part-time in the destination states. Acme obviously has nexus in all of the states. Would the subcontractor S Corps also have nexus in the other states, even though they are paid all income through ACME? Meaning, does the intermediary step affect nexus? I would think that they still have nexus in any of the states that they work in (physical presence), even though their income is not directly from those states.

Further twist: ACME also hires local contractors to work these out-of-state contracts, but they never leave state A (let's say they are writing software remotely, and communicating it via the internet). Do these subcontractor S Corps have nexus in the states that the software is written for, even though there is no physical presence?

}}

{{ForumReplyPost|UserID=RoyDaleOne|Date=9 May 2008|Text=Because, each State's definition of nexus can vary, you need to ask an attorney who has such knowledge, after all nexus is a legal question. Or, Wwtaxes, you could refine your question to specific states.}}

{{ForumReplyPost|UserID=Wwtaxes|Date=9 May 2008|Text=RDO - The answer was somewhat hypothetical, but I'll get as close as I can with an example. ACME is in MN. They have contracts in lots of states, including CA, IA, KS, TX, and NY. The IA and KS ones are of particular interest, bc they are the ones where the sub works a substantial amount, both in KS or IA, and remotely from MN. The work in the other states is anywhere from 1-8 days in the state (very short seminars). This is just one of the examples, and I don't do ACME's taxes, but I worked for ACME on an unrelated project, and this question has always nagged at me, and a similar situation may come up soon as I have software consultant clients that very well can work remotely. I would have guessed I'd have to find a tax specialist for the specific states, but I'll take your suggestion and look for an attorney as well.}}

{{ForumReplyPost|UserID=Sandysea|Date=10 May 2008|Text=Also, WW try the multi state tax commission in WA. I used this to determine nexus and they have attorney's (paid by our tax dollars) to assist in these areas.

Most states DO have nexus questionnaires and you can remain anonymous when filling them out to make sure you understand the different state requirements.

Some states would consider seminars nexus and others will not. Depends on how aggressive they are.

}}

{{ForumReplyPost|UserID=KatieJ|Date=11 May 2008|Text=Joyce, I don't think your question is all that complicated, nor do I think you will find any significant variation among states in their interpretation of it. The performance of personal services in a state universally creates nexus there, unless it is below a ''de minimis'' threshold established by the state. The subcontractors, as I understand it, are performing services in the "destination" states; as a result, they are universally taxable there, unless protected by a ''de minimis'' rule. The "intermediary" step is generally meaningless; as long as the entity itself as a physical presence in the state, it's taxable. It doesn't matter who benefits, directly or indirectly, from the service (except as noted below).

As a practical matter, many contractors work in other states for short periods of time and escape notice. The legal ability of the state to impose the tax is not really in question; it's more a matter of the resources the state devotes to enforcement and the luck of the draw.

Also, although the subcontractor clearly has nexus in every state where it performs services, the operation of the apportionment formula may result in little or no taxable income or tax liability. Most states use a variation of the UDITPA three-factor formula of property, payroll and sales. Movable property generally is assigned to the numerator of the property factor on a time basis. Payroll generally goes to the state where the employee is covered for unemployment insurance purposes -- it isn't broken up on the basis of time. Sales of services are generally assigned to the place where the greatest proportion of the income-producing activity occurs; some states would prorate sales of services performed in more than one state on the basis of time. There are a few states that assign sales of services, not to the location where the income-producing activity takes place, but to the place where the benefit of the service is enjoyed -- i.e., not where the work is done, but where the customer is located. Georgia, Ohio, Minnesota and Iowa are states that use this market-based approach to sales of services.

The State A subcontractor that performs all of its services in State A generally wouldn't have nexus in any other states; however, the states are getting more aggressive in that area. Ohio, for example, asserts jurisdiction to impose its Commercial Activity Tax (CAT) on any entity that has more than $500,000 of "Ohio taxable sales" in a calendar quarter, or that has more than 25% of its property, payroll OR sales during the year in Ohio. The catch here is that Ohio assigns sales of services, not to the place where the services are performed (or the place where the greatest proportion of the income-producing activity occurs), but to the place where the benefit of the service is enjoyed. Thus a Minnesota contractor, performing all of its services in Minnesota, would be subject to the CAT if more than 25% of its revenue was earned by performing services for Ohio customers, even if it never set foot in Ohio. This statutory provision may not withstand constitutional scrutiny in that extreme case, but a taxpayer may have to go to court to get out of it. Now, if the subcontractor performs its services on behalf of the contractor, who is in Minnesota, and the contractor's customer is in Ohio, I'm not sure where Ohio would source the contractor's receipt ... but you see the issue. }}

{{ForumReplyPost|UserID=PVVCPA|Date=September 11, 2013|Text=KatieJ says the following:

''...Public Law 86-272 protects you from net income taxes as long as your personnel in the state don't do anything other than soliciting sales, which are approved outside the state and shipped from outside the state.''

'' A business that has employees or independent contractors regularly soliciting sales of tangible personal property in the state already has a phyiscal presence. P.L. 86-272 bars the state from imposing a net income tax on such a business as long as the activities of the sales personnel are limited to solicitation...''

I am having trouble reconciling KatieJ's statements with the requirements by many of the states that a foreign corporation register and pay income tax if their in-state payroll exceeds $50,000. If a CA corporation hires a team of sales people in Ohio, and the sales people only solicit orders that are approved and distributed out of California, '''does the CA corporation need to apportion income to Ohio'''?}}

{{ForumReplyPost|UserID=Marcilio|Date=12 September 2013|Text=Nexus is such a thorny problem because each state has its own definitions. There is physical nexus, which most people are aware of, and also business nexus which is trickier. Say, for example, an Illinois manufacturer sells goods to a wholesale distributor in WA. The IL company has a business nexus, but not a physical nexus, and therefore has an excise tax liability (WA has no corporation income tax). MI says that if someone is physically present in that state for less than 10 days, they don't have nexus, but more than 10 days, they do. And so the story goes.

Shipped to and shipped from are common issues. If you ship out of the home state and into another state in which you have nexus, then income is reported to the 2nd state, otherwise the sale typically belongs to home state. When the number of locations increases, so does the complexity. In the above case, since orders are approved and processed in CA, only sales to Ohio customers are taxable in Ohio. I don't know off the top of my head if Ohio apportions only sales, or whether payroll & property are also included in the apportionment.}}

{{ForumReplyPost|UserID=Ckenefick|Date=12 September 2013|Text=''does the CA corporation need to apportion income to Ohio?''

It's debatable because the PL pertains to income taxes. So, if the state taxing regime involves a gross receipts tax, arguably, the protection afforded by the PL won't apply.

http://mcgladrey.com/Tax-Services/The-emergence-of-factor-presence-nexus-standards}}

{{ForumReplyPost|UserID=KatieJ|Date=14 September 2013|Text=The McGladrey article that Chris linked to provides a useful description and analysis of the "factor presence" nexus test, which was invented by economist Charles McLure and proposed by the MTC in 2002. As noted in that article, several states, including Ohio and California, have adopted that standard, Ohio in 2005 for purposes of its Commercial Activity Tax (CAT), measured by gross receipts, and California for purposes of the corporation franchise tax (measured by net income) effective in 2011. So a company with more than 50,000 of property or payroll, or 500,000 of sales, or more than 25% of its total property, payroll or sales within the state is a taxpayer under the statutory law. Of course, states cannot override federal statutory law; therefore, no matter how much of the factors a company has in a state, that state cannot impose a net income tax if its activities are within the bounds of Public Law 86-272 protection.

So to answer PVV's question: a California corporation that has more than $50,000 of payroll in Ohio is subject to the CAT, under Ohio law. P.L. 86-272 does not protect a taxpayer from gross receipts taxes. Ohio no longer imposes a corporate tax measured by income. However, if the facts are reversed, i.e. an Ohio corporation has more than $50,000 of payroll (or more than $500,000 of sales) in California, it would not be subject to the California franchise tax as long as its representatives' activities did not go beyond the bounds of P.L. 86-272.

}}

{{ForumReplyPost|UserID=Ckenefick|Date=14 September 2013|Text=KatieJ, where you been? The place hasn't been the same...We've been guessing at all these state tax questions, hopefully the FTB won't mind. }}

{{ForumReplyPost|UserID=PVVCPA|Date=September 14, 2013|Text=Thank you, KatieJ. Great information.

I guess it should also be mentioned, in my example, above, that if the "team of sales people" were working out of office space owned or leased by the foreign corporation, then their activities would no longer be protected by P.L. 86-272. However, if all of the sales people are working out of their in-home offices, then the protection remains.

When KatieJ flipped around my example, and made it an Ohio corporation employing sales people in California, she stated that the Ohio corporation would not be subject to the CA Franchise Tax since this is a net income tax. However, they would still be required to register with CA and pay the $800 minimum tax. Is that correct?}}

User talk:KatieJ

PVVCPA — Sat, 14 Sep 2013 14:53:30 GMT

PVVCPA:

{{UserTalkPageHeader}}

__TOC__

Katie,
Was wondering if you could help me understand how guaranteed payments are apportioned as CA source income for nonresident members? If an LLC does business within and without CA, but the member never steps foot in CA, is his guaranteed payment sourced as CA income in accordance with the regular business apportionment % of the LLC or is it based on nexus for that member? If so, what effect does this have on the payroll factor? I have read through notice 89-493, CA R&TC 17854 & 17951-4 and the instructions. Still confused as to how this all fits together. My understanding is the payroll factor will vary depending on if they are a professional services firm. I did see a previous post relating to this and you indicated that the payroll factor still applies the 60/40% test (it sounded like you had a good historical perspective on this). Is the 60/40% allocation found in the example at R&TC 17951-4(g) applicable to "both" professional service and non-professional service firms? BTW: The CA FTB could not answer my question.

Thank you,

[[User:Gregj|Gregj]] 15:11, 3 November 2010 (CDT)

== Of course not! ==

Every user gets to choose who they respond to!! I know you often like to know a bit about the level of experience of those you're helping, so I was kind of hoping he'd update his user page before you read his question. You're one who certainly does tend to answer differently for the newbies than to the pros, often with a different level of detail and/or complexity. But you're also good at getting a sense for people based on the content of their questions, too.

Anyway, apologies for "eavesdropping," so to speak. One of the reasons I spend so much time on the site is to learn a lot, and I knew I'd pick up some good tips from your response to Greg. Which is yet another reason I wish he'd have posted it out on the forums, for all to learn from.

[[User:Trillium|Trillium]]

== Actually, I've been known to respond politely to many ==

without profiles, but then ask for a profile before any further discussion. Trillium isn't the only evesdropper (now where did that name come from?). [[User:Kevinh5|Kevinh5]]

Hampton Court Palace outside London was the palace of King Henry VIII of England. In the eaves of its Great Hall, small faces are carved into the oak beams which lean at an angle of 45 degrees to the ground. These are known as 'Eaves Droppers'. Henry was known to be a strong ruler and often put spies in crowds of people to listen in to conversations. He wanted his staff (who slept in the Great Hall between banquets and would lie on straw looking up at the eaves) to know that he or his people would be listening at all times.

== Cleanup ==

Having been reminded (by Trillium) that nothing is ever lost in this wiki environment, I have cleaned up my talk page by deleting everything up to current entries. All the old questions are still there under the "history" tab. [[User:KatieJ|KatieJ]] 12:01, 4 November 2010 (CDT)

== Distribution and AAA ==

Hi Katie, I read your profile and feel that I have good connection with you- simply because I am a working mom.
I try to understand more about the distribution and AAA, from the accounting and tax views. For distribution, it is reported on page 3 of Form 1120s, what other area I need to make entries- equity a/c or on the client's book? Another area I am very vague, it is the AAA account.In NJ, the numbers just flow through automatically from the software, I am not sure if it is right. How do I keep track of it? I don't remember I have learned all of these when I took my accounting courses years ago. Is any taxation book out there will help me to master these area better?
I read your thread and liked your answer and found out you were a teacher- no wonder!
Thanks for reading & Have a good day!
JYC Tax

Katie:

You were very helpful with your reply regarding the consolidated tax return. I was wondering if I can speak with you on the phone. My emial is k.olson@cox.net and my phone number is 310-864-3371.

Thank you for your cooperation.

Sincerely,

Kathleen Olson

== CA apportionment ==

KatieJ,

I [[Discussion:CA state income source changes ??|posted this question]] a few days ago but no replies. Since I've seen several of your posts in the past regarding CA taxes, I hoped maybe you could shed some light on my situation as follows:

Can someone please help me regarding a 2010 CA apportionment issue? I have a partnership client who is located in IL and performs most of his services in IL. In 2010 he did some work for a few CA hospitals and I am trying to dfetermine whether he will have a filing requirement in that state. For two of the clients he performed less than 50% of the work in CA, but for the third he performed more than 50% of the work in CA. Overall between the three clients less than 50% of the total work for CA clients was performed in CA.

Based on these figures would we need to apportion any of the income to CA? To add another twist, our client called FTB and spoke to someone who told him that "analysis was different than consulting" and that because he was only doing "analysis" in CA and the "consulting" while he was back in IL that none of the income would need to be apportioned to CA. This part sounds strange to me, but then again we only do a few CA returns which are much more straightforward.

Thanks in advance for any comments.

[[User:Nightsnorkeler|Nightsnorkeler]] 16:21, 8 January 2011 (UTC)

== State Nexus ==

Hi KatieJ, I posted a question on message board ([[Discussion:Nexus Court Awards]]) and JR suggested you would be the person to help answer. I am Johncpa99.

Here is the fact pattern: My client is a law firm with offices in VA. All personnel/offices are in VA; however, due to the nature of the lawsuits (class action) the attorney often travels to a different states where the trials are located. Question: Does the state where the trial is located have nexus on any proceeds awarded to attorney (ie. commissions on settlement. The only presence in the trial state is to have the trial. Would it matter if stayed at a hotel/rented an office, etc?

Thank you in advance for any help.

== Johncpa99 ==

if easier, my direct email is sternercpa@yahoo.com

Again, Thank you very much.

== Maybe you'ld like to change this... ==

Katie, you've got this out there: "An S corporation may own up to 100% of the stock of another corporation, S or C."

But the owned corp can't be an S because it has a corporation owning its stock. I respect your technical moxie enough that I didn't just rush in and mess with what you've posted - which I might have done if this had been one of those young whippersnapper know-nothing know-it-alls...

[[User:Harry Boscoe|Harry Boscoe]]

== From XZ ==

Hi Katie:

Thank you very much for answering my question regarding S-corp income apportionment between NC and AZ.

Can you please answer my other post about personal use of auto? I know I am asking too much favor from you. I am starting out on my own in my second year and I am trying hard to do a good job. I will try to spend time answering questions from other forum members to contribute to the forum.

Thanks,

xz

== Husband in CA, Wife in OH ==

Was wondering if you could help me out? I have a client that moved to CA from OH, his wife his stayed in OH to continue working. They have two homes and for the near future she does not plan to move out there. I am not familiar with CA tax law to fully understand where the income will be taxed. They are planning on filing MFJ for federal purposes. My first inclination is that the CA income is taxed in CA on a part-year resident return and all OH income is taxed in OH on a resident return. Any insight or direction on where to verify would be helpful. Thank yyou in advance.

== You can find out if someone posted a question (other than on your talk page) ==

by looking at their contribution history (Contribs or Edits)

http://www.taxalmanac.org/index.php/Special:Contributions/Romine17

[[User:Kevinh5|Kevinh5]]

Katie,

What happens to E&P when a S corp that has E&P from prior tax years when it was a C corp, converts to a LLC (partnership)? Does the presents of the E&P make such a conversion unavailable? or must the E&P be purged before the conversion is done? do you have citations?

== massachusetts husband /wife 50/50 interest LLC. ==

Hi Katie,

I was looking for some guidance on this issue. here's some background.
I have a client of mine who owned a pizza shop ( an s-corp) filed a 1120 s every year.

he sold his business to his son in law. in march 2010. the son in law's lawyer set it up as a LLC with husband and wife each owning a 50% interest.

The IRS sent the ss-4 saying they should file a form 1065.

The son in law has been getting a paycheck from the corp since march 2010.

I don't think they want to pay self employment taxes on icome of the corp if possible.

is there a way that i can have them taxes as an s-corp. both on fed and state of Massachusetts?

what are the steps I would have to take at this point in time to do this?

Thanks
Ted

== CA multistate tax ==

Hi Katie,

Have a CA tax question for you.

Effective in 2011, California has adopted the "factors presence" nexus test that was proposed by the MTC in 2002. Any business with more than $50K of property or payroll, or more than $500K of sales, in the state, and that is not protected from a net income tax by Public Law 86-272, will be considered "doing business" and subject to the franchise tax.

So if a WA Company has an employee in CA state protected by 86-272 (mere solicitation), they will not be considered doing business even if they are doing 4 million in sales to CA for income and franchise tax? This is an LLC by the way.

On the flip side, if they have an employee doing more than just sales, but less than 500k in sales, say 400k, they wouldn't be considered doing business in CA and don't have to file? Or do they get you since you should be registered anyway?

In advance, thank you for being a great resource to the community.

Thank you,

Neil

Katie:

Here, I hope a private post, for the moment.

Yea, giving TAX advice (and asking questions) is scary!

One could be at a place with others just waiting to pick you apart for NOT 100% CORRECT!

It takes guts to post here!

That was me in multi-state. I was thinking a company had to be DOING Business in a state to be taked there, meaning not just producing something but also SELLING IT FROM-WITHIN that state.

I am ''familiar'' with multi-state (aka CA 100R) and the 3 factors (well now 4 with sales twice).

Plant is one, but i guess I was thinking it was a factor IF one was DOING BUSINESS (as I state above) in the state, not that IT gave the state NEXUS over the company.

I read YOU ARE/WERE CA FRANCHISE TAX BOARD.

This is a question for the forum, but I's rather, for the moment to not have the guts for there.

I have a 30 year client who developled (in my Opinion) THE BEST FULL CONSTRUCTION (JUB-COSTING) ACCOUNTING SOFTWARE WITH MULTI-STATE PAYROLL.

His proprietorship, now a LLC was located in CA from 1978 to 2006 when he moved his family (wife and two married sone & wives) to Texas.

His sales are all via Internet and from software conventions in Las Vegas and back east (non in CA)

His program support is all from employees in the company's Texas office OR one Long-Term ("family-type") lady WHO LIVES IN CALIF!
She provides ALL her program support to the company's clients through out the USA FROM the desk and computer in her HOME.

CA SAYS THAT IS NEXUS AND "YOU" "WILL" APPROTION YOUR LLC INCOME TO CALIF (oh and the 540NR's for the Husband & Wife LLC owners).

Katie, during tax season, and I've spent (ordered) $500 worth of multi-state text for such as Kattie Wright I have to research this.

Katie, I HAVE NO CLIENTS, I ONLY HAVE FRIENDS WHOM I CHOSE TO PROVIDE MY SERVICES TO (my definifion of Friend comes from '68nam when that meant you gave ALL to protect someone YOU CHOOSE to be YOUR FRIEND)

This CA 100R does not FEEL right, it may be legally right but doesn't feel right. ONE employee form a computer, no "Boots (heel) on the groung!

Thank You for listening

Hugh

OH I had a post before this in reply to your post (the S-Corp multi-dtate) that I started here but moved to the forum.

== Actually ==

could you give me your off-site email address so I can speak off-site. Thanks kevinhuston@msn.com [[User:Kevinh5|Kevinh5]]

I just sent an email to you, please check to see if it went to your 'junk' folder. [[User:Kevinh5|Kevinh5]]

== Kay ==

I would really appreciate your ear, wise Katie. I filed as small business. Portrait painter made under 12,000 gross and did not claim my sons ssi death benefit. I am now being audited by the state. Do they have access to my bank accounts? Do I have to claim my son's benefits? I lied to get the education credit also. Am I doomed on the federal level as well? shaking in my second hand boots here, Kay

[[User:Kay9]]

==Resources for non-pros==

Hi, Katie! I will, of course, leave it up to you whether or not you respond to Kay at all, but I thought you might want to point Kay to some of the resources we have for non-pros on the top of the [[Discussion Forum - Consumer Questions|Consumer Questions]] page. In particular, finding free tax prep locations by state/county/city, a search engine offered by the University of Missouri: [http://extension.missouri.edu/hes/taxed/sites/Default.aspx Find VITA, TCE or AARP sites], and [[Discussion:How_to_find_a_local_Tax_Professional|Finding a local tax preparer]].

(To copy/paste that entire block of text, your best bet is to click "edit this page" and scroll back down here to the bottom, and highlight the version that has the actual links spelled out. If you just click the text content, the links may not be functional once you paste them on someone else's user page. Let me know if you need more info on that, or if you'd rather I just send a note to Kay with that info, myself.)

[[User:Trillium|Trillium]] 22:31, 6 March 2011 (UTC)

== State Tax for travelling consultant ==

In which state to file state tax for salaried travelling consultant who works for a IT company that has office in California but clients in all states. Consultant travels to differnt client location (e.g AZ or any other state) from Monday to Thursday and returns home in Kansas on Friday and Spouse working locally in Kansas.
Consltnat's employer deducted tax state for California and spouse's employer deducted tax for Kansas.

Is it appropriate to file joint return as Resident for Kansas and Non-resident for California?

Thanks
Rajesh

Hi Katie - You have helped me on one or two state questions over the years and hoped you could answer this one. A client moved from PA to So. Korea for a new job with UC Riverside. (no CA residency) He is receiving the foreign income exclusion (as physical presence for this year). His W-2 from Riverside shows CA state income (no withholding), but should he file a CA return as non-resident since it is a CA source income? And after reading through all the CA instructions - it doesn't look like they accept the foreign income exclusion, so he would end up owing tax to CA - does that sound correct? Thank you.
[[User:Krav|Krav]] 15:26, 5 April 2011 (UTC)

Hello Katie, I wanted to personally (well as personally as I can using this venue), to thank you so much for ALL your help.
I should have guessed that you are (were) a teacher by the precision and clarity of your responses to my mundane question, thank you and in case you do not know who this is, your last reply to Boblink (who is also retired) was:

"With respect to whether the LP is an "investment partnership" for IRC Sec. 721(b) purposes, I believe it depends on whether there are other investors, family members, etc. who will also be contributing similar assets. If the client is the only contributor, so that he is not diversifying his investments by putting them into this vehicle, then I would guess it comes under 721(a) and no gain is recognized. If there are other contributors, I couldn't tell you how much "diversification" is enough to bring it under 721(b). I know just enough about this to be dangerous. That's about how much you will know after you have been through a basic partnership tax course such as the CCH offering. Enough to be dangerous."

The Living Trust along with the LP and the S-Corp were not intended to be a "scam" or anything that was illegal, immoral, unethical,..... but were a vehicle to help "protect" assets and avoid probate.
Unfortunately the only objective of the attorney that set up this arrangement was to make money, which he is entitled to but leaving the documents without an explanation of what they are, how they relate to each other and what to do with them, was not on his agenda but the die is cast, it is what it is.
The Living Trust is a 99.5% partner in the LP whose only "business" is buying and selling stock but I'll read up on 721(b) just to make sure that I am not overlooking anything.
And as far as being dangerous, I believe that ignorance is more dangerous than having a bit of knowledge because you may know enough to realize that you really don't know anything.
Thank you again for helping me through this maze.
Regards,
Bob

Please make sure to sign your message by adding four tildes: [[User:Boblink|Boblink]] 02:50, 24 April 2011 (UTC) at the end of your message
I am not sure what [[User:Boblink|Boblink]] 02:50, 24 April 2011 (UTC) means but here it is

== Tax Ramifications for Profits, Loses and Withdrawals for a Limited Partnership? ==

Hi Katie - You have helped me on one or two state questions over the years and hoped you could answer this one. A client moved from PA to So. Korea for a new job with UC Riverside. (no CA residency) He is receiving the foreign income exclusion (as physical presence for this year). His W-2 from Riverside shows CA state income (no withholding), but should he file a CA return as non-resident since it is a CA source income? And after reading through all the CA instructions - it doesn't look like they accept the foreign income exclusion, so he would end up owing tax to CA - does that sound correct? Thank you. Krav 15:26, 5 April 2011 (UTC)

I wanted to personally (well as personally as I can using this venue), to thank you so much for ALL your help. I should have guessed that you are (were) a teacher by the precision and clarity of your responses to my mundane question, thank you and in case you do not know who this is, your last reply to Boblink (who is also retired) was:

"With respect to whether the LP is an "investment partnership" for IRC Sec. 721(b) purposes, I believe it depends on whether there are other investors, family members, etc. who will also be contributing similar assets. If the client is the only contributor, so that he is not diversifying his investments by putting them into this vehicle, then I would guess it comes under 721(a) and no gain is recognized. If there are other contributors, I couldn't tell you how much "diversification" is enough to bring it under 721(b). I know just enough about this to be dangerous. That's about how much you will know after you have been through a basic partnership tax course such as the CCH offering. Enough to be dangerous."

The Living Trust along with the LP and the S-Corp were not intended to be a "scam" or anything that was illegal, immoral, unethical,..... but were a vehicle to help "protect" assets and avoid probate. Unfortunately the only objective of the attorney that set up this arrangement was to make money, which he is entitled to but leaving the documents without an explanation of what they are, how they relate to each other and what to do with them, was not on his agenda but the die is cast, it is what it is. The Living Trust is a 99.5% partner in the LP whose only "business" is buying and selling stock but I'll read up on 721(b) just to make sure that I am not overlooking anything. And as far as being dangerous, I believe that ignorance is more dangerous than having a bit of knowledge because you may know enough to realize that you really don't know anything.
Thank you again for helping me through this maze.
Regards, Bob
[[User:Boblink|Boblink]] 02:55, 24 April 2011 (UTC)

P.S.-this is a DUPLICATE of a message that I sent/left without the topic/title

==Apportioning Guaranteed Payments==

Hi Katie,

I saw [[Discussion:1065 apportionment between ca, nj|some of your posts]] on having to "apportion guaranteed payments by the same percentage as distributive shares of income." I have been looking into this and have come to the same conclusion. My situation is with an LLC where a member is providing services as if he was an employee. The company could easily hire an outside manager and I would argue there shouldn't be a different tax outcome. The member in this case has a very small interest in the LLC. I'm surprised I haven't found more on this. So far I know that MI and MN source the GP to where the partner worked. Also for international tax the IRC also sources based on where the services were performed. Have you seen any journal articles on this? One work around is to call it a 707(a) payment in a non-partner capacity and then prepare a 1099.

Thanks
Justin

23:06, 30 April 2011 [[User:Jlafber]]

Hello KatieJ,

I took your advice and read over this case (http://www.taxpravo.ru/sudebnie_dela/statya-81297-William_A_Price_v_Commissioner_United_States_Tax_Court_-)

Interested to know, do you think if the legal entity owning the hospital had been structured differently than Mr. Prince would have won?

All the best,

Covance

== Safe Horbor (I worked in Asia & my family live in California) ==

Hi KatieJ,

I left California since March 2006 to work for Philips in Hongkong & China! I then changed my job to another Hongkong company working in China from September 2007 through February 2010! On March 2010 I started with another company working in China. I am now temporary back to US to sell my house in San Diego. The plan is to also move my wife to HK/China. The kids are all in colleges now.

I travelled back to California once a year for about 3-4 weeks. I have no intangible incomes from any sources. All incomes were from working in Hongkong/china.

While I was out in HK/China, my wife and 3 childrens are living in California. My wife is a homemaker!My 3 childrens attending schools in California!

California FTB is now questioning me on my 2009 tax return... I thought I am qualified for the safe harbor rule... So, I didn't file any California tax return while I was away eventhough my family are in California!

Questions:
1. I believe I qualified for safe harbor rule, am I?
2. Do I still need to file california return for 2009? They didn't ask for 2007, 2008!
3. how do I claim safe harbor? Letters from the companies I worked for in Hongkong/china? My passport?
4. I heard some said I qualified for safe harbor but my spouse NOT and some also said she has to file with half of my income? If this is the case, can she still able to itemize full deduction from mortage,...?

Please advise...

Thanks

TomKung
[[User:Tomkung|Tomkung]] 11:16, 12 May 2011 (

'''''KatieJ,

'''''I updated my profile per your request but I can't find the consumer's board, so, I posted under Intuit Tax Questions area...Please Help''

'''Thanks
'''Tomkung 03:05, 14 May 2011 (UTC)'''''

== Don't know where ==

Hi, Katie: I don't know where your non-pro posted his question. It wasn't on this site, and I checked the other intuit boards, including the TurboTax board - which is where he really should be posting anyway - and I didn't see a relevant question on any of those.

Perhaps he should just be redirected to either [https://ttlc.intuit.com/app/full_page TurboTax community] to post the question there, or better yet, [[Discussion:How to find a local Tax Professional]], so he can work with someone who can understand the entire situation and implications of any elections, etc.

[[User:Trillium|Trillium]] 14:38, 14 May 2011 (UTC)

== Non-resident safe harbor ==

I posted this on tax almanac and did not receive any comments. I was wondering if you could help me with this issue. Thanks in advance for any help:

My client left Calif in Aug 2010 under a > 546 day employment related contract and has not returned. Question: Can he be considered a PY resident in 2010 under the safe harbor?
My confusion is that FTB Pub 1031 and §17041(d) say "return" visits up to 45 days in a tax year are allowed under the safe harbor. He left in Aug and didn't return.
However, the 540NR instructions say if he is present in CA more than 45 days in 2010, he doesn't qualify for the safe harbor. He was present before he left (ie, Jan- July).
As a follow up question, is any election or statement required on the return to claim the safe harbor?

[[User:Taxinca]]

Hi, Katie - Here's a link to Taxinca's discussion, since I know you prefer to respond on the boards: [[Discussion:Calif Non-Resident Safe Harbor]].

[[User:Trillium|Trillium]] 02:05, 27 May 2011 (UTC)

== Sorry I missed you the other week ==

when you were in Waynesville. So sad to hear of the loss of a family member too.

I was actually out of the office that day, so I didn't even get your message for a few days when I returned.

Hopefully next time you visit the are it is for happier reasons!

Thanks for calling!

[[User:Kevinh5|Kevinh5]]

Hello Katie,

I'm hoping you can help me with a CA-specific question. It's related to some questions you've answered before but none of them fit this specific fact pattern.

Client had an approx $30k capital loss in 2002, carried forward and only used against ordinary income $3k/yr in subsequent tax returns. The carryover will be just about used up next year.

Now the client has found out that, due to VLCI2 he may have to amend several (but not all) California returns since 2005 to report cap gain distribution income from a foreign account and pay tax on it.

Must the capital losses previously carried forward be brought BACK to 2005 to offset this income? 2005 would use up a portion of the carryover as would 2006, 2007 and 2009 but the amount carried forward year-to-year will obviously change, and for CA only the loss would "run out" before 2010 and additional tax would be due on the 2010 return (independent of the VLCI2 income) because $3000 of ordinary could no longer be offset.

Or should the year-to-year carryforward regime be preserved resulting in additional tax liability for the earlier years of this sequence?

Thanks very much.

Steve
[[User:Newtaxguy|Newtaxguy]] 19:07, 5 August 2011 (UTC)

''Katie - I think that Newtaxguy may have posted a part of that issue on the forum, here: [[Discussion:Cap loss carryover in back year amendment]]; in case you wish to respond there. [[User:Trillium|Trillium]] 19:25, 5 August 2011 (UTC)'''

Hello KatieJ,

We messaged in days past about state composite tax issues and I respect you broad perspective.

Am dealing with reverse credits for taxes paid to other states, specifically where a CA resident has apportioned partnership income in several states including VA (both party to a reverse credit agreement).

So odd to see non-resident VA granting credit for resident CA tax, and CA refusing credit for VA tax. I thought reciprocity agreements in general facilitated portability for wage earners - but business income as well, and across the country?

Does a reverse credit for only pass-through business income make sense to you, i.e pass the "smell test" for intent?

Much thanks,
[[User:Fpayne|Fpayne]] 23:53, 3 October 2011 (UTC)Fpayne[[User:Fpayne|Fpayne]] 23:53, 3 October 2011 (UTC)

== CA unitary return Capital loss ==

Hi Katie,

Its mshikder again. I need to check with you one more thing.

I am filing combined return to CA which consist of all members in a federal consolidated group except for a insurance company. I am leaving out the insurance company because I believe, CA does not impose income/ franchise tax on insurance company.

Anyway, some members have capital gain and one member has capital loss. Should I add back the entire capital loss on CA return for that member?

Thanks again.

I appreciate.

Mohammed
612 859 6644

== CA unitary return Capital loss ==

Hi Katie,

Its mshikder again. I need to check with you one more thing.

I am filing combined return to CA which consist of all members in a federal consolidated group except for a insurance company. I am leaving out the insurance company because I believe, CA does not impose income/ franchise tax on insurance company.

Anyway, some members have capital gain and one member has capital loss. Should I add back the entire capital loss on CA return for that member?

Thanks again.

I appreciate.

== New York CT-3 question ==

Hi Kathie,

I have a follow up question regarding my question at this thread http://www.taxalmanac.org/index.php/Discussion:New_York_CT-3_question. I would be more than willing to pay for your time.I was wondering if you could contact me via khanzade@swbell.netto discuss this matter further.

Regards
AmirK

== CA New Jobs Credit[[User:Bob W|Bob W]] 13:47, 22 December 2011 (UTC) ==

Hi Katie,
I am an out of state preparer and I could sure use some help with this credit for a client in CA. Could you please contact me? bob@raw-cpa.com[[User:Bob W|Bob W]] 13:47, 22 December 2011 (UTC)

== Nah, ==

I just get off on being snarky some days. [[User:Kevinh5|Kevinh5]]

But you're right, it would help if people wrote comprehensible questions in decent English using lower case letters appropriately.

== Does limited partner of an LLC have filing requirment in CA. ==

Hi Katie,

I have many questions:

Does a true limited partner have a filing requirement in CA. A CA partnership has nexus with CA and has a limited partner, that is an llc, without nexus with CA. I believe the limited partner would have a filing requirment to pay tax on their share of income, but no franchise fee.

Should they file form 568. I think they should. It's for 2009, so they would already be late.

I hope this makes sense.

[[User:TOrahaCPA|TOrahaCPA]] 20:28, 9 January 2012 (UTC)Terry

== Los Angeles area preparers ==

Hi Katie,

Hope all is well and the New Year brings forth great promise for you. Anyway, it is that time right now and I had a client come in with an California LLC non filing issue. Didn't file in 2010 and needs to file in 2011.

With the regulations abundance of California tax law, I am hesitant to deal in that state.

My client is a 49% shareholder in the LLC, her sister owns the other 51%, and I have no idea even what kind of business entity they have chosen. The sisters plan was to just go to an H&R Block. Obviously I said Nooooooooooooooooooooooo.

If you know of anyone in the LA area, or you yourself are wishing for new clients, any assistance is appreciated.

[[User:Fsteincpa|Fsteincpa]] 16:41, 10 January 2012 (UTC)

== Sent ==

Email has been sent.

Thanks much for the referral.

[[User:Fsteincpa|Fsteincpa]] 20:19, 10 January 2012 (UTC)

== Terry EA ==

Thanks for the referral. Terry called yesterday and I forwarded his phone number along. We talked for a bit. He seems very nice and was very helpful. We shall see what comes of it.

Thanks again,

[[User:Fsteincpa|Fsteincpa]] 22:19, 12 January 2012 (UTC)

Hi Katie, although I have been using TaxWise software since the 1990 filing season, I have never used the online version. Overall I've been extremely satisfied with the software, even after CCH took over. I've also been using UltraTax for the last few years, and while TaxWise is not even close to the power of UltraTax it also doesn't cost nearly as much. For less than $2,500 for TaxWise I get unlimited everything (all businesses and all states) including unlimited e-files! That won't even buy the base UltraTax package. The office that I use UltraTax in spends about $14,000 per year after PPR and efile fees. Although TaxWise has it's limitations, for the price it is a great program and handles 95% of my clients returns quite easily. For someone with a lot of clients with S-Corps and partnerships I would definately recommend something with better tracking and data-sharing such as UltraTax.

I'm sorry I couldn't give you any insight into the online version.

== TaxWise online ==

Hi Katie, although I have been using TaxWise software since the 1990 filing season, I have never used the online version. Overall I've been extremely satisfied with the software, even after CCH took over. I've also been using UltraTax for the last few years, and while TaxWise is not even close to the power of UltraTax it also doesn't cost nearly as much. For less than $2,500 for TaxWise I get unlimited everything (all businesses and all states) including unlimited e-files! That won't even buy the base UltraTax package. The office that I use UltraTax in spends about $14,000 per year after PPR and efile fees. Although TaxWise has it's limitations, for the price it is a great program and handles 95% of my clients returns quite easily. For someone with a lot of clients with S-Corps and partnerships I would definately recommend something with better tracking and data-sharing such as UltraTax.

I'm sorry I couldn't give you any insight into the online version.

Sorry for the messed up post, I haven't posted on users' pages much!

[[User:Nightsnorkeler|Nightsnorkeler]] 06:01, 3 February 2012 (UTC)

== Taxation of LLC where two owners are CA residents and one is Texas Residence ==

Hi Katie,

First off - Thanks, in advance for your help. I'm a practicing CPA here in San Diego and also a SDSU Grad (long time ago...)

I have a client who does consulting work. They are a LLC formed in CA. Two partners live and work here in CA. One lives and works out of Texas. They work equally for their business and do work for other business' all over the world.

The Texas owner's CPA proposed the following split of income. I don't think this is possible, but am having a problem understanding the rules for allocation of income.

- Each partner will receive $120K in guaranteed payments. This is treated as wages for tax purposes. As such, B's (The texas owner) $120K is subject to TX income tax (or lack thereof) while the two CA owners is treated as CA tax.
- The remaining profits in the company (~$40K per partner) are distributed equally among us, not wages, but ordinary income.
- These monies need to be "apportioned" based on states of residence of the partners: 2/3 of this is subject to CA tax and 1/3 is subject to TX tax.
- The three of us would file CA and TX forms because of the apportionment.
- Additionally, the company would have to do an LLC filing in TX for the apportionment to apply. We are likely to be below the Texas threshold for any entity level taxation.

This is what was proposed by the texas owners' CPA.

Do you think this works?

I read the following document - https://www.ftb.ca.gov/law/notices/1999/99-8att.pdf

This seems to indicate that the owners all split the income based on where the income is earned AT THE PARTNERSHIP LEVEL. So based on this, the owners from CA would be taxed in CA on all their income and the owner from Texas would get taxed on 2/3 of his income to CA.

What do you think?

Again - Thanks, in advance for your help.

Take care- Mark

== Taxation of LLC where two owners are CA residents and one is Texas Residence ==

Hi Katie,

First off - Thanks, in advance for your help. I'm a practicing CPA here in San Diego and also a SDSU Grad (long time ago...)

I have a client who does consulting work. They are a LLC formed in CA. Two partners live and work here in CA. One lives and works out of Texas. They work equally for their business and do work for other business' all over the world.

The Texas owner's CPA proposed the following split of income. I don't think this is possible, but am having a problem understanding the rules for allocation of income.

- Each partner will receive $120K in guaranteed payments. This is treated as wages for tax purposes. As such, B's (The texas owner) $120K is subject to TX income tax (or lack thereof) while the two CA owners is treated as CA tax.
- The remaining profits in the company (~$40K per partner) are distributed equally among us, not wages, but ordinary income.
- These monies need to be "apportioned" based on states of residence of the partners: 2/3 of this is subject to CA tax and 1/3 is subject to TX tax.
- The three of us would file CA and TX forms because of the apportionment.
- Additionally, the company would have to do an LLC filing in TX for the apportionment to apply. We are likely to be below the Texas threshold for any entity level taxation.

This is what was proposed by the texas owners' CPA.

Do you think this works?

I read the following document - https://www.ftb.ca.gov/law/notices/1999/99-8att.pdf

This seems to indicate that the owners all split the income based on where the income is earned AT THE PARTNERSHIP LEVEL. So based on this, the owners from CA would be taxed in CA on all their income and the owner from Texas would get taxed on 2/3 of his income to CA.

What do you think?

Again - Thanks, in advance for your help.

Take care- Mark

== Katie! ==

I am so sorry to read about your recent health issues. Rehab after a stroke can take time, so be sure to'' give yourself'' time... get lots of rest and try to recognize all of the small gains you are making every day. Hope to have you back here at full strength when you're ready. (And at half-strength you probably run circles around most of us anyway. So to speak.)

[[User:Trillium|Trillium]] 03:05, 29 February 2012 (UTC)

== Get well ==

Sorry to hear about your stroke. Hope you have a smooth recovery. Nevermind on my poorly timed question. Take care.

[[User:Jimmer|Jimmer]] 14:39, 29 February 2012 (UTC)

== Get Well Soon ==

Sorry to hear about your stroke, I hope you fully recover. I have read many of your answers and it seems like you have command of many corporate Tax topics like no other. Readers and contributors of Tax Almanac are blessed with your answers, I hope you fully recover and get well soon. I do have an 'S' Corporation COD by shareholder to his 'S' Corporation question. Thank you in advance for your kind help.cloudaccounting 03:08, 4 March 2012 (UTC)

== Stay strong ==

I was sorry to hear your news; but the Katie we know will do battle & come back stronger than ever. As Trillium said, you can run circles around us under any circumstances. Please keep us posted on your progress; your expertise and humor will be missed as you recover. [[User:Belle|Belle]] 17:45, 4 March 2012 (UTC)

== Just a quick "Hello"... ==

Hi KatieJ,
Just wanted to drop a quick note of thanks for your reply to my question, and to let you know you've been added to my prayers for a quick & speedy "Catch-Up"....for a complete recovery! Just keep plugging away!

== CA ==

KatieJ - I had a question for you:

CA LLC (partnership) based in San Francisco has a member that is also an LLC (also taxed as a partnership). This upper-tier LLC is based in NC. When K1 income flows up from the lower-tier LLC (the CA LLC) to the upper-tier LLC (the NC LLC), are there any CA tax withholding obligations...on the flow-thru income itself?

I don't think there is, but thought I'd check.

If I'm right, individual members of the NC LLC, all of whom are CA non-residents, will be part of a CA Group Composite Return, Form 540-NR.

(My recollection and 'real quick' last minute research here seems to indicate that CA withholding tax is only due on actual "distributions" - not on pass-thru income. FYI - This return will be extended, seeing that client just throws this at me at the last minute).

We have always filed CA LLC returns for both entities...but this will be the first year that the thing has made any money.

You're the Best!

[[User:Ckenefick|Ckenefick]] 03:15, 7 April 2012 (UTC)ckenefick

== Thanks! ==

Thanks, KatieJ. I appreciate the feedback. One question...you mentioned:

''The upper tier NC LLC can get a waiver of withholding by agreeing to withhold when it makes a distribution to its individual nonresident members.''

When lower issues K1 to upper tier, upper tier will report said income as CA source and flow it through to the K1's it will issue to the individual members of upper tier. As such, the individual members will pay CA tax on this income (either via a composite return or via filing separate individual returns).

But when said income (a portion, actually - just a tax distribution) is actually paid from lower tier to upper tier (most likely in the following year), and then actually paid from upper tier to individual upper tier members...it seems to me there should be no CA withholding on any of these payments b/c this income has already been taxed to CA.

I've browsed through the pub, but haven't read it thoroughly. I thought I saw something to the effect that if the distributed income has already been taxed in CA, no withholding is actually required.

[[User:Ckenefick|Ckenefick]] 21:14, 14 April 2012 (UTC)ckenefick

== Arthur ==

Katie, I just had occasion to look up your profile (again) and saw that you had a stroke. very sorry to hear it, and really hope you are doing well. Reason I looked you up is that I was answering a question for another TA pro, who turns out to be an Arthur alum, also in CA. Her TA name is CindyLee. There are quite a number of us. Did you happen to see my post kidding you about practicing law w/o a license and my not "catching" you? Len Podolin[[User:Podolin|Podolin]] 22:50, 18 April 2012 (UTC)

Hi Katie,

Very sorry hear the news of your stroke. I hope you are feeling better and recover fully soon. Please feel free to let me know if I could be of any assistance.

Best wishes and regards.

Mohammed

== I hope you are progressing well. ==

So sorry to hear of your recent stroke. We love you. [[User:Kevinh5|Kevinh5]]

Hi KatieJ,

I don't know you beyond this message board but I must say you impress me as quite a terrific person on numerous counts. You obviously are a very eloquent writer and seem quite knowledgeable in taxes. Your profile reads quite well also. I see you suffered a stroke. I never had a stoke per se (although I'm always fearful of getting one) but I did have a heart attack back in 2006. I think any serious medical condition or illness changes your perspective on life and makes one re-think many of the things we take for granted. I certainly wish you all the best and I hope you have a full recovery. We need to hang on to as many good people as we can. Again, thanks for your feedback on my post. I appreciate the help.[[User:Taxman75|Bob K]] 21:33, 10 May 2012 (UTC)

== 2008 SOL NYS ==

Hey Katie! I see you had a response to my post about the 08 SOL for NY. It did not take.....when I look, it has your name as the last poster, but no post.

Thanks for taking the time! Hope you are well.

[[User:Kbairtax|Kbairtax]]

== 2008 SOL NYS ==

Hey Katie....Thanks for clarifying.

I looked on the NYS website too and found as you did...nothing. THe IRS website I did find the right information so I am good there, but I am just not sure if NYS conformed. THey GENERALLY do, but I could not even find antyhing that states the normal. I will keep looking.

Thanks again! [[User:Kbairtax|Kbairtax]]

== 2008 Refund ==

Katie...

I found it in an article on the site, so it is likely not authoritive. BUT, I will use it to my advantage as it was released to the public.

http://www.irs.gov/newsroom/article/0,,id=254725,00.html

Thanks again for taking the time on this!!

[[User:Kbairtax|Kbairtax]]

== 2008 refund ==

Katie....Thanks for you help. I hit the same dead end. What I was more hoping someone knew is where it is that NYS follows the IRS for due dates. Or a court case that may mention that they do. I don't have a good way to search those things for NYS. I can never remember a time when NYS did not, but then again, I have only been doing taxes for 10 years.

If you come across anything, you know where to find me. I am going to fire off a letter and see where it gets me.

Thanks again! [[User:Kbairtax|Kbairtax]]

== 2008 Refund ==

Katie....you made my day! Thanks for the cite. I am going to tuck that way as I see a second letter getting written after NYS denies my first.

[[User:Kbairtax|Kbairtax]] 21:09, 21 May 2012 (UTC)

Hi Katie,

This is Phillysunny, You responded to my issue on demand penaly for 2010 tax return. I would like to know frmo you if I should call them and discuss this over phone and/or also send fax of explanation?

Also I wanted to see if the tax return which was created is right or wrong since now I dont trust my that CPA who is not reachable. FTB said they are taking anywehre upto 11 weeks to process return, So should I take next few days to get my return cleaned and verified and send it by thursday (postmark day) so that it's right. My concern is in case if penalty is not waived I at least need to make sure my actual tax liability is correct/less so that 25% of that is proportionately lesser.

Thanks,

Sonny [[User:Phillysunny|Phillysunny]] 19:02, 11 June 2012 (UTC)

[[User:Phillysunny|Phillysunny]] 19:02, 11 June 2012 (UTC)

== 3805Z Trade or Business Income ==

Katie, Thank you for your recent post on [[Discussion:CA_Form_3805Z_-_Trade_or_business_income_limitation]] and setting WEISSEA straight on what the question is. I was wondering if you had any opinions about my question on how much income is reported by the taxpayer in calculating how much credit they get to claim.

I have received instructions from one of these tax credit mills on how to prepare my client's 3805Z and it does not seem correct.

** Thank you for the reply, Katie.

--[[User:Wiles|Wiles]] 14:23, 29 June 2012 (UTC)

== LP technical termination ==

Hi Katie,
I was in your tax class back in 96. I hope you're doing well and could help with a weird situation I have.

I have a LP client that filed a final 2008 return and mailed the Certificate of Cancellation on 4/12/09.

Unknown to the client (until a few months ago), the Certificate of Cancellation was rejected by the SOS because the signer wasnt the GP on record.

He recently got a FTB notice for the 09 tax return. In order to cancel with the SOS, he filed the amendment to change the GP to an SMLLC and also the Cert of Cancellation of 1/12/12. It was accepted and endorsed by the SOS.

Now we don't know what to do about the 09, 10, and 11 CA tax returns. My original thought was to file the 565 for those years and pay the tax. The odd thing here is that all the other partners left as of 12/31/08, so that would that leave just the one GP for 09, 10, 11? By defintion, the partnership terminated with the greater than 50% change. Could I argue that the LP had a technical termination on 12/31/08 and therefore not liable for the $800 tax for those later years?

Also, the new GP is an SMLLC which will dissolve this year. The LP was never profitable and never made distributions to the partners.

Any thoughts would be appreciated.
Thanks.
[[User:Birdman|Birdman]] 19:05, 10 July 2012 (UTC)

== California LLC ==

dear Katie,

I am not a tax professional and I have been reading some of the posts in an attempt to better understand the tax liabilities of our California LLC (me and my husband and two friends) which provides scientific consulting. For example, I learned from your posts that LLCs are not supposed to give partners wages, but rather guaranteed payments, something I had not expected. In short, we can really use a tax professional like you to help us with tax planning and returns. We are in San Diego and we like to know if you are still accepting clients. If not, we would really appreciate your referral of other CPAs.

Thank you kindly,

Chuan

8583577134
csuanza@yahoo.com

== EZ Credit ==

Katie, Just wanted to let you know that I updated the thread.

--[[User:Wiles|Wiles]] 23:27, 11 July 2012 (UTC)

KatieJ - I'm so sorry to hear about your health. I hope your recuperation is going well.

Here's a really odd issue to consider if you feel like it.

I have a client here in Maryland who moved out of state Oct 2011. He is owner of a very profitable S corp, only 5% of the income being allocated to MD.

So I was assuming that I would include 3/4 of the S corp income on his resident return.

But, now I see MD Administrative Release 8, which tells me that ALL of the 2011 S corp income is allocated based on where his residence was as of the last day of the year!

This is costing the state of MD hundreds of thousands in taxes on this return, but I suppose they would make up for it with taxpayers who move into the state part way through the year, which of course with tax rates approaching 10% is getting less and less likely.

Is that odd? Do you know if other states have this rule, as opposed to simple proration based on days of residence in the state?

Smokeytax

[[User:Smokeytax|Smokeytax]] 09:41, 24 August 2012 (UTC)

== Better ==

i hope you are doing well. [[User:RoyDaleOne|What do I know?]] 14:21, 27 December 2012 (UTC)

== Special allocation of multi-state income ==

Hi Katie

I was in the Masters program (tax) at SDSU in late 80's and took a class from you while studying there.

I have a client who gets a K-1 from a multistate business that apportions their income. The LLC does commodity trading from multiple office locations. One of the partners in OK gets an override on the CA office income. He gets a distribution payment for that income. The apportioned K-1 income from CA is much larger. The CA partner is getting income apportioned from OK, but he has no interest in the OK office, or their profits.

Could they have a special allocations agreement to specially allocate the partners income, to be weighted by the actual income sourced from each state? Any excess or shortfall would be allocated on the weighted average. CA apportioned income would still be allocated the same, but the alllocation amongst the partners would be different based on the economic reality of their earnings source. This would be part of the shareholder agreement. Would CA have a problem with this? Would it have to be approved by CA ahead of time?

I looked at CA 25137 regarding a petition for a special allocation - is this ever approved?

Thank you

Brucebca[[User:Brucebca|Brucebca]] 17:28, 18 January 2013 (UTC)

brucebcpa@hotmail.com

Hi Katie,

I hope you are recovering well from your recent stroke. I see you have made some great contributions to this site I am thankful to you for that.

I came across your page while searching for an answer to my state sourced income question and I see that you are an expert on state tax issues. I was hoping you may be able to provide some insight to my recent question.

The post is located at the below link. Thank you.

http://www.taxalmanac.org/index.php/Discussion:Truck_Driver_/_Maine_State_taxes_(source_of_income)

== CA - change of domicile to WA ==

Hi KatieJ - I hope you are recovering well. Your knowledge on residency is impressive!!

I have a client who is moving out of CA to WA for a new long term job - maybe 4-6 years, to work with a company to the point of sale, then sell the company for a substantial amount of money. We are trying to make sure that domicile is changed to WA. They have two houses here in CA - one in the mountains, and one "regular" they have lived in for years.

My question is - I know that CA wants the intent for them to be gone either permanently or indefinitely. They will do the usual - change voter registration, drivers licenses, new church, etc. But what about the house in CA? They want to keep it, and potentially move back in 5 or so years. Is the 5 years indefinite enough to be gone and not considered domiciled in CA? I have read they should lease the house unfurnished to an unrelated 3rd party to at least sever this tie. Would it hurt the domicile issue if they moved back into this same house 4-6 years later? Any chance that 5 years is long enough that they could let their adult daughter live in the house rent free - or is that not a permanent severing of the ties? The spouse wants to come back to CA one week a month to visit her daughter, and also spend time in the mountain house. How does the sever look in that situation?

The biggest concern is that if this new company in WA does indeed sell in 4-6 years, then we don't want CA to tax on the sale. The 546 day rule won't work in their instance since they plan to be in CA more than 45 days each. The current home in CA is really the sticky point right now.

Thank you so much.

[[User:Lemon-aide|Lemon-aide]] 21:00, 5 August 2013 (UTC)

== Nexus thread ==

Hi KatieJ,

I see Fred drew you back to TA today. I am glad to hear you are doing well.

I don't know if you stuck around long enough to see an old thread was bumped up by yours truly. [[Discussion:What_is_nexus%3F]]. I would really appreciate any input you can provide on this.

You need to spend less time on Facebook and more time with your real friends here on TA.

--[[User:PVVCPA|PVVCPA]] 22:11, 12 September 2013 (UTC)

Thank you for taking the time to respond. I very much appreciate it. I hope to see you around TA more often.

--[[User:PVVCPA|PVVCPA]] 14:53, 14 September 2013 (UTC)

Discussion:Obamacare - outrageously high premium increase

PVVCPA — Thu, 12 Sep 2013 22:18:09 GMT

PVVCPA:

{{General Chat}}


{{ForumNewPost|UserID=Natalie|Date=September 12, 2013|Text=I just received a notice from my health insurance carrier. My family premium is expected to go up 59% next year after my current contract runs out and Obamacare kicks in. If I drop my dependents, the single plan will be 33% higher than the current rate.

Has anyone else received projected rates or received information from clients?}}

{{ForumReplyPost|UserID=Fsteincpa|Date=12 September 2013|Text=Mine renews in March or April. Should be fun.

Natalie, you have insurance through your firm correct? }}

{{ForumReplyPost|UserID=Natalie|Date=September 12, 2013|Text=Yes, that's correct. My contract ends 6/30/14, but they sent out a notice with the new rates.}}

{{ForumReplyPost|UserID=Kevinh5|Date=12 September 2013|Text=My notice from Blue Cross said 'The good news is that health care reform will likely have minimal impact on you because you have a Grandfathered Plan. That means you're protected from the significant rate increases that others may face due to health care reform.'

Just opened it, I was going to throw it out as junk mail until I read your post.}}

{{ForumReplyPost|UserID=CrowJD|Date=12 September 2013|Text=Unlike most civilized Western countries who realized that a single payor system is more efficient and would cut down on numerous insurance contracts, and numerous hospital and doctor employees to construe those contracts, the dirty deal with Obamacare was that we left the private insurers in the mix.

The private insurer is NOT your friend.

'''On top of that, when certain people went around the country telling lies about the Public Option (and the so-called Death Panel), they got rid of the only leverage we had to hold in private insuers in check.''' ''' That leverage was the public option.
'''

In my state of Georgia, the elected insurance commisioner says openly that he will do everything in his power to thwart the law. Even one of our most notable Georgia conservative journalists pointed out that he was shooting the people of Georgia in the foot.

Bottom Line: whether you know it or not, our health system in the USA is in absolute crisis. I know this from many years of collecting medical debt. I saw many cases where insurance companies had screwed their customers royally and on purpose and left them high and dry to pay a bill. After we sued a patient and the patient tried to bring in his insurer to pay, I saw the insurance companies remove these cases to Federal court, as permitted under ERISA, where they would sit for years, and the poor patient on the hook for thousands in medical debt.

Our system is broken. Go ahead and repeal Obamacare or destroy it, but it will not be the end of the story I can assure you.

Private for profit insurance companies do not belong in the health business, just as they do not belong in the fire suppression business. Most first departments are either public or volunteer....for a good reason. You should not have to be a millionaire to have a fire put out at your house AND we don't need to have 20 firehouses on a corner all operated by different private companies.

If we want to reduce costs, go to a single payor system AND definitely give experienced nurse practitioners and Physician Assistants the right to open their own offices (especially in poor urban and rural areas).

}}

{{ForumReplyPost|UserID=H.D. Freifunk|Date=12 September 2013|Text=@Kevin: My notice from Blue Cross said 'The good news is that health care reform will likely have minimal impact on you because you have a Grandfathered Plan. That means you're protected from the significant rate increases that others may face due to health care reform.'

Wow. That sentence from Blue Cross is a "tad" loaded in my opinion. :) Of course they are private now. And many of OUR former not-for-profit community hospitals were allowed to go profit by corrupt politicians in the 90s. But where was the payback to the general public for years of a non-profit status? What did the community get for THEIR hospital? I won't go into this any further now. I've discussed it here before.

Obamacare may turn out not to be the answer, but don't kid yourselves, we will not return to the status quo. The status quo is chaos and it is not sustainable.}}

{{ForumReplyPost|UserID=PVVCPA|Date=September 12, 2013|Text=Our broker is doing early renewal for us and we are getting by with *only* a 20% increase. It would be 40%-50% increase if we waited for regular renewal cycle.}}

User talk:KatieJ

PVVCPA — Thu, 12 Sep 2013 22:14:20 GMT

PVVCPA:

User talk:KatieJ

PVVCPA — Thu, 12 Sep 2013 22:13:20 GMT

PVVCPA: /* Nexus thread */ new section

{{UserTalkPageHeader}}

__TOC__

Katie,
Was wondering if you could help me understand how guaranteed payments are apportioned as CA source income for nonresident members? If an LLC does business within and without CA, but the member never steps foot in CA, is his guaranteed payment sourced as CA income in accordance with the regular business apportionment % of the LLC or is it based on nexus for that member? If so, what effect does this have on the payroll factor? I have read through notice 89-493, CA R&TC 17854 & 17951-4 and the instructions. Still confused as to how this all fits together. My understanding is the payroll factor will vary depending on if they are a professional services firm. I did see a previous post relating to this and you indicated that the payroll factor still applies the 60/40% test (it sounded like you had a good historical perspective on this). Is the 60/40% allocation found in the example at R&TC 17951-4(g) applicable to "both" professional service and non-professional service firms? BTW: The CA FTB could not answer my question.

Thank you,

[[User:Gregj|Gregj]] 15:11, 3 November 2010 (CDT)

== Of course not! ==

Every user gets to choose who they respond to!! I know you often like to know a bit about the level of experience of those you're helping, so I was kind of hoping he'd update his user page before you read his question. You're one who certainly does tend to answer differently for the newbies than to the pros, often with a different level of detail and/or complexity. But you're also good at getting a sense for people based on the content of their questions, too.

Anyway, apologies for "eavesdropping," so to speak. One of the reasons I spend so much time on the site is to learn a lot, and I knew I'd pick up some good tips from your response to Greg. Which is yet another reason I wish he'd have posted it out on the forums, for all to learn from.

[[User:Trillium|Trillium]]

== Actually, I've been known to respond politely to many ==

without profiles, but then ask for a profile before any further discussion. Trillium isn't the only evesdropper (now where did that name come from?). [[User:Kevinh5|Kevinh5]]

Hampton Court Palace outside London was the palace of King Henry VIII of England. In the eaves of its Great Hall, small faces are carved into the oak beams which lean at an angle of 45 degrees to the ground. These are known as 'Eaves Droppers'. Henry was known to be a strong ruler and often put spies in crowds of people to listen in to conversations. He wanted his staff (who slept in the Great Hall between banquets and would lie on straw looking up at the eaves) to know that he or his people would be listening at all times.

== Cleanup ==

Having been reminded (by Trillium) that nothing is ever lost in this wiki environment, I have cleaned up my talk page by deleting everything up to current entries. All the old questions are still there under the "history" tab. [[User:KatieJ|KatieJ]] 12:01, 4 November 2010 (CDT)

== Distribution and AAA ==

Hi Katie, I read your profile and feel that I have good connection with you- simply because I am a working mom.
I try to understand more about the distribution and AAA, from the accounting and tax views. For distribution, it is reported on page 3 of Form 1120s, what other area I need to make entries- equity a/c or on the client's book? Another area I am very vague, it is the AAA account.In NJ, the numbers just flow through automatically from the software, I am not sure if it is right. How do I keep track of it? I don't remember I have learned all of these when I took my accounting courses years ago. Is any taxation book out there will help me to master these area better?
I read your thread and liked your answer and found out you were a teacher- no wonder!
Thanks for reading & Have a good day!
JYC Tax

Katie:

You were very helpful with your reply regarding the consolidated tax return. I was wondering if I can speak with you on the phone. My emial is k.olson@cox.net and my phone number is 310-864-3371.

Thank you for your cooperation.

Sincerely,

Kathleen Olson

== CA apportionment ==

KatieJ,

I [[Discussion:CA state income source changes ??|posted this question]] a few days ago but no replies. Since I've seen several of your posts in the past regarding CA taxes, I hoped maybe you could shed some light on my situation as follows:

Can someone please help me regarding a 2010 CA apportionment issue? I have a partnership client who is located in IL and performs most of his services in IL. In 2010 he did some work for a few CA hospitals and I am trying to dfetermine whether he will have a filing requirement in that state. For two of the clients he performed less than 50% of the work in CA, but for the third he performed more than 50% of the work in CA. Overall between the three clients less than 50% of the total work for CA clients was performed in CA.

Based on these figures would we need to apportion any of the income to CA? To add another twist, our client called FTB and spoke to someone who told him that "analysis was different than consulting" and that because he was only doing "analysis" in CA and the "consulting" while he was back in IL that none of the income would need to be apportioned to CA. This part sounds strange to me, but then again we only do a few CA returns which are much more straightforward.

Thanks in advance for any comments.

[[User:Nightsnorkeler|Nightsnorkeler]] 16:21, 8 January 2011 (UTC)

== State Nexus ==

Hi KatieJ, I posted a question on message board ([[Discussion:Nexus Court Awards]]) and JR suggested you would be the person to help answer. I am Johncpa99.

Here is the fact pattern: My client is a law firm with offices in VA. All personnel/offices are in VA; however, due to the nature of the lawsuits (class action) the attorney often travels to a different states where the trials are located. Question: Does the state where the trial is located have nexus on any proceeds awarded to attorney (ie. commissions on settlement. The only presence in the trial state is to have the trial. Would it matter if stayed at a hotel/rented an office, etc?

Thank you in advance for any help.

== Johncpa99 ==

if easier, my direct email is sternercpa@yahoo.com

Again, Thank you very much.

== Maybe you'ld like to change this... ==

Katie, you've got this out there: "An S corporation may own up to 100% of the stock of another corporation, S or C."

But the owned corp can't be an S because it has a corporation owning its stock. I respect your technical moxie enough that I didn't just rush in and mess with what you've posted - which I might have done if this had been one of those young whippersnapper know-nothing know-it-alls...

[[User:Harry Boscoe|Harry Boscoe]]

== From XZ ==

Hi Katie:

Thank you very much for answering my question regarding S-corp income apportionment between NC and AZ.

Can you please answer my other post about personal use of auto? I know I am asking too much favor from you. I am starting out on my own in my second year and I am trying hard to do a good job. I will try to spend time answering questions from other forum members to contribute to the forum.

Thanks,

xz

== Husband in CA, Wife in OH ==

Was wondering if you could help me out? I have a client that moved to CA from OH, his wife his stayed in OH to continue working. They have two homes and for the near future she does not plan to move out there. I am not familiar with CA tax law to fully understand where the income will be taxed. They are planning on filing MFJ for federal purposes. My first inclination is that the CA income is taxed in CA on a part-year resident return and all OH income is taxed in OH on a resident return. Any insight or direction on where to verify would be helpful. Thank yyou in advance.

== You can find out if someone posted a question (other than on your talk page) ==

by looking at their contribution history (Contribs or Edits)

http://www.taxalmanac.org/index.php/Special:Contributions/Romine17

[[User:Kevinh5|Kevinh5]]

Katie,

What happens to E&P when a S corp that has E&P from prior tax years when it was a C corp, converts to a LLC (partnership)? Does the presents of the E&P make such a conversion unavailable? or must the E&P be purged before the conversion is done? do you have citations?

== massachusetts husband /wife 50/50 interest LLC. ==

Hi Katie,

I was looking for some guidance on this issue. here's some background.
I have a client of mine who owned a pizza shop ( an s-corp) filed a 1120 s every year.

he sold his business to his son in law. in march 2010. the son in law's lawyer set it up as a LLC with husband and wife each owning a 50% interest.

The IRS sent the ss-4 saying they should file a form 1065.

The son in law has been getting a paycheck from the corp since march 2010.

I don't think they want to pay self employment taxes on icome of the corp if possible.

is there a way that i can have them taxes as an s-corp. both on fed and state of Massachusetts?

what are the steps I would have to take at this point in time to do this?

Thanks
Ted

== CA multistate tax ==

Hi Katie,

Have a CA tax question for you.

Effective in 2011, California has adopted the "factors presence" nexus test that was proposed by the MTC in 2002. Any business with more than $50K of property or payroll, or more than $500K of sales, in the state, and that is not protected from a net income tax by Public Law 86-272, will be considered "doing business" and subject to the franchise tax.

So if a WA Company has an employee in CA state protected by 86-272 (mere solicitation), they will not be considered doing business even if they are doing 4 million in sales to CA for income and franchise tax? This is an LLC by the way.

On the flip side, if they have an employee doing more than just sales, but less than 500k in sales, say 400k, they wouldn't be considered doing business in CA and don't have to file? Or do they get you since you should be registered anyway?

In advance, thank you for being a great resource to the community.

Thank you,

Neil

Katie:

Here, I hope a private post, for the moment.

Yea, giving TAX advice (and asking questions) is scary!

One could be at a place with others just waiting to pick you apart for NOT 100% CORRECT!

It takes guts to post here!

That was me in multi-state. I was thinking a company had to be DOING Business in a state to be taked there, meaning not just producing something but also SELLING IT FROM-WITHIN that state.

I am ''familiar'' with multi-state (aka CA 100R) and the 3 factors (well now 4 with sales twice).

Plant is one, but i guess I was thinking it was a factor IF one was DOING BUSINESS (as I state above) in the state, not that IT gave the state NEXUS over the company.

I read YOU ARE/WERE CA FRANCHISE TAX BOARD.

This is a question for the forum, but I's rather, for the moment to not have the guts for there.

I have a 30 year client who developled (in my Opinion) THE BEST FULL CONSTRUCTION (JUB-COSTING) ACCOUNTING SOFTWARE WITH MULTI-STATE PAYROLL.

His proprietorship, now a LLC was located in CA from 1978 to 2006 when he moved his family (wife and two married sone & wives) to Texas.

His sales are all via Internet and from software conventions in Las Vegas and back east (non in CA)

His program support is all from employees in the company's Texas office OR one Long-Term ("family-type") lady WHO LIVES IN CALIF!
She provides ALL her program support to the company's clients through out the USA FROM the desk and computer in her HOME.

CA SAYS THAT IS NEXUS AND "YOU" "WILL" APPROTION YOUR LLC INCOME TO CALIF (oh and the 540NR's for the Husband & Wife LLC owners).

Katie, during tax season, and I've spent (ordered) $500 worth of multi-state text for such as Kattie Wright I have to research this.

Katie, I HAVE NO CLIENTS, I ONLY HAVE FRIENDS WHOM I CHOSE TO PROVIDE MY SERVICES TO (my definifion of Friend comes from '68nam when that meant you gave ALL to protect someone YOU CHOOSE to be YOUR FRIEND)

This CA 100R does not FEEL right, it may be legally right but doesn't feel right. ONE employee form a computer, no "Boots (heel) on the groung!

Thank You for listening

Hugh

OH I had a post before this in reply to your post (the S-Corp multi-dtate) that I started here but moved to the forum.

== Actually ==

could you give me your off-site email address so I can speak off-site. Thanks kevinhuston@msn.com [[User:Kevinh5|Kevinh5]]

I just sent an email to you, please check to see if it went to your 'junk' folder. [[User:Kevinh5|Kevinh5]]

== Kay ==

I would really appreciate your ear, wise Katie. I filed as small business. Portrait painter made under 12,000 gross and did not claim my sons ssi death benefit. I am now being audited by the state. Do they have access to my bank accounts? Do I have to claim my son's benefits? I lied to get the education credit also. Am I doomed on the federal level as well? shaking in my second hand boots here, Kay

[[User:Kay9]]

==Resources for non-pros==

Hi, Katie! I will, of course, leave it up to you whether or not you respond to Kay at all, but I thought you might want to point Kay to some of the resources we have for non-pros on the top of the [[Discussion Forum - Consumer Questions|Consumer Questions]] page. In particular, finding free tax prep locations by state/county/city, a search engine offered by the University of Missouri: [http://extension.missouri.edu/hes/taxed/sites/Default.aspx Find VITA, TCE or AARP sites], and [[Discussion:How_to_find_a_local_Tax_Professional|Finding a local tax preparer]].

(To copy/paste that entire block of text, your best bet is to click "edit this page" and scroll back down here to the bottom, and highlight the version that has the actual links spelled out. If you just click the text content, the links may not be functional once you paste them on someone else's user page. Let me know if you need more info on that, or if you'd rather I just send a note to Kay with that info, myself.)

[[User:Trillium|Trillium]] 22:31, 6 March 2011 (UTC)

== State Tax for travelling consultant ==

In which state to file state tax for salaried travelling consultant who works for a IT company that has office in California but clients in all states. Consultant travels to differnt client location (e.g AZ or any other state) from Monday to Thursday and returns home in Kansas on Friday and Spouse working locally in Kansas.
Consltnat's employer deducted tax state for California and spouse's employer deducted tax for Kansas.

Is it appropriate to file joint return as Resident for Kansas and Non-resident for California?

Thanks
Rajesh

Hi Katie - You have helped me on one or two state questions over the years and hoped you could answer this one. A client moved from PA to So. Korea for a new job with UC Riverside. (no CA residency) He is receiving the foreign income exclusion (as physical presence for this year). His W-2 from Riverside shows CA state income (no withholding), but should he file a CA return as non-resident since it is a CA source income? And after reading through all the CA instructions - it doesn't look like they accept the foreign income exclusion, so he would end up owing tax to CA - does that sound correct? Thank you.
[[User:Krav|Krav]] 15:26, 5 April 2011 (UTC)

Hello Katie, I wanted to personally (well as personally as I can using this venue), to thank you so much for ALL your help.
I should have guessed that you are (were) a teacher by the precision and clarity of your responses to my mundane question, thank you and in case you do not know who this is, your last reply to Boblink (who is also retired) was:

"With respect to whether the LP is an "investment partnership" for IRC Sec. 721(b) purposes, I believe it depends on whether there are other investors, family members, etc. who will also be contributing similar assets. If the client is the only contributor, so that he is not diversifying his investments by putting them into this vehicle, then I would guess it comes under 721(a) and no gain is recognized. If there are other contributors, I couldn't tell you how much "diversification" is enough to bring it under 721(b). I know just enough about this to be dangerous. That's about how much you will know after you have been through a basic partnership tax course such as the CCH offering. Enough to be dangerous."

The Living Trust along with the LP and the S-Corp were not intended to be a "scam" or anything that was illegal, immoral, unethical,..... but were a vehicle to help "protect" assets and avoid probate.
Unfortunately the only objective of the attorney that set up this arrangement was to make money, which he is entitled to but leaving the documents without an explanation of what they are, how they relate to each other and what to do with them, was not on his agenda but the die is cast, it is what it is.
The Living Trust is a 99.5% partner in the LP whose only "business" is buying and selling stock but I'll read up on 721(b) just to make sure that I am not overlooking anything.
And as far as being dangerous, I believe that ignorance is more dangerous than having a bit of knowledge because you may know enough to realize that you really don't know anything.
Thank you again for helping me through this maze.
Regards,
Bob

Please make sure to sign your message by adding four tildes: [[User:Boblink|Boblink]] 02:50, 24 April 2011 (UTC) at the end of your message
I am not sure what [[User:Boblink|Boblink]] 02:50, 24 April 2011 (UTC) means but here it is

== Tax Ramifications for Profits, Loses and Withdrawals for a Limited Partnership? ==

Hi Katie - You have helped me on one or two state questions over the years and hoped you could answer this one. A client moved from PA to So. Korea for a new job with UC Riverside. (no CA residency) He is receiving the foreign income exclusion (as physical presence for this year). His W-2 from Riverside shows CA state income (no withholding), but should he file a CA return as non-resident since it is a CA source income? And after reading through all the CA instructions - it doesn't look like they accept the foreign income exclusion, so he would end up owing tax to CA - does that sound correct? Thank you. Krav 15:26, 5 April 2011 (UTC)

I wanted to personally (well as personally as I can using this venue), to thank you so much for ALL your help. I should have guessed that you are (were) a teacher by the precision and clarity of your responses to my mundane question, thank you and in case you do not know who this is, your last reply to Boblink (who is also retired) was:

"With respect to whether the LP is an "investment partnership" for IRC Sec. 721(b) purposes, I believe it depends on whether there are other investors, family members, etc. who will also be contributing similar assets. If the client is the only contributor, so that he is not diversifying his investments by putting them into this vehicle, then I would guess it comes under 721(a) and no gain is recognized. If there are other contributors, I couldn't tell you how much "diversification" is enough to bring it under 721(b). I know just enough about this to be dangerous. That's about how much you will know after you have been through a basic partnership tax course such as the CCH offering. Enough to be dangerous."

The Living Trust along with the LP and the S-Corp were not intended to be a "scam" or anything that was illegal, immoral, unethical,..... but were a vehicle to help "protect" assets and avoid probate. Unfortunately the only objective of the attorney that set up this arrangement was to make money, which he is entitled to but leaving the documents without an explanation of what they are, how they relate to each other and what to do with them, was not on his agenda but the die is cast, it is what it is. The Living Trust is a 99.5% partner in the LP whose only "business" is buying and selling stock but I'll read up on 721(b) just to make sure that I am not overlooking anything. And as far as being dangerous, I believe that ignorance is more dangerous than having a bit of knowledge because you may know enough to realize that you really don't know anything.
Thank you again for helping me through this maze.
Regards, Bob
[[User:Boblink|Boblink]] 02:55, 24 April 2011 (UTC)

P.S.-this is a DUPLICATE of a message that I sent/left without the topic/title

==Apportioning Guaranteed Payments==

Hi Katie,

I saw [[Discussion:1065 apportionment between ca, nj|some of your posts]] on having to "apportion guaranteed payments by the same percentage as distributive shares of income." I have been looking into this and have come to the same conclusion. My situation is with an LLC where a member is providing services as if he was an employee. The company could easily hire an outside manager and I would argue there shouldn't be a different tax outcome. The member in this case has a very small interest in the LLC. I'm surprised I haven't found more on this. So far I know that MI and MN source the GP to where the partner worked. Also for international tax the IRC also sources based on where the services were performed. Have you seen any journal articles on this? One work around is to call it a 707(a) payment in a non-partner capacity and then prepare a 1099.

Thanks
Justin

23:06, 30 April 2011 [[User:Jlafber]]

Hello KatieJ,

I took your advice and read over this case (http://www.taxpravo.ru/sudebnie_dela/statya-81297-William_A_Price_v_Commissioner_United_States_Tax_Court_-)

Interested to know, do you think if the legal entity owning the hospital had been structured differently than Mr. Prince would have won?

All the best,

Covance

== Safe Horbor (I worked in Asia & my family live in California) ==

Hi KatieJ,

I left California since March 2006 to work for Philips in Hongkong & China! I then changed my job to another Hongkong company working in China from September 2007 through February 2010! On March 2010 I started with another company working in China. I am now temporary back to US to sell my house in San Diego. The plan is to also move my wife to HK/China. The kids are all in colleges now.

I travelled back to California once a year for about 3-4 weeks. I have no intangible incomes from any sources. All incomes were from working in Hongkong/china.

While I was out in HK/China, my wife and 3 childrens are living in California. My wife is a homemaker!My 3 childrens attending schools in California!

California FTB is now questioning me on my 2009 tax return... I thought I am qualified for the safe harbor rule... So, I didn't file any California tax return while I was away eventhough my family are in California!

Questions:
1. I believe I qualified for safe harbor rule, am I?
2. Do I still need to file california return for 2009? They didn't ask for 2007, 2008!
3. how do I claim safe harbor? Letters from the companies I worked for in Hongkong/china? My passport?
4. I heard some said I qualified for safe harbor but my spouse NOT and some also said she has to file with half of my income? If this is the case, can she still able to itemize full deduction from mortage,...?

Please advise...

Thanks

TomKung
[[User:Tomkung|Tomkung]] 11:16, 12 May 2011 (

'''''KatieJ,

'''''I updated my profile per your request but I can't find the consumer's board, so, I posted under Intuit Tax Questions area...Please Help''

'''Thanks
'''Tomkung 03:05, 14 May 2011 (UTC)'''''

== Don't know where ==

Hi, Katie: I don't know where your non-pro posted his question. It wasn't on this site, and I checked the other intuit boards, including the TurboTax board - which is where he really should be posting anyway - and I didn't see a relevant question on any of those.

Perhaps he should just be redirected to either [https://ttlc.intuit.com/app/full_page TurboTax community] to post the question there, or better yet, [[Discussion:How to find a local Tax Professional]], so he can work with someone who can understand the entire situation and implications of any elections, etc.

[[User:Trillium|Trillium]] 14:38, 14 May 2011 (UTC)

== Non-resident safe harbor ==

I posted this on tax almanac and did not receive any comments. I was wondering if you could help me with this issue. Thanks in advance for any help:

My client left Calif in Aug 2010 under a > 546 day employment related contract and has not returned. Question: Can he be considered a PY resident in 2010 under the safe harbor?
My confusion is that FTB Pub 1031 and §17041(d) say "return" visits up to 45 days in a tax year are allowed under the safe harbor. He left in Aug and didn't return.
However, the 540NR instructions say if he is present in CA more than 45 days in 2010, he doesn't qualify for the safe harbor. He was present before he left (ie, Jan- July).
As a follow up question, is any election or statement required on the return to claim the safe harbor?

[[User:Taxinca]]

Hi, Katie - Here's a link to Taxinca's discussion, since I know you prefer to respond on the boards: [[Discussion:Calif Non-Resident Safe Harbor]].

[[User:Trillium|Trillium]] 02:05, 27 May 2011 (UTC)

== Sorry I missed you the other week ==

when you were in Waynesville. So sad to hear of the loss of a family member too.

I was actually out of the office that day, so I didn't even get your message for a few days when I returned.

Hopefully next time you visit the are it is for happier reasons!

Thanks for calling!

[[User:Kevinh5|Kevinh5]]

Hello Katie,

I'm hoping you can help me with a CA-specific question. It's related to some questions you've answered before but none of them fit this specific fact pattern.

Client had an approx $30k capital loss in 2002, carried forward and only used against ordinary income $3k/yr in subsequent tax returns. The carryover will be just about used up next year.

Now the client has found out that, due to VLCI2 he may have to amend several (but not all) California returns since 2005 to report cap gain distribution income from a foreign account and pay tax on it.

Must the capital losses previously carried forward be brought BACK to 2005 to offset this income? 2005 would use up a portion of the carryover as would 2006, 2007 and 2009 but the amount carried forward year-to-year will obviously change, and for CA only the loss would "run out" before 2010 and additional tax would be due on the 2010 return (independent of the VLCI2 income) because $3000 of ordinary could no longer be offset.

Or should the year-to-year carryforward regime be preserved resulting in additional tax liability for the earlier years of this sequence?

Thanks very much.

Steve
[[User:Newtaxguy|Newtaxguy]] 19:07, 5 August 2011 (UTC)

''Katie - I think that Newtaxguy may have posted a part of that issue on the forum, here: [[Discussion:Cap loss carryover in back year amendment]]; in case you wish to respond there. [[User:Trillium|Trillium]] 19:25, 5 August 2011 (UTC)'''

Hello KatieJ,

We messaged in days past about state composite tax issues and I respect you broad perspective.

Am dealing with reverse credits for taxes paid to other states, specifically where a CA resident has apportioned partnership income in several states including VA (both party to a reverse credit agreement).

So odd to see non-resident VA granting credit for resident CA tax, and CA refusing credit for VA tax. I thought reciprocity agreements in general facilitated portability for wage earners - but business income as well, and across the country?

Does a reverse credit for only pass-through business income make sense to you, i.e pass the "smell test" for intent?

Much thanks,
[[User:Fpayne|Fpayne]] 23:53, 3 October 2011 (UTC)Fpayne[[User:Fpayne|Fpayne]] 23:53, 3 October 2011 (UTC)

== CA unitary return Capital loss ==

Hi Katie,

Its mshikder again. I need to check with you one more thing.

I am filing combined return to CA which consist of all members in a federal consolidated group except for a insurance company. I am leaving out the insurance company because I believe, CA does not impose income/ franchise tax on insurance company.

Anyway, some members have capital gain and one member has capital loss. Should I add back the entire capital loss on CA return for that member?

Thanks again.

I appreciate.

Mohammed
612 859 6644

== CA unitary return Capital loss ==

Hi Katie,

Its mshikder again. I need to check with you one more thing.

I am filing combined return to CA which consist of all members in a federal consolidated group except for a insurance company. I am leaving out the insurance company because I believe, CA does not impose income/ franchise tax on insurance company.

Anyway, some members have capital gain and one member has capital loss. Should I add back the entire capital loss on CA return for that member?

Thanks again.

I appreciate.

== New York CT-3 question ==

Hi Kathie,

I have a follow up question regarding my question at this thread http://www.taxalmanac.org/index.php/Discussion:New_York_CT-3_question. I would be more than willing to pay for your time.I was wondering if you could contact me via khanzade@swbell.netto discuss this matter further.

Regards
AmirK

== CA New Jobs Credit[[User:Bob W|Bob W]] 13:47, 22 December 2011 (UTC) ==

Hi Katie,
I am an out of state preparer and I could sure use some help with this credit for a client in CA. Could you please contact me? bob@raw-cpa.com[[User:Bob W|Bob W]] 13:47, 22 December 2011 (UTC)

== Nah, ==

I just get off on being snarky some days. [[User:Kevinh5|Kevinh5]]

But you're right, it would help if people wrote comprehensible questions in decent English using lower case letters appropriately.

== Does limited partner of an LLC have filing requirment in CA. ==

Hi Katie,

I have many questions:

Does a true limited partner have a filing requirement in CA. A CA partnership has nexus with CA and has a limited partner, that is an llc, without nexus with CA. I believe the limited partner would have a filing requirment to pay tax on their share of income, but no franchise fee.

Should they file form 568. I think they should. It's for 2009, so they would already be late.

I hope this makes sense.

[[User:TOrahaCPA|TOrahaCPA]] 20:28, 9 January 2012 (UTC)Terry

== Los Angeles area preparers ==

Hi Katie,

Hope all is well and the New Year brings forth great promise for you. Anyway, it is that time right now and I had a client come in with an California LLC non filing issue. Didn't file in 2010 and needs to file in 2011.

With the regulations abundance of California tax law, I am hesitant to deal in that state.

My client is a 49% shareholder in the LLC, her sister owns the other 51%, and I have no idea even what kind of business entity they have chosen. The sisters plan was to just go to an H&R Block. Obviously I said Nooooooooooooooooooooooo.

If you know of anyone in the LA area, or you yourself are wishing for new clients, any assistance is appreciated.

[[User:Fsteincpa|Fsteincpa]] 16:41, 10 January 2012 (UTC)

== Sent ==

Email has been sent.

Thanks much for the referral.

[[User:Fsteincpa|Fsteincpa]] 20:19, 10 January 2012 (UTC)

== Terry EA ==

Thanks for the referral. Terry called yesterday and I forwarded his phone number along. We talked for a bit. He seems very nice and was very helpful. We shall see what comes of it.

Thanks again,

[[User:Fsteincpa|Fsteincpa]] 22:19, 12 January 2012 (UTC)

Hi Katie, although I have been using TaxWise software since the 1990 filing season, I have never used the online version. Overall I've been extremely satisfied with the software, even after CCH took over. I've also been using UltraTax for the last few years, and while TaxWise is not even close to the power of UltraTax it also doesn't cost nearly as much. For less than $2,500 for TaxWise I get unlimited everything (all businesses and all states) including unlimited e-files! That won't even buy the base UltraTax package. The office that I use UltraTax in spends about $14,000 per year after PPR and efile fees. Although TaxWise has it's limitations, for the price it is a great program and handles 95% of my clients returns quite easily. For someone with a lot of clients with S-Corps and partnerships I would definately recommend something with better tracking and data-sharing such as UltraTax.

I'm sorry I couldn't give you any insight into the online version.

== TaxWise online ==

Hi Katie, although I have been using TaxWise software since the 1990 filing season, I have never used the online version. Overall I've been extremely satisfied with the software, even after CCH took over. I've also been using UltraTax for the last few years, and while TaxWise is not even close to the power of UltraTax it also doesn't cost nearly as much. For less than $2,500 for TaxWise I get unlimited everything (all businesses and all states) including unlimited e-files! That won't even buy the base UltraTax package. The office that I use UltraTax in spends about $14,000 per year after PPR and efile fees. Although TaxWise has it's limitations, for the price it is a great program and handles 95% of my clients returns quite easily. For someone with a lot of clients with S-Corps and partnerships I would definately recommend something with better tracking and data-sharing such as UltraTax.

I'm sorry I couldn't give you any insight into the online version.

Sorry for the messed up post, I haven't posted on users' pages much!

[[User:Nightsnorkeler|Nightsnorkeler]] 06:01, 3 February 2012 (UTC)

== Taxation of LLC where two owners are CA residents and one is Texas Residence ==

Hi Katie,

First off - Thanks, in advance for your help. I'm a practicing CPA here in San Diego and also a SDSU Grad (long time ago...)

I have a client who does consulting work. They are a LLC formed in CA. Two partners live and work here in CA. One lives and works out of Texas. They work equally for their business and do work for other business' all over the world.

The Texas owner's CPA proposed the following split of income. I don't think this is possible, but am having a problem understanding the rules for allocation of income.

- Each partner will receive $120K in guaranteed payments. This is treated as wages for tax purposes. As such, B's (The texas owner) $120K is subject to TX income tax (or lack thereof) while the two CA owners is treated as CA tax.
- The remaining profits in the company (~$40K per partner) are distributed equally among us, not wages, but ordinary income.
- These monies need to be "apportioned" based on states of residence of the partners: 2/3 of this is subject to CA tax and 1/3 is subject to TX tax.
- The three of us would file CA and TX forms because of the apportionment.
- Additionally, the company would have to do an LLC filing in TX for the apportionment to apply. We are likely to be below the Texas threshold for any entity level taxation.

This is what was proposed by the texas owners' CPA.

Do you think this works?

I read the following document - https://www.ftb.ca.gov/law/notices/1999/99-8att.pdf

This seems to indicate that the owners all split the income based on where the income is earned AT THE PARTNERSHIP LEVEL. So based on this, the owners from CA would be taxed in CA on all their income and the owner from Texas would get taxed on 2/3 of his income to CA.

What do you think?

Again - Thanks, in advance for your help.

Take care- Mark

== Taxation of LLC where two owners are CA residents and one is Texas Residence ==

Hi Katie,

First off - Thanks, in advance for your help. I'm a practicing CPA here in San Diego and also a SDSU Grad (long time ago...)

I have a client who does consulting work. They are a LLC formed in CA. Two partners live and work here in CA. One lives and works out of Texas. They work equally for their business and do work for other business' all over the world.

The Texas owner's CPA proposed the following split of income. I don't think this is possible, but am having a problem understanding the rules for allocation of income.

- Each partner will receive $120K in guaranteed payments. This is treated as wages for tax purposes. As such, B's (The texas owner) $120K is subject to TX income tax (or lack thereof) while the two CA owners is treated as CA tax.
- The remaining profits in the company (~$40K per partner) are distributed equally among us, not wages, but ordinary income.
- These monies need to be "apportioned" based on states of residence of the partners: 2/3 of this is subject to CA tax and 1/3 is subject to TX tax.
- The three of us would file CA and TX forms because of the apportionment.
- Additionally, the company would have to do an LLC filing in TX for the apportionment to apply. We are likely to be below the Texas threshold for any entity level taxation.

This is what was proposed by the texas owners' CPA.

Do you think this works?

I read the following document - https://www.ftb.ca.gov/law/notices/1999/99-8att.pdf

This seems to indicate that the owners all split the income based on where the income is earned AT THE PARTNERSHIP LEVEL. So based on this, the owners from CA would be taxed in CA on all their income and the owner from Texas would get taxed on 2/3 of his income to CA.

What do you think?

Again - Thanks, in advance for your help.

Take care- Mark

== Katie! ==

I am so sorry to read about your recent health issues. Rehab after a stroke can take time, so be sure to'' give yourself'' time... get lots of rest and try to recognize all of the small gains you are making every day. Hope to have you back here at full strength when you're ready. (And at half-strength you probably run circles around most of us anyway. So to speak.)

[[User:Trillium|Trillium]] 03:05, 29 February 2012 (UTC)

== Get well ==

Sorry to hear about your stroke. Hope you have a smooth recovery. Nevermind on my poorly timed question. Take care.

[[User:Jimmer|Jimmer]] 14:39, 29 February 2012 (UTC)

== Get Well Soon ==

Sorry to hear about your stroke, I hope you fully recover. I have read many of your answers and it seems like you have command of many corporate Tax topics like no other. Readers and contributors of Tax Almanac are blessed with your answers, I hope you fully recover and get well soon. I do have an 'S' Corporation COD by shareholder to his 'S' Corporation question. Thank you in advance for your kind help.cloudaccounting 03:08, 4 March 2012 (UTC)

== Stay strong ==

I was sorry to hear your news; but the Katie we know will do battle & come back stronger than ever. As Trillium said, you can run circles around us under any circumstances. Please keep us posted on your progress; your expertise and humor will be missed as you recover. [[User:Belle|Belle]] 17:45, 4 March 2012 (UTC)

== Just a quick "Hello"... ==

Hi KatieJ,
Just wanted to drop a quick note of thanks for your reply to my question, and to let you know you've been added to my prayers for a quick & speedy "Catch-Up"....for a complete recovery! Just keep plugging away!

== CA ==

KatieJ - I had a question for you:

CA LLC (partnership) based in San Francisco has a member that is also an LLC (also taxed as a partnership). This upper-tier LLC is based in NC. When K1 income flows up from the lower-tier LLC (the CA LLC) to the upper-tier LLC (the NC LLC), are there any CA tax withholding obligations...on the flow-thru income itself?

I don't think there is, but thought I'd check.

If I'm right, individual members of the NC LLC, all of whom are CA non-residents, will be part of a CA Group Composite Return, Form 540-NR.

(My recollection and 'real quick' last minute research here seems to indicate that CA withholding tax is only due on actual "distributions" - not on pass-thru income. FYI - This return will be extended, seeing that client just throws this at me at the last minute).

We have always filed CA LLC returns for both entities...but this will be the first year that the thing has made any money.

You're the Best!

[[User:Ckenefick|Ckenefick]] 03:15, 7 April 2012 (UTC)ckenefick

== Thanks! ==

Thanks, KatieJ. I appreciate the feedback. One question...you mentioned:

''The upper tier NC LLC can get a waiver of withholding by agreeing to withhold when it makes a distribution to its individual nonresident members.''

When lower issues K1 to upper tier, upper tier will report said income as CA source and flow it through to the K1's it will issue to the individual members of upper tier. As such, the individual members will pay CA tax on this income (either via a composite return or via filing separate individual returns).

But when said income (a portion, actually - just a tax distribution) is actually paid from lower tier to upper tier (most likely in the following year), and then actually paid from upper tier to individual upper tier members...it seems to me there should be no CA withholding on any of these payments b/c this income has already been taxed to CA.

I've browsed through the pub, but haven't read it thoroughly. I thought I saw something to the effect that if the distributed income has already been taxed in CA, no withholding is actually required.

[[User:Ckenefick|Ckenefick]] 21:14, 14 April 2012 (UTC)ckenefick

== Arthur ==

Katie, I just had occasion to look up your profile (again) and saw that you had a stroke. very sorry to hear it, and really hope you are doing well. Reason I looked you up is that I was answering a question for another TA pro, who turns out to be an Arthur alum, also in CA. Her TA name is CindyLee. There are quite a number of us. Did you happen to see my post kidding you about practicing law w/o a license and my not "catching" you? Len Podolin[[User:Podolin|Podolin]] 22:50, 18 April 2012 (UTC)

Hi Katie,

Very sorry hear the news of your stroke. I hope you are feeling better and recover fully soon. Please feel free to let me know if I could be of any assistance.

Best wishes and regards.

Mohammed

== I hope you are progressing well. ==

So sorry to hear of your recent stroke. We love you. [[User:Kevinh5|Kevinh5]]

Hi KatieJ,

I don't know you beyond this message board but I must say you impress me as quite a terrific person on numerous counts. You obviously are a very eloquent writer and seem quite knowledgeable in taxes. Your profile reads quite well also. I see you suffered a stroke. I never had a stoke per se (although I'm always fearful of getting one) but I did have a heart attack back in 2006. I think any serious medical condition or illness changes your perspective on life and makes one re-think many of the things we take for granted. I certainly wish you all the best and I hope you have a full recovery. We need to hang on to as many good people as we can. Again, thanks for your feedback on my post. I appreciate the help.[[User:Taxman75|Bob K]] 21:33, 10 May 2012 (UTC)

== 2008 SOL NYS ==

Hey Katie! I see you had a response to my post about the 08 SOL for NY. It did not take.....when I look, it has your name as the last poster, but no post.

Thanks for taking the time! Hope you are well.

[[User:Kbairtax|Kbairtax]]

== 2008 SOL NYS ==

Hey Katie....Thanks for clarifying.

I looked on the NYS website too and found as you did...nothing. THe IRS website I did find the right information so I am good there, but I am just not sure if NYS conformed. THey GENERALLY do, but I could not even find antyhing that states the normal. I will keep looking.

Thanks again! [[User:Kbairtax|Kbairtax]]

== 2008 Refund ==

Katie...

I found it in an article on the site, so it is likely not authoritive. BUT, I will use it to my advantage as it was released to the public.

http://www.irs.gov/newsroom/article/0,,id=254725,00.html

Thanks again for taking the time on this!!

[[User:Kbairtax|Kbairtax]]

== 2008 refund ==

Katie....Thanks for you help. I hit the same dead end. What I was more hoping someone knew is where it is that NYS follows the IRS for due dates. Or a court case that may mention that they do. I don't have a good way to search those things for NYS. I can never remember a time when NYS did not, but then again, I have only been doing taxes for 10 years.

If you come across anything, you know where to find me. I am going to fire off a letter and see where it gets me.

Thanks again! [[User:Kbairtax|Kbairtax]]

== 2008 Refund ==

Katie....you made my day! Thanks for the cite. I am going to tuck that way as I see a second letter getting written after NYS denies my first.

[[User:Kbairtax|Kbairtax]] 21:09, 21 May 2012 (UTC)

Hi Katie,

This is Phillysunny, You responded to my issue on demand penaly for 2010 tax return. I would like to know frmo you if I should call them and discuss this over phone and/or also send fax of explanation?

Also I wanted to see if the tax return which was created is right or wrong since now I dont trust my that CPA who is not reachable. FTB said they are taking anywehre upto 11 weeks to process return, So should I take next few days to get my return cleaned and verified and send it by thursday (postmark day) so that it's right. My concern is in case if penalty is not waived I at least need to make sure my actual tax liability is correct/less so that 25% of that is proportionately lesser.

Thanks,

Sonny [[User:Phillysunny|Phillysunny]] 19:02, 11 June 2012 (UTC)

[[User:Phillysunny|Phillysunny]] 19:02, 11 June 2012 (UTC)

== 3805Z Trade or Business Income ==

Katie, Thank you for your recent post on [[Discussion:CA_Form_3805Z_-_Trade_or_business_income_limitation]] and setting WEISSEA straight on what the question is. I was wondering if you had any opinions about my question on how much income is reported by the taxpayer in calculating how much credit they get to claim.

I have received instructions from one of these tax credit mills on how to prepare my client's 3805Z and it does not seem correct.

** Thank you for the reply, Katie.

--[[User:Wiles|Wiles]] 14:23, 29 June 2012 (UTC)

== LP technical termination ==

Hi Katie,
I was in your tax class back in 96. I hope you're doing well and could help with a weird situation I have.

I have a LP client that filed a final 2008 return and mailed the Certificate of Cancellation on 4/12/09.

Unknown to the client (until a few months ago), the Certificate of Cancellation was rejected by the SOS because the signer wasnt the GP on record.

He recently got a FTB notice for the 09 tax return. In order to cancel with the SOS, he filed the amendment to change the GP to an SMLLC and also the Cert of Cancellation of 1/12/12. It was accepted and endorsed by the SOS.

Now we don't know what to do about the 09, 10, and 11 CA tax returns. My original thought was to file the 565 for those years and pay the tax. The odd thing here is that all the other partners left as of 12/31/08, so that would that leave just the one GP for 09, 10, 11? By defintion, the partnership terminated with the greater than 50% change. Could I argue that the LP had a technical termination on 12/31/08 and therefore not liable for the $800 tax for those later years?

Also, the new GP is an SMLLC which will dissolve this year. The LP was never profitable and never made distributions to the partners.

Any thoughts would be appreciated.
Thanks.
[[User:Birdman|Birdman]] 19:05, 10 July 2012 (UTC)

== California LLC ==

dear Katie,

I am not a tax professional and I have been reading some of the posts in an attempt to better understand the tax liabilities of our California LLC (me and my husband and two friends) which provides scientific consulting. For example, I learned from your posts that LLCs are not supposed to give partners wages, but rather guaranteed payments, something I had not expected. In short, we can really use a tax professional like you to help us with tax planning and returns. We are in San Diego and we like to know if you are still accepting clients. If not, we would really appreciate your referral of other CPAs.

Thank you kindly,

Chuan

8583577134
csuanza@yahoo.com

== EZ Credit ==

Katie, Just wanted to let you know that I updated the thread.

--[[User:Wiles|Wiles]] 23:27, 11 July 2012 (UTC)

KatieJ - I'm so sorry to hear about your health. I hope your recuperation is going well.

Here's a really odd issue to consider if you feel like it.

I have a client here in Maryland who moved out of state Oct 2011. He is owner of a very profitable S corp, only 5% of the income being allocated to MD.

So I was assuming that I would include 3/4 of the S corp income on his resident return.

But, now I see MD Administrative Release 8, which tells me that ALL of the 2011 S corp income is allocated based on where his residence was as of the last day of the year!

This is costing the state of MD hundreds of thousands in taxes on this return, but I suppose they would make up for it with taxpayers who move into the state part way through the year, which of course with tax rates approaching 10% is getting less and less likely.

Is that odd? Do you know if other states have this rule, as opposed to simple proration based on days of residence in the state?

Smokeytax

[[User:Smokeytax|Smokeytax]] 09:41, 24 August 2012 (UTC)

== Better ==

i hope you are doing well. [[User:RoyDaleOne|What do I know?]] 14:21, 27 December 2012 (UTC)

== Special allocation of multi-state income ==

Hi Katie

I was in the Masters program (tax) at SDSU in late 80's and took a class from you while studying there.

I have a client who gets a K-1 from a multistate business that apportions their income. The LLC does commodity trading from multiple office locations. One of the partners in OK gets an override on the CA office income. He gets a distribution payment for that income. The apportioned K-1 income from CA is much larger. The CA partner is getting income apportioned from OK, but he has no interest in the OK office, or their profits.

Could they have a special allocations agreement to specially allocate the partners income, to be weighted by the actual income sourced from each state? Any excess or shortfall would be allocated on the weighted average. CA apportioned income would still be allocated the same, but the alllocation amongst the partners would be different based on the economic reality of their earnings source. This would be part of the shareholder agreement. Would CA have a problem with this? Would it have to be approved by CA ahead of time?

I looked at CA 25137 regarding a petition for a special allocation - is this ever approved?

Thank you

Brucebca[[User:Brucebca|Brucebca]] 17:28, 18 January 2013 (UTC)

brucebcpa@hotmail.com

Hi Katie,

I hope you are recovering well from your recent stroke. I see you have made some great contributions to this site I am thankful to you for that.

I came across your page while searching for an answer to my state sourced income question and I see that you are an expert on state tax issues. I was hoping you may be able to provide some insight to my recent question.

The post is located at the below link. Thank you.

http://www.taxalmanac.org/index.php/Discussion:Truck_Driver_/_Maine_State_taxes_(source_of_income)

== CA - change of domicile to WA ==

Hi KatieJ - I hope you are recovering well. Your knowledge on residency is impressive!!

I have a client who is moving out of CA to WA for a new long term job - maybe 4-6 years, to work with a company to the point of sale, then sell the company for a substantial amount of money. We are trying to make sure that domicile is changed to WA. They have two houses here in CA - one in the mountains, and one "regular" they have lived in for years.

My question is - I know that CA wants the intent for them to be gone either permanently or indefinitely. They will do the usual - change voter registration, drivers licenses, new church, etc. But what about the house in CA? They want to keep it, and potentially move back in 5 or so years. Is the 5 years indefinite enough to be gone and not considered domiciled in CA? I have read they should lease the house unfurnished to an unrelated 3rd party to at least sever this tie. Would it hurt the domicile issue if they moved back into this same house 4-6 years later? Any chance that 5 years is long enough that they could let their adult daughter live in the house rent free - or is that not a permanent severing of the ties? The spouse wants to come back to CA one week a month to visit her daughter, and also spend time in the mountain house. How does the sever look in that situation?

The biggest concern is that if this new company in WA does indeed sell in 4-6 years, then we don't want CA to tax on the sale. The 546 day rule won't work in their instance since they plan to be in CA more than 45 days each. The current home in CA is really the sticky point right now.

Thank you so much.

[[User:Lemon-aide|Lemon-aide]] 21:00, 5 August 2013 (UTC)

== Nexus thread ==

Hi KatieJ,

I see Fred drew you back to TA today. I am glad to hear you are doing well.

I don't know if you stuck around long enough to see an old thread was bumped up by yours truly. [[Discussion:What_is_nexus%3F]]. I would really appreciate any input you can provide on this.

You need to spend less time on Facebook and more time with your real friends here on TA.

--[[User:PVVCPA|PVVCPA]] 22:11, 12 September 2013 (UTC)

== Nexus thread ==

Hi KatieJ,

I see Fred drew you back to TA today. I am glad to hear you are doing well.

I don't know if you stuck around long enough to see an old thread was bumped up by yours truly. [[Discussion:What_is_nexus%3F]]. I would really appreciate any input you can provide on this.

You need to spend less time on Facebook and more time with your real friends here on TA.

--[[User:PVVCPA|PVVCPA]] 22:13, 12 September 2013 (UTC)

User talk:KatieJ

PVVCPA — Thu, 12 Sep 2013 22:11:38 GMT

PVVCPA: /* Nexus thread */ new section

Discussion:What is nexus?

PVVCPA — Wed, 11 Sep 2013 23:49:35 GMT

PVVCPA:

Discussion:Has anyone noticed?

PVVCPA — Wed, 11 Sep 2013 21:53:39 GMT

PVVCPA:

{{General Chat}}


{{ForumNewPost|UserID=RoyDaleOne|Date=12 December 2012|Text=Has anyone noticed, that lately, some of the comments have taken on a sharp edge or is it my imagination?}}

{{ForumReplyPost|UserID=Podolin|Date=12 December 2012|Text=Lately?}}

{{ForumReplyPost|UserID=Kyea|Date=12 December 2012|Text=The "Trolls" will find a way.}}

{{ForumReplyPost|UserID=SashkaCPA|Date=12 December 2012|Text=Comments by newbies like me or by old-timers?}}

{{ForumReplyPost|UserID=Death&Taxes|Date=12 December 2012|Text=In the tax forum or here in chat? }}

{{ForumReplyPost|UserID=PollyAdler|Date=12 December 2012|Text=Very invigorating morning. I just condemned Maryh to the consumer forum.}}

{{ForumReplyPost|UserID=Death&Taxes|Date=12 December 2012|Text=Rather Grinch of you, Polly.....}}

{{ForumReplyPost|UserID=PHIL MOODY|Date=12 December 2012|Text=I have notice that in prior years, starting about Thanksgiving, HOW THE GRENCH STOLE CHRISTMAS, and CHARLIE BROWN CHRISTMAS was on about every other night. So far this year, Charlie has been on only once, which I missed, and I have not seen the Grench.

What gives?

My favorite two shows. Something is going on, and as we say down here, it aint right, theres a yankee in there sommers.
}}

{{ForumReplyPost|UserID=PollyAdler|Date=12 December 2012|Text=I haven't seen my favorite shows either, and I've noticed I have no trouble finding a parking spot at the malls. They better get the old favorites on the air, or risk a serious downturn in Christmas sales. And no, Hollywood, I will not buy the video. I want to see them for free like I used to see them (well, not exactly free what with my extortive cable bill.)}}

{{ForumReplyPost|UserID=Kevinh5|Date=12 December 2012|Text=If you're referring to [[Discussion:Proceeds from farm sale]], RD1, you might be interested in hearing the backstory.

The OP had posted this exact same question 4 times on this forum. Trillium had deleted 3 as duplicates (triplicates? quadruplicates?) because it is against the policy to multiple post on this site. Furthermore, multiple posts are extremely inefficient, as they waste space on the 'recent discussions' page, and don't allow continuity where answerers can't see prior answers of others. They are just rude to those trying to help, as well as those who want to learn by reading old posts via the yellow box, really.

At the same time, I opened the remaining discussion, to find that the OP'er had made an edit which completely removed all of his question. Thinking he would re-post, I merely deleted the unreadable discussion.

Trillium then asked me whether this was intentional to delete all of his posts on the subject, since Trillium had just deleted the other 3.

I then went back, and restored the OP's first, un-edited post for that 4th discussion, so that he could get the benefit of answers to his question.

When a discussion is deleted then restored, the forum does not show the OP name in the discussion list. What's more, until there is a response, the discussion won't even show up in the recent discussion list until a reply is posted.

Therefore I answered his question. Seeing that he was indeed a tax professional, and not a consumer, I gave him the correct answer, along with my concern that he seemed to misunderstand some very basic tax concepts (capital gain). I further pointed out where he should research to correct any basis misunderstandings.

If you felt I was rude in spending more than 15 minutes making sure that his question wasn't completely deleted (because of his own editing mistake and rude re-posting of 4 discussions of the same question), or that his question didn't deserve to be answered and therefore I should have left it deleted, or left it invisible on the recent discussion list, or that I didn't correctly answer his question fully and completely, please post a message to my talk page, and we can discuss this. I certainly won't waste my time in the future 'helping' ensure that those things don't happen.

OR, maybe you would be interested in volunteering some time to help moderate the forum and you can do the background work and be chided for doing so.

I may have misinterpreted, and maybe you are referring to some other recent discussion. If so, could you please point that out to me?}}

{{ForumReplyPost|UserID=RoyDaleOne|Date=12 December 2012|Text=I see now that what I wrote did not convey the question I had. So I will try to correct that impression.

It the tax forum, has anyone noticed, that lately, some of the comments have taken on a '''edgy aspect''', or cutting, or is it my imagination?

Kevin:

This is a link to one, however, there are more comments that could be referenced, it is not the only one.

http://www.taxalmanac.org/index.php/Discussion:Gifting_S_corp_stock_to_employee_and_valuation

My question is very "narrow" in that it is concerning the "tone" of the conservation conveyed.

The civility in the comments is very important to me. So I am asking the question.

I may be more sensitive to the tone of some of the comments then other members of the forum and if so I apology.

}}

{{ForumReplyPost|UserID=PollyAdler|Date=12 December 2012|Text=According to the Abcnews website, even Santa was seen running for his life during the Oregon mall shooting. It is reported that his "costume" and beard remained intact, so I assume that Crackamas Mall featured the real Santa, or one of his relatives.

Yes, Virginia, there is a Santa Claus, he is alive, and Christmas will proceed as scheduled, assuming there are no more mass murder attempts at the Crackamas Mall.}}

{{ForumReplyPost|UserID=Kevinh5|Date=12 December 2012|Text=I do see some edgy comments there, Roy. I also know that several people who routinely do give good accurate answers have an edge. I have had to work to not get personally offended when they answer me. But in the end they were still accurate answers. I'm a big boy and can take the edge. Some people might not have as thick of skin as I do.}}

{{ForumReplyPost|UserID=RoyDaleOne|Date=12 December 2012|Text=Kevin, thanks for your response. You have added to my question. Why should you be the one have a thick skin, and be the one not to get personally offended? By your comment you were offended, but did it take you being a big boy to show your professional manners?

Good accurate answers, but sometimes not the only good accurate answers.

}}

{{ForumReplyPost|UserID=Death&Taxes|Date=12 December 2012|Text=Here is a classic ChrisK issued today:

"Don't forget, the yellow box has been enhanced with VRT (Voice Recognition Technology), so move close to your computer screen and speak into the yellow box. Works best through a straw."
}}

{{ForumReplyPost|UserID=Kevinh5|Date=12 December 2012|Text=I'm here for the information, Roy. My mind is like a sponge, wanting to soak all the tax knowledge in. Sometimes, the people willing to share the knowledge have character. Personally, I'd rather have correct information and have to put up with character than to have no answers, or worse, wrong answers, from people with better social behavior.}}

{{ForumReplyPost|UserID=Ukbones|Date=13 December 2012|Text=I cringe when glimpsing at some of my prior posts. At times, sarcasm and ribbing don't convey well but it's the poster's responsibility. I'm thick skinned but I don't expect the same of others.}}

{{ForumReplyPost|UserID=Fsteincpa|Date=13 December 2012|Text=I only try to pick on Kevin, as I know he knows I jest.

And yeah, that one thread was quite testy. Edgy even. Not sure if it's all the time, more like specific times and maybe these people have a history of disagreements.

Kevin is on point that all should have thick skin. I don't pretend to know everything or even to be good at remember the stupid numbers and things, but I love reading here because I do absorb things from the back and forth. That is part of the reason I stick up for the newbie repeat question askers who might not have used the yellow box, because a new discussion a year or 3 later that offers different viewpoint can sometimes illuminate things. I don't want this place to be wikipedia where nothing new is added because it's all been stated before.

And, as always I ramble on.

Can't wa ll just get along. }}

{{ForumReplyPost|UserID=NMexEA|Date=13 December 2012|Text=Sure. We COULD. But where's the fun in THAT?}}

{{ForumReplyPost|UserID=Ukbones|Date=13 December 2012|Text=I don't condone the "put-downs" but good forums need characters and this forum has many. Imagine a TA without Kevin's irritation at the dust gathering on the yellow-box.}}

{{ForumReplyPost|UserID=Fsteincpa|Date=13 December 2012|Text=lol. I do agree with the characters and the minor edginess. The one thread they posted seemed a bit over the top, but, by the same token, I think highly of the posters who are going at it, and I would imagine it's more a matter of how they feel towards each others verbal parries.

Being one not even able to argue within that one particular thread because my knowledge isn't to the point of any one of those old geezers, it's not a threat to me from the being worried if I chimed in aspect. anyone with the requisite knowledge to chime in probably wouldn't be too worried as well.

Differences of opinions and varied discourse increases the knowledge of all involved. }}

{{ForumReplyPost|UserID=SashkaCPA|Date=13 December 2012|Text=Minor edginess? This is public forum. If I didn't send you private message then there is no need to answer question if you do not feel like answering.

If I’d go for example to any auto forum and post a question: “how to remove spark plugs?” in most cases someone who’s been around that forum either will provide me with a link to a similar question already answered by someone before or will give me detailed explanation such as:

1. Remove cover.
2. Unplug orange wire.
3. Use socket # 21 to remove spark plug.

Here what you get on Tax almanac:

1. Do you even know how to handle tools? I do not think you know how to open a hood since you didn’t fill out your profile. And use yellow box next time.
2. You didn't tell us how you are going to pull orange wire
3. Can you even see a wire?

Next reply:

1. I see that you updated your profile and have some tools but you need to know how to ask question right.
2. Next time make sure you ask question right because you should be asking how to get to spark plug and not how to remove it.
}}

{{ForumReplyPost|UserID=MWPXYZ|Date=13 December 2012|Text=Good thing you corrected that missspelling.}}

{{ForumReplyPost|UserID=Podolin|Date=14 December 2012|Text=Good thing you corrected that '''missspelling.'''}}

{{ForumReplyPost|UserID=Actionbsns|Date=14 December 2012|Text=And now another reason to come to TA regularly - I now know how to change a spark plug. YAY! I once installed push rods in a 68 Boss 429 Mustang. No idea what they are, nor could I do it again, but I just might be able to change the spark plugs. I'm so glad.}}

{{ForumReplyPost|UserID=PHIL MOODY|Date=14 December 2012|Text=I know the yellow box is useful, but sometimes, the law/regulations/court cases change and I like to know what people think now. Also, I have answered some questions, perhaps with too much starch, or too few words.

Sometimes, I am in a hurry, and believe a little response is better than none.

I put on my by-pass list those people that give recommendations, such as pulling the orange wire, and the only orange wire my vehicle goes to the battery, and the only tools I have are a screw driver and a pair of pliers?

I admire those on the board that can quote code/reg by the numbers in support of their position.

}}

{{ForumReplyPost|UserID=Ukbones|Date=14 December 2012|Text=Asking a poorly thought-out or repetitive question on a motorcycle forum will bring a tirade of insults directed mainly toward your intelligence, genitals, mother and then grandmother. In that order.}}

{{ForumReplyPost|UserID=MWPXYZ|Date=14 December 2012|Text=Sorry, should have been "Good thing you done went and corrected that missspelling"

Couldn't remember if the word had 1 or 2 "s"s; so i put both in.

The last time I changed spark plugs was in a desperate attempt to avoid a visit to a garage. However, the trouble was much more serious. My initial efforts however, started a spirited argument between 2 (certified) mechanics on the use of "dielectric grease".

I suppose there is a difference in portraying "the" important elements involved in a business decision and portraying the individual who has a different assessment of those important elements. But, it is a stressful time of year.}}

{{ForumReplyPost|UserID=Ukbones|Date=14 December 2012|Text=You put three in.

Would you please translate the last paragraph to English? You're agitating the dead.

"I suppose there is a difference in portraying "the" important elements involved in a business decision and portraying the individual who has a different assessment of those important elements."

''"Discuss the facts not the source(s)"'' maybe?

}}

{{ForumReplyPost|UserID=Taocpa|Date=2012-12-14|Text=I know my posts sometimes contain "edgy" comments. It's only because I have a sarcastic sense of humor, among other things.

I know some posts may seem trivial to some, but not to others. There are also some of us who, due to situations beyond our control, post questions "asked and answered" already. If that happens, it is nice when someone posts a link to the previous discussion.

Just my humble opinion.

Tom}}

{{ForumReplyPost|UserID=Sumwun|Date=14 December 2012|Text=There is one important factor that has not been discussed yet. If the discussion linked to by RD1 had been held in the bar after a professional meeting, it probably wouldn't have been a big deal. Body language would have told the participants (and onlookers) a whole lot more than can be conveyed online. In this case, I suspect the argument would have come across as much more civil than appears in writing. I base that view on my experiences and observations on boards such as these and in chatrooms (where, incidentally, I met my wife of eleven years). However, others will have different experiences to me and some will be scared away by talk that they perceive to be little short of venomous.

So what do we do? Fred says that we shouldn't scare away the newbies. He's right. Ukbones observes that this forum would be poorer for a lack of characters. Right again. Online interaction is intense and misunderstandings get magnified as a result. I think it does us all good to reflect on the effect of those interactions occasionally and, perhaps, to modify our behavior just a bit. In conclusion, therefore, thank you RD1 for taking the time to start this useful discussion.}}

{{ForumReplyPost|UserID=MWPXYZ|Date=14 December 2012|Text=1+2 =3
I suppose "Discuss the facts not the source(s)" is more succinct, but the edgy discussions are more about what '''are''' the important elements/issues than "facts".

Today, unfortunately; I wish I could agitate the dead.}}

{{ForumReplyPost|UserID=Death&Taxes|Date=14 December 2012|Text=Much of the discussion often is ferreting out the facts. The edginess often arises because it is impossible to argue facts when all the facts are not given at the start, but have to be dragged out of the OP bit by bit (or the OP disappears and we never do learn what he wanted, but all had a good time making it up as we went along.

Argue the Facts!

Argue the Law!

Pound the Table!}}

{{ForumReplyPost|UserID=CathysTaxes|Date=15 December 2012|Text=Boy, am I slow today. It took me awhile to figure out what "RD1" means (IOW, who "RD1" is).}}

{{ForumReplyPost|UserID=NMexEA|Date=15 December 2012|Text=Always use the grease. Modern heads are made of aluminum alloy. Ungreased plugs will freeze in place then strip when you try to force them out.}}

{{ForumReplyPost|UserID=Podolin|Date=15 December 2012|Text=Just an example of possible misunderstandings in how a concept is expressed: ''and in chatrooms (where, incidentally, I met my wife of eleven years)''. Did Sumwun meet a lovely, single lady 11+ years ago, on a chatroom, and then marry her? Probably, but read the clause again Maybe he met her 11+ years ago, married her, and then met her again recently on a chatroom.}}

{{ForumReplyPost|UserID=NMexEA|Date=15 December 2012|Text=And use a torque wrench to tighten the new plugs.}}

{{ForumReplyPost|UserID=Sumwun|Date=15 December 2012|Text=Podolin, it was the former! You're right, though. Now you mention it, that clause does lokk a bit daft.}}

{{ForumReplyPost|UserID=MP-JD-LLM|Date=18 December 2012|Text=You all say edgy like it's a bad thing!

I recall getting into a couple "edgy" exchanges with ChrisK. I have found them to be at once enjoyable, perplexing, frusting, irritating, and educational. Without occassional exchanges like this, this site would be dull. My advice is embrace edgy. It makes life interesting. MP }}

{{ForumReplyPost|UserID=RoyDaleOne|Date=18 December 2012|Text=Well, I don't do edgy very well and stay stay civil. When I think I am making a valid point and the response(s) becomes edgy, I can carry on and on and on, and made no progress as to the potential good comment.

I don't need your advice as to how I handle edgy.

Tax comments are dull by nature and definition. Your interesting comments can be confusing as to what you are trying to convey and end up wasting my time trying to understand the comments when I am reading them.

I say keep your edgy to the general chat threads. I know I will read nothing usefully in the general chat threads.

}}

{{ForumReplyPost|UserID=Death&Taxes|Date=18 December 2012|Text=There are times when citing Code, Regs etc gets through loud and clear, but what do you do when a CPA keeps insisting he can create his own rules? [[Discussion: Capital Loss Carryovers ]]}}

{{ForumReplyPost|UserID=MP-JD-LLM|Date=18 December 2012|Text=RD1, your post is a valant attempt at edgy, but doesn't quite make it. Perhaps some edgy lessons would help. Or, is this an attempt at ironic?}}

{{ForumReplyPost|UserID=RoyDaleOne|Date=25 December 2012|Text=http://www.taxalmanac.org/index.php/Discussion:Escrow_Credit_to_Buyer_for_Real_Property_Tax

}}

{{ForumReplyPost|UserID=RoyDaleOne|Date=26 December 2012|Text=Has this forum deteriorated to such a condition that it no longer cares what some of us like, need, or prefer to have as its official decorum, or statement of decorum?

I am just asking a question, no other inference should be drawn.}}

{{ForumReplyPost|UserID=Harry Boscoe|Date=26 December 2012|Text=No, it hasn't.}}

{{ForumReplyPost|UserID=RoyDaleOne|Date=26 December 2012|Text=I am very glad of that.

But, can we have a larger sample size? <----- auditor coming out in me.}}

{{ForumReplyPost|UserID=Death&Taxes|Date=28 December 2012|Text=[[Discussion: Rental Prop -lawsuit]] }}

{{ForumReplyPost|UserID=Podolin|Date=28 December 2012|Text=D&T, those were intended in good nature - I think.}}

{{ForumReplyPost|UserID=RoyDaleOne|Date=29 December 2012|Text=http://www.taxalmanac.org/index.php/Discussion:Financial_statement_note_on_pawn_shop}}

{{ForumReplyPost|UserID=Belle|Date=January 1, 2013|Text=http://www.taxalmanac.org/index.php/Discussion:Escrow_Credit_to_Buyer_for_Real_Property_Tax}}

{{ForumReplyPost|UserID=HowardS|Date=2 January 2013|Text=I hope Dave Fogel reconsiders. His expertise has helped me and many others and he would be sorely missed.}}

{{ForumReplyPost|UserID=Fsteincpa|Date=2 January 2013|Text=As do I Howard, as do I. }}

{{ForumReplyPost|UserID=RoyDaleOne|Date=2 January 2013|Text=Me too.}}

{{ForumReplyPost|UserID=CathysTaxes|Date=2 January 2013|Text=Oh, no, Dave can't leave.}}

{{ForumReplyPost|UserID=Kevinh5|Date=2 January 2013|Text=Most all of us who have posted here have had our feelings hurt, some many times. Most of us have also left the discussion forum for a period of time.

I am probably as guilty as the rest for hurting feelings and for having my own feelings hurt. You just have to decide whether the juice is worth the squeeze. (an obvious reference to the quote in the movie The Girl Next Door)}}

{{ForumReplyPost|UserID=Fsteincpa|Date=2 January 2013|Text=Remember that Kevin once left. Dave may just need a break, as we all do, and then he will come guide us once more. }}

{{ForumReplyPost|UserID=Belle|Date=January 3, 2013|Text=I truly hope Dave does return. His insight & guidance on this board for the last few years has been invaluable.
}}

{{ForumReplyPost|UserID=CathysTaxes|Date=3 January 2013|Text=Yeah, Kevin, when you left, I missed ya.}}

{{ForumReplyPost|UserID=Fr. Mackelhenry|Date=3 January 2013|Text=We need to put love before business on Christmas Eve. Maybe a gift didn't arrive in time for the holiday, or someone's Omaha Steaks thawed out on the front porch. Even Scrooge put aside personal animosity and greed on Christmas Eve. Of course, for many years before he was visited by the ghosts, he was the worst of the lot.

It's no use to fret about it, we can't afford to pay what other sites pay and we'll just have to settle for what we can get.

Everyone listen to this beautiful song and stare at the picture. Do not take your eyes off the pictures.

http://www.youtube.com/watch?v=hoyENu61Fss

An Indian can starve himself for twenty years and get by on half a glass of water during that time and we can learn something from him. No I am not a Hindu but I probably should be.

}}

{{ForumReplyPost|UserID=Wiles|Date=30 August 2013|Text=So, when is Dave coming back? He was definitely an asset to TA.

Is this what happened to Riley, too? Did somebody get under his skin? I have always wondered where did Riley go. I know he started changing aliases...and then he just plumb disappeared.}}

{{ForumReplyPost|UserID=PollyAdler|Date=30 August 2013|Text=Dave was like Leonardo di Vinci or I would say even more like Michelangelo. Prickly, prickly, prickly. Sometimes he could be sensitive if challanged, but this is not unusal among the great artists. I think there was an event which offended him. I can talk about it because it was one of the few times I was not (unjustly) accused in the incident.

As far as Riley, maybe he saw himself in print somewhere else and read the TA terms of service and decided it was time to leave. I'm just guessing. Plus, I'm sure it's a burden for people to always expect you to have the right answer. It's also possible that he was just too covered up with work to keep posting here. Who knows?

One of the Popes was able to talk Michelangelo into coming back and finishing the Vatican construction, even though it had gotten into an awful mess under another architect. Michelangelo was not summoned to the Vatican, the Pope got in his carriage and went to Michelangelo. To this day the Vatican has a structural flaw in one of the great columns behind the Bernini alter (in left field behind the alter). They bit off more than they could chew over the many years it was under construction. I don't know if we could maybe send an archbishop out to talk to Dave.

[Removed comment about minor leagues & big game.]}}

{{ForumReplyPost|UserID=Kevinh5|Date=30 August 2013|Text=I would say that Dave certainly was ready for the pressure of the big game. He fielded more foul balls and questions from left field about COD than anyone else on this site. Even when people threw him a curve ball. In the end, it was a spit-ball that made him mad. I don't blame him, really. or should I say I don't blame him, Riley}}

{{ForumReplyPost|UserID=Fsteincpa|Date=30 August 2013|Text=Not sure about Dave or Riley, but I had meant to pass this along a few weeks ago, but I had my own family issues going on.

RoyDaleOne aka Roy Cline passed away back in February. I was assisting Roy and some others on a project prior to tax season and when tax season started, we backed off as planned. August 13 I got an email from one of the programmers telling me of Roy's passing.

Not sure where to post this. But, talking about people being gone made me remember.

Here is the email I received

I have been out of the loop for a while since I last talked with Roy. This was planned for the 2013 tax season which was going to consume Roy's time and yours possibly though July at least, I re-established contact recently.

If you already know, then please bear with me. Roy has gone to his rest. This happened in February of this year. I have attached a remembrance of Roy's life for those of you who may not have known. I know some of you knew him far longer than I. We will all miss him.

Roy exceptionally enthused over our projects to develop CPA software to assist others in the profession. As such he had renewed his IRS connections and was sending me a fair amount of items. He was upbeat and positive on all points, something that I hope to continue. The point is that I am still interested in continuing this effort subject to your interests as well.

Roy's son, Sgt. Major Patrick Durr is in the last years of his career. but has been copied on our correspondence. He will hopefully provide some input in future days to this effort. My purpose here is to continue the planning for a while as there are some things that need to consolidated.

Please understand that the benefit of Roy's part will be provided to his wife, Lynn, if we can move ahead. This will take some months at least due to other commitments here, but we can hopefully get to a design document that is refined from the e-mail exchanges previously circulating among us. Roy envisioned several projects leading to products. This vision we shared to do them one at a time, listening to your input and moving ahead.

Therefore if you are interested in continuing the participation that Roy and I had with you, could you please send a confirming e-mail to me at the new e-mail address, and also copy Patrick. }}

{{ForumReplyPost|UserID=PollyAdler|Date=30 August 2013|Text=Terrible news. My sympathy to his family and friends. He will live on through this site. In Perpetuam.

@Kevin5: I would say that Dave certainly was ready for the pressure of the big game.

[Edit: Just got word that my two fans in Taiwan are serving 5-10 for tax evasion.]

}}

{{ForumReplyPost|UserID=Fr. Mackelhenry|Date=31 August 2013|Text=Kevin, are you suggesting that Dave was Riley? Now that would really be impressive news. But I don't ever remember Riley getting riled. Maybe he did. You don't have to answer this question, obviously.}}

{{ForumReplyPost|UserID=CathysTaxes|Date=31 August 2013|Text=So sad. I was wondering where Roy was. I missed his posts. I'm so sorry to hear of his passing.}}

{{ForumReplyPost|UserID=Smktax|Date=31 August 2013|Text=I always suspected that Riley was Ralph Weintraub. Ralph passed away not long after R2 stopped posting. Ralph's obituary states that he passed on March 5, 2012 (http://www.legacy.com/obituaries/latimes/obituary.aspx?n=ralph-weintraub&pid=156343428). I believe that R2's last post was in Dec. 2011.}}

{{ForumReplyPost|UserID=Fr. Mackelhenry|Date=31 August 2013|Text=Every time there is a big change in the law, we lose of few of the greats. But this time I think it was the weather. Rarely does the death certificate capture the real cause of death. I've seen the doctors scribble them out like they were a grocery list. It is a pity that no real thought goes into them, and yet for most of us they are our only biography. How shall we meet our death? We simply do not know. You can have heart disease for 20 years, but it ends up you are led by an infected finger into paradise.

Faure ''In Paradisum'': http://www.youtube.com/watch?v=6-i1ESIRKdA

Concert for George; Clapton, Preston: http://www.youtube.com/watch?v=SY21jdwM9CI}}

{{ForumReplyPost|UserID=Death&Taxes|Date=31 August 2013|Text=We begin to realize how self-centered we are when a person's absence is not noticed.

I recall how stunned I was to learn that LH2004 had passed; while he did not post with the frequency of many others, I knew when I saw his answers that here was something I could rely upon.}}

{{ForumReplyPost|UserID=Smktax|Date=1 September 2013|Text=I didn't know LH had passed. I agree, I always liked to see his responses.}}

{{ForumReplyPost|UserID=ZL28|Date=2 September 2013|Text=that's horrible...i believe he was quite young
}}

{{ForumReplyPost|UserID=ZL28|Date=2 September 2013|Text=didn't realize Ralph Weintraub was Riley; Ralph..one of the all time great ones!}}

{{ForumReplyPost|UserID=Rupert|Date=2 September 2013|Text=I believe LH2004 passed away sometime in the summer of 2011. He was very well respected on this forum and several others.

http://www.fatwallet.com/forums/finance/1109949/m16077174/#m16077174

http://www.bogleheads.org/forum/viewtopic.php?t=77833}}

{{ForumReplyPost|UserID=PVVCPA|Date=September 11, 2013|Text=Does anybody know what has happened to KatieJ?}}

Discussion:What is nexus?

PVVCPA — Wed, 11 Sep 2013 20:51:00 GMT

PVVCPA:

{{ForumThreadHeading|Tax_Questions|Tax Questions}}


{{ForumNewPost|UserID=Actionbsns|Date=25 July 2007|Text=I have to ask this question because all through college, teachers were referring to "empirical data" and I never really new what THAT was, always intended to look it up, never had the time or thought of it at the wrong time, so I always just took it in context.

But I keep hearing about NEXUS, first heard it from the CPA I worked with here, but I don't know what it is and when it comes up in a discussion, I don't really understand it. Sounds like a new hair gel to me, so I'm pretty sure that's wrong.}}

{{ForumReplyPost|UserID=JR1|Date=July 25, 2007|Text=Too much to tell. Use the yellow search box to the left there...and read all you like. But it's how states determine when you have to file tax returns in their state.}}

{{ForumReplyPost|UserID=Jdugancpa|Date=25 July 2007|Text=http://www.thefreedictionary.com/nexus

http://m-w.com/dictionary/nexus

Nexus = connection. If you have nexus with a state, they can grab you and tax you. If you don't, they can't. Think of it like an electric socket. If you have no nexus it can't shock you, but stick your finger in it and watch your hair curl.}}

{{ForumReplyPost|UserID=Actionbsns|Date=25 July 2007|Text=Thanks JR and JD - reading some of the things that relate to IRS using the term nexus, I can see where substituting "connection" works well. From the one post I read this morning Washington state must have some stringent rules regarding how Nexus or a connection of business income relates to their state. I'm not clear how a state really makes that decision and it seems to vary with the state. One of the discussions that popped up on the yellow search relates to the use of Nevada corporations, I've seen a few of them here in Hawaii, no income earned in Nevada, no physical presence in Nevada, so no Nexus and no taxes (even though Nevada has no state tax, if you substituted another state, still, no Nexus). Am I right? and the issue would be whether or not the state agreed. }}

{{ForumReplyPost|UserID=Michaelstar|Date=25 July 2007|Text=Think of Nexus as a connection through physical presence. Without a physical presence - it is hard to have Nexus connected to a state as I understand the concept.}}

{{ForumReplyPost|UserID=Jdugancpa|Date=25 July 2007|Text=Nexus can be established by an agent, as well as an employee. So a manufacturer in WA hiring a manufacturer's rep in Ohio who travels to IL, IO & IN may well have nexus in all four states due to the activities of the agent (assuming the agent is repping the WA company's products in all four states).}}

{{ForumReplyPost|UserID=Chautauqua|Date=25 July 2007|Text=I've been using Nexus on my hair for years....is this wrong?}}

{{ForumReplyPost|UserID=Bottom Line|Date=25 July 2007|Text=I've always understood Nexus as: when the Tampa Bay Buccaneers play the Seattle Seahawks in Seattle, they have to pay income tax in Washington State because they earned income there. }}

{{ForumReplyPost|UserID=Jdugancpa|Date=26 July 2007|Text=Luckily for the Buccaneers (my HS mascot, BTW) WA has no income tax. Too bad for our Seahawks, however, because when they go to FL its just like they stuck that finger into the electric socket. Connection gets made, hair gets curled, wallet gets fleeced!}}

{{ForumReplyPost|UserID=Bottom Line|Date=26 July 2007|Text=Bad example. Should have used Cincinnati Bengals. Must be a special tax since FL doesn't have income tax either.}}

{{ForumReplyPost|UserID=Www.cpa1.biz|Date=26 July 2007|Text=Going further on Nexus. I see the situation about the bucaneers playing in seattle. What about if my office in in one state people from all over the country buy stuff from me. Is there nexus there. I mean if someone sells stuff over the Internet from people all over the country, do they have nexus in each state?}}

{{ForumReplyPost|UserID=Bottom Line|Date=26 July 2007|Text=My understanding is that if your office is in one state and your only contact with other states is to sell product to be shipped to those states (you never physically enter the other states), you are not considered to be doing business in those states.}}

{{ForumReplyPost|UserID=Natalie|Date=July 26, 2007|Text=Action, there are some companies that get bad advice and set up corporations in Nevada thinking they'll be sheltered from taxes in Hawaii. If they operate out of Hawaii, they pay tax in Hawaii. In addition, although Nevada doesn't have income taxes, they do have things like payroll excise tax, live entertainment tax and of course sales tax.}}

{{ForumReplyPost|UserID=Taxref|Date=26 July 2007|Text=Nexus has become a much more complex issue due to the internet. Not all that long ago NY won a court case in which a TN resident who telecommuted to his job in NY was found to have NY nexus. The TN resident was ruled to be liable for NY income tax. I think we will be seeing many more of these kinds of disputes.}}

{{ForumReplyPost|UserID=Death&Taxes|Date=26 July 2007|Text=Has NY taken a similar position on alimony paid from NY income earned by a non-resident? Or do I have it backwards, and the State challenged a non-resident's deduction of alimony based on his earnings in NY.....in other words, another form of nexus.}}

{{ForumReplyPost|UserID=Taxref|Date=26 July 2007|Text=I'm afraid I don't know the answer to that one D&T.

I think you and I (along with many other NJ practitioners) will be hearing more about the telecommuting issues in the next few years. Much like the IT-203 days-working-outside-NY tax notices which went out a few years ago, I suspect NY will try to see how much potential tax is out there from NJ telecommuters. }}

{{ForumReplyPost|UserID=Sandysea|Date=26 July 2007|Text=BJ; you do not have nexus in the other states (generally speaking of course) if you have no PE or physical presence in that state. If they are buying over the internet, and you don't have any agents or employees or have any leased tangible or intellectual property in another state, the state should not require you to file returns. You should however indicate on your invoices (if you are selling taxable goods or services) that the individual in that state is responsible for "use taxes"....protects you a bit from the burden of proof analogy that some states seem to equate.

I.E. Client of mine may NOT have had nexus in a state...sold taxable goods in that state. Initially the revenue agencies will look to the purchaser of the product for the use taxes, but most states indicate that the burden of collection then falls on the seller if the buyer does not pay.....I dealt with this and it is not equitable, but I had 3 states in the US which shifted the burden to the client who did not establish nexus....}}

{{ForumReplyPost|UserID=Waynecpa|Date=26 July 2007|Text=Things will be changing though. Check out the following link at the WA Department of Revenue website:

[http://dor.wa.gov/Content/GetAFormOrPublication/PublicationBySubject/TaxTopics/MoreSST.aspx]}}

{{ForumReplyPost|UserID=Jdugancpa|Date=26 July 2007|Text=Wayne, this is going to be a reporting nightmare for a lot of small businesses who will now have to track shipping destinations rather than just reporting by point of origin.}}

{{ForumReplyPost|UserID=CTurner555|Date=27 July 2007|Text=Also check out the OH website for the CAT tax - specifically question #31. Sales of $150,000 in a year nexus to Ohio are taxable. This will be a major nightmare for all states.

[http://tax.ohio.gov/faqs/content/commercial_activities/qa.asp]}}

{{ForumReplyPost|UserID=Donniecastleman|Date=27 July 2007|Text=Nexus or no nexus, this thread got a smile and a chuckle out of me! From this moment on, I hate the Titans!}}

{{ForumReplyPost|UserID=TheTinCook|Date=27 July 2007|Text=Just wanted to add a little bit about the TN/NY nexus case.

In that case, the TN resident actually spent ~25% of his time physically present in NY.

The opinion [http://decisions.courts.state.ny.us/ad3/Decisions/2004/92539.pdf here].}}

{{ForumReplyPost|UserID=Death&Taxes|Date=27 July 2007|Text=The Tennessee case turns on him being in Tennessee for his own convenience, not for the convenience of the employer. He had paid NY tax on the days he worked there, but that was not good enough for Albany. Of course, the worse blow is that he has no state tax in Tennessee to take credit against.}}

{{ForumReplyPost|UserID=TheTinCook|Date=27 July 2007|Text=So the lesson here is to never take a job from a NY company?}}

{{ForumReplyPost|UserID=Death&Taxes|Date=27 July 2007|Text=Nexus can be particularly vexing for creative people. Where is a story written that is sold to a magazine published in NY, or if the check is given to the person's agent in New York? We are seeing more expansive interpretations of nexus. Does an artist or sculptor consigning work to a gallery in SOHO create a NYC presence for Nexus. While artists and writers are given special dispensation from IRS regarding inventories, is nexus created here?}}

{{ForumReplyPost|UserID=Bottom Line|Date=29 July 2007|Text=And how about this - my husband writes an article in our home in FL. He e-mails it to his publisher in NY who then posts the article on the internet which is read worldwide (KFFL.com). He's never been in NY. The publisher mails a check to our house in FL. As of now, there's no Nexus. But depending upon court cases, this could get out of hand very easily.}}

{{ForumReplyPost|UserID=KatieJ|Date=30 July 2007|Text="Nexus" is the connection between the state and the entity or activity that allows the state to impose a tax under the due process and commerce clauses of the U.S. Constitution. Until 1992 most of us thought that there was no difference in the nexus standards under due process and commerce. However, in 1992, in the _Quill_ decision, the U.S. Supreme Court made a distinction. Purposeful availment of the market in a state is generally sufficient to create nexus for due process purposes. Under the due process clause, nexus may be considered a proxy for notice -- if your activities with respect to the state are sufficient to put you on notice that you may be subject to the jurisdiction of the state's courts, you have nexus. So, for example, a mail order seller that has no connection with the state other than mailing in catalogs, accepting orders by mail and telephone, and filling the orders by shipping the product from outside the state does have nexus for due process purposes.

However, the Court set a higher standard under the commerce clause. While some earlier cases referred to a "minimal connection" for due process purposes, the 1977 _Complete Auto Transit_ case uses the term "substantial nexus" for commerce clause purposes. The _Quill_ case had to do with use tax collection responsibility, and the Court followed its 1966 _National Bellas Hess_ decision, holding that for use tax collection purposes the commerce clause requires that there be a physical presence in the state in order to have the requisite "substantial nexus."

The distinction between due process and commerce clause nexus throws the issue into the lap of Congress. Before _Quill_, it was unclear whether Congress could legislate authority for the states to require remote sellers to collect sales and use taxes on sales shipped into the state. Congress has the power to regulate interstate commerce, but Congress cannot legislate away due process. Since systematic exploitation of the market has been held to constitute due process nexus, Congress may, if it wishes, enact legislation authorizing states to require remote sellers to collect use taxes. So far it shows no inclination to do so, however.

Whether the physical presence requirement applies to other business activity taxes is an unresolved question. The U.S. Supreme Court recently denied certiorari in two state supreme court cases, one holding that a physical presence IS required, and another holding that it IS NOT required. In every business activity tax case the Court has decided over the years where commerce clause nexus was found to exist, there was a physical presence. However, those are all pre-_Quill_ decisions. Relying on language such as that in the U.S. Supreme Court decision in _Tyler Pipe_ and _National Can_, state courts have held that engaging in activities that help to maintain and exploit the market in a state is enough to create commerce clause nexus even when there is no physical presence. For example, the South Carolina Supreme Court found in _Geoffrey_ (1992, post-Quill) that a Delaware intangible holding company (IHC) that owns the trademarks, trade names, etc. of Toys R Us was subject to South Carolina tax because the use of the intangibles was licensed to TRU stores in South Carolina. Geoffrey had no physical presence in the state. The U.S. Supreme Court denied certiorari in that case.

Legislation pending in Congress (the Business Activity Tax Simplification Act, or BATSA) would provide a physical presence requirement for all business activity taxes.

Federal legislation (Public Law 86-272, 1959) limits states' authority to impose taxes ON OR MEASURED BY INCOME on out-of-state companies whose activities in the state are limited to solicitation of sales of tangible personal property. Obviously if you have sales personnel located or regularly traveling into the state, you have a physical presence there, and you have due process/commerce clause nexus. However, Public Law 86-272 protects you from net income taxes as long as your personnel in the state don't do anything other than soliciting sales, which are approved outside the state and shipped from outside the state. P.L. 86-272 does not protect a seller from other state taxes, such as use tax collection responsibility, franchise taxes measured by capital stock or net worth, gross receipts taxes (e.g., Washington B&O or Ohio CAT), or employer taxes. Whether the new Texas "margin tax" is subject to 86-272 protection is questionable, although the Texas statute itself says that it is not.

A note on New York's screwy "convenience of the employer" rule, at issue in the _Huckaby_ case referred to by Taxref and TinCook: The issue here is not exactly the same as the business "nexus" issue. The rules for individuals are a little bit different, arising from a different line of U.S. Supreme Court jurisprudence. In general, states have the power to tax all of the income of a resident, and all income of nonresidents arising from sources within the state. Generally, states take the position that the source of income from the personal services of an individual is the state where the services are performed. New York takes this a step farther and says, if you work for a NY employer, and you spend ANY time at your NY employer's premises, ALL of your earnings from that employment are from a NY source, unless your services were performed outside NY out of necessity (i.e., they could not, by their nature, have been performed elsewhere) and not for the convenience of either the employer or the employee. (This is colloquially known as the "convenience of the employer" rule.) So Mr. Huckaby, who lived in Tennessee and spent about 25% of his time working at his employer's location in NY and the rest working at his home in Tennessee, was subject to NY tax on 100% of his salary. This was especially painful for Mr. Huckaby because Tennessee does not have a comprehensive individual income tax -- TN only taxes interest and dividend income of residents. He'd have been even worse off, though, if he had lived and worked at home in an income tax state, e.g., California, because while California would have given him credit for the tax he paid to NY on the 25% of his salary that he earned working in NY, he would have received no credit for the tax paid to NY on the other 75% that he earned working in California. So he'd have paid tax to both states on the same income, with no credit relief. The same would be true in many other states.

We had high hopes for _Huckaby_ -- the NY regulation has been on the books for many years and was upheld by the NY Court of Appeals (the high court in NY) in the 1970's, but the world has turned a few times since then. However, the Court of Appeals upheld the regulation again, and the U.S. Supreme Court denied cert. So there you are.

NY has made some changes in the "convenience of the employer" rule, effective in 2006. Now a day working in a home office can be considered a day working outside NY if the home office is a "bona fide employer office." Determining whether the home office qualifies requires going through a Byzantine series of tests. For details, look at New York Technical Service Bureau Memorandum TSB-M-06(5)I, 05/15/2006.

As for creative people: So far, I think the place where the work (writing, painting, sculpting, whatever) takes place is the source of the income. However, if an artist consigns a painting to a dealer in NY, and the NY dealer sells it, it's pretty clear the artist has sold tangible personal property in NY and has NY source income. This is a source issue, not really a nexus issue, although the two are intertwined.
}}

{{ForumReplyPost|UserID=JAD|Date=30 July 2007|Text=I just read the Huckaby case and am again appalled at the insane laws that taxpayers (and we) must navigate. That New York could arbitrarily come up with a justification for taxing income that, as I understand it, most other states would not tax and should not tax is another example of why I believe the federal government should standardize general, broad brush laws among the states. Make some limits on what they can do, as they did, to some extent, w PL 86-272. I remember a frustrated mid-level practitioner making that statement many years ago when I was fresh out of college, and I have come to agree with him. }}

{{ForumReplyPost|UserID=KatieJ|Date=31 July 2007|Text=BATSA (I could look up the H.R. number if anybody really cares) would extend P.L. 86-272 protection to solicitation of all kinds of sales, not just sales of TPP. It would also require a physical presence to create nexus for all business activity tax purposes, and set fairly high thresholds for what constitutes physical presence. The states are vehemently opposed to it, as well they might be. Coupled with the repeal (or nonexistence, in many states) of sales throwback rules, which business interests have succeeded in enacting in some states and are championing in others, BATSA would create huge amounts of "nowhere" income, i.e., income assigned to states that would be prevented by federal law from taxing it.

The corporate income tax has already eroded as a source of state revenue (due in large part to the activities of folks like me, who have gone around for 25 years restructuring businesses to take advantage of differences in state laws that create planning opportunities) to such an extent that some states have enacted new (actually archaic) kinds of taxes to replace it -- such as the Texas "margin tax" and the Ohio Commercial Activity Tax. However, BATSA would invalidate the broad statutory nexus standards in the Ohio CAT -- which are probably unconstitutional anyway.

As far as I know, though, nothing has been proposed that would affect the validity of the New York "convenience of the employer" rule. Sad to say.

}}

{{ForumReplyPost|UserID=CorpTaxPro|Date=29 August 2007|Text=From everything here, you can gather there is no simple definition, except to say it is a point at which a company (or person) is deemed to have enough connection with a jurisdicition to become subject to their laws for tax on income. Since 1986 the findings of PL 86-272 were held to mean that basically there had to be a physical precense material enough to justify being taxed. Basically, own or rent some property there.

Thats been challenged and worked arounf a lot....and now...some States are straightfowardly asking the Supreme Court to revisit the issue and rule taht a financial presence would be enough to give rise to nexus....calling it financial nexus. The lead case has to do with a credit card company, who owns nothing, only solicits business through very broad ads, etc., but has many customers carrying their cards in any State....they argue that the fact the CC biz gets $ from the residents of the State is enough to give it nexus. They very well may win.}}

{{ForumReplyPost|UserID=KatieJ|Date=30 August 2007|Text=P.L. 86-272 really has nothing to do with the "physical presence" issue. A business that has employees or independent contractors regularly soliciting sales of tangible personal property in the state already has a phyiscal presence. P.L. 86-272 bars the state from imposing a net income tax on such a business as long as the activities of the sales personnel are limited to solicitation, as further defined by the U.S. Supreme Court in the 1992 Wrigley case.

Many states are asserting jurisdiction to tax out-of-state businesses on an "economic presence" basis, and so far the U.S. Supreme Court has not been willing to stop them. The credit card company case to which CorpTaxPro refers is MBNA National Bank NA v. West Virginia, 640 SE 2d 226 (2006), in which the West Virginia Supreme Court held that the bank that solicited West Virginia residents and issued credit cards to them had due process/commerce clause nexus and is subject to the corporate income tax. The U.S. Supreme Court denied certiorari in that case (Dkt No 06-1228, 6/18/2007).

In a very similar case, the Tennessee Supreme Court in 1999 held that an out-of-state credit card issuer did not have nexus because it had no physical presence in the state. J.C. Penney National Bank, 19 SW 3d 831 (1999). The U.S. Supreme Court denied certiorari in that one too (Dkt No 00-2005, 8/3/2000).

So, go figure. The Court seems unwillling to tackle the issue. I don't know what they are waiting for; surely they couldn't have found a case with cleaner facts than MBNA. No legal inference can be drawn from the denial of certiorari; it does not imply that the Court approved of the result in the state court. It only means the Court decided, for whatever reasons, not to take the case. So the credit card companies DO have nexus in West Virginia, and DO NOT in Tennessee. Other states will doubtless follow one or the other, but neither decision is controlling in any other state.}}

{{ForumReplyPost|UserID=Cyclops|Date=30 August 2007|Text=It was Toyota's first luxury car. }}

{{ForumReplyPost|UserID=Wwtaxes|Date=9 May 2008|Text=A slight variation on the question of nexus: ACME, Inc, an S Corp in state A, has contracts in several states. They hire local (ie, in state A) subcontractors to work these contracts. These contractors work part-time in state A on the projects, and part-time in the destination states. Acme obviously has nexus in all of the states. Would the subcontractor S Corps also have nexus in the other states, even though they are paid all income through ACME? Meaning, does the intermediary step affect nexus? I would think that they still have nexus in any of the states that they work in (physical presence), even though their income is not directly from those states.

Further twist: ACME also hires local contractors to work these out-of-state contracts, but they never leave state A (let's say they are writing software remotely, and communicating it via the internet). Do these subcontractor S Corps have nexus in the states that the software is written for, even though there is no physical presence?

}}

{{ForumReplyPost|UserID=RoyDaleOne|Date=9 May 2008|Text=Because, each State's definition of nexus can vary, you need to ask an attorney who has such knowledge, after all nexus is a legal question. Or, Wwtaxes, you could refine your question to specific states.}}

{{ForumReplyPost|UserID=Wwtaxes|Date=9 May 2008|Text=RDO - The answer was somewhat hypothetical, but I'll get as close as I can with an example. ACME is in MN. They have contracts in lots of states, including CA, IA, KS, TX, and NY. The IA and KS ones are of particular interest, bc they are the ones where the sub works a substantial amount, both in KS or IA, and remotely from MN. The work in the other states is anywhere from 1-8 days in the state (very short seminars). This is just one of the examples, and I don't do ACME's taxes, but I worked for ACME on an unrelated project, and this question has always nagged at me, and a similar situation may come up soon as I have software consultant clients that very well can work remotely. I would have guessed I'd have to find a tax specialist for the specific states, but I'll take your suggestion and look for an attorney as well.}}

{{ForumReplyPost|UserID=Sandysea|Date=10 May 2008|Text=Also, WW try the multi state tax commission in WA. I used this to determine nexus and they have attorney's (paid by our tax dollars) to assist in these areas.

Most states DO have nexus questionnaires and you can remain anonymous when filling them out to make sure you understand the different state requirements.

Some states would consider seminars nexus and others will not. Depends on how aggressive they are.

}}

{{ForumReplyPost|UserID=KatieJ|Date=11 May 2008|Text=Joyce, I don't think your question is all that complicated, nor do I think you will find any significant variation among states in their interpretation of it. The performance of personal services in a state universally creates nexus there, unless it is below a ''de minimis'' threshold established by the state. The subcontractors, as I understand it, are performing services in the "destination" states; as a result, they are universally taxable there, unless protected by a ''de minimis'' rule. The "intermediary" step is generally meaningless; as long as the entity itself as a physical presence in the state, it's taxable. It doesn't matter who benefits, directly or indirectly, from the service (except as noted below).

As a practical matter, many contractors work in other states for short periods of time and escape notice. The legal ability of the state to impose the tax is not really in question; it's more a matter of the resources the state devotes to enforcement and the luck of the draw.

Also, although the subcontractor clearly has nexus in every state where it performs services, the operation of the apportionment formula may result in little or no taxable income or tax liability. Most states use a variation of the UDITPA three-factor formula of property, payroll and sales. Movable property generally is assigned to the numerator of the property factor on a time basis. Payroll generally goes to the state where the employee is covered for unemployment insurance purposes -- it isn't broken up on the basis of time. Sales of services are generally assigned to the place where the greatest proportion of the income-producing activity occurs; some states would prorate sales of services performed in more than one state on the basis of time. There are a few states that assign sales of services, not to the location where the income-producing activity takes place, but to the place where the benefit of the service is enjoyed -- i.e., not where the work is done, but where the customer is located. Georgia, Ohio, Minnesota and Iowa are states that use this market-based approach to sales of services.

The State A subcontractor that performs all of its services in State A generally wouldn't have nexus in any other states; however, the states are getting more aggressive in that area. Ohio, for example, asserts jurisdiction to impose its Commercial Activity Tax (CAT) on any entity that has more than $500,000 of "Ohio taxable sales" in a calendar quarter, or that has more than 25% of its property, payroll OR sales during the year in Ohio. The catch here is that Ohio assigns sales of services, not to the place where the services are performed (or the place where the greatest proportion of the income-producing activity occurs), but to the place where the benefit of the service is enjoyed. Thus a Minnesota contractor, performing all of its services in Minnesota, would be subject to the CAT if more than 25% of its revenue was earned by performing services for Ohio customers, even if it never set foot in Ohio. This statutory provision may not withstand constitutional scrutiny in that extreme case, but a taxpayer may have to go to court to get out of it. Now, if the subcontractor performs its services on behalf of the contractor, who is in Minnesota, and the contractor's customer is in Ohio, I'm not sure where Ohio would source the contractor's receipt ... but you see the issue. }}

{{ForumReplyPost|UserID=PVVCPA|Date=September 11, 2013|Text=KatieJ says the following:

''...Public Law 86-272 protects you from net income taxes as long as your personnel in the state don't do anything other than soliciting sales, which are approved outside the state and shipped from outside the state.''

'' A business that has employees or independent contractors regularly soliciting sales of tangible personal property in the state already has a phyiscal presence. P.L. 86-272 bars the state from imposing a net income tax on such a business as long as the activities of the sales personnel are limited to solicitation...''

I am having trouble reconciling KatieJ's statements with the requirements by many of the states that a foreign "person" register and pay income tax if their in-state payroll exceeds $50,000. If a CA corporation hires a team of sales people in Ohio, and the sales people only solicit orders that are approved and distributed out of California, '''does the CA corporation need to apportion income to Ohio'''?}}

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Thu, 29 Aug 2013 16:33:45 GMT

PVVCPA:

{{Advanced Tax Questions}}


{{ForumNewPost|UserID=PVVCPA|Date=August 26, 2013|Text=A Corp, a C-Corp, receives restricted shares of B Corp, another unrelated C-Corp, as payment for services to be provided by A Corp to B Corp. The shares of B Corp only have a nominal value and does have potential for upside appreciation. The shareholders of A Corp want to capture any future appreciation outside of A Corp by immediately distributing the shares of B Corp out of A Corp to themselves.

Are there any issues with with A Corp immediately making an 83(b) election and then transferring the shares of B Corp to the shareholders of A Corp as a dividend at the same FMV that was declared on the election?

Will the LTCG clock on the B Corp shares begun ticking for the shareholders of A Corp on the day that dividend is issued even though the restrictions are still applicable? Do the shareholders also have to make an 83(b) election on the shares of B Corp that they receive as a dividend?}}

{{ForumReplyPost|UserID=Podolin|Date=27 August 2013|Text=First issue I see is that 83(a) applies to the corp. unless corp. disposes of the restricted stock in an "arm's length transaction". Is the distribution you describe an arm's length transaction? I don't know.

Next issue is that 83(b) can only be elected by a person who performs services in connection with which property is transferred. Unless the recipient shareholders, rather than the corp., performed the services, they cannot make the 83(b) election.

Why didn't the customer just hire the shareholders and transfer the stock to them?}}

{{ForumReplyPost|UserID=PVVCPA|Date=August 27, 2013|Text=''Why didn't the customer just hire the shareholders and transfer the stock to them?''

There is cash, IP and equipment that is owned by A Corp that will be used during the provision of services to B Corp.

Another option is to form a partnership and give A Corp an interest and the shareholders of A Corp the remaining interest. Do the 83(b) in the partnership, and then liquidate after the project is done. However, this idea comes with the costs and burden of a new entity. It also requires due diligence in deciding how much interest to give to A Corp for what it is contributing to the venture. In addition, there are 2 shareholders of A Corp that aren't doing jack, so why do they get an interest?}}

{{ForumReplyPost|UserID=PVVCPA|Date=August 27, 2013|Text=Leonard, I am not sure what you mean by 83(a) 'being an issue' since A Corp is planning on making the 83(b) election, anyhow. Can you please elaborate for me?}}

{{ForumReplyPost|UserID=PVVCPA|Date=August 27, 2013|Text=Re-reading 83(a) now...In this particular deal, B Corp will allow its restricted shares to be transferred to the shareholders of A Corp. Due to this ability to transfer, then it seems that 83(a) will require immediate income recognition by A Corp on the grant date. Therefore, no 83(b) will be required, and they get what they want by virtue of the transfer provision. This seems to accomplish what we want for stage 1.

Now to stage 2. A Corp issues the dividend to the shareholders. This dividend will be valued the same as what was recognized as income in stage 1. However, the shares of B Corp still have restrictions on them. Does the LTCG clock start ticking immediately?}}

{{ForumReplyPost|UserID=Podolin|Date=27 August 2013|Text=''In this particular deal, B Corp will allow its restricted shares to be transferred to the shareholders of A Corp.'' See 83(c)(2). }}

{{ForumReplyPost|UserID=Ckenefick|Date=27 August 2013|Text=''Due to this ability to transfer, then it seems that 83(a) will require immediate income recognition by A Corp on the grant date.''

I don't think so. See Sec 83(c)(2) as to the transferability issue. If the stock is still substantially non-vested in the ''transferee's'' hands, the stock isn't "transferable."

''The rights of a person in property are transferable only if the rights in such property of any transferee are not subject to a substantial risk of forfeiture.''

And from the Regs:

''In Year 1, X Corp sells to E, an employee, 100 shares of X stock at $10 per share. At the time of the sale, the fair market value of the X stock is $100 per share. Under the terms of the sale, each share of stock is subject to a substantial risk of forfeiture which will not lapse until Year 7. Evidence of this restriction is stamped on the face of E's stock certificates, which are therefore nontransferable for purposes of the rules on compensation paid in property. Since, in Year 1, E's stock is substantially nonvested, E does not include any of the amount in his gross income as compensation for that year. In Year 3, E sells his 100 shares of X stock in an arm's-length sale to I, an investment company, for $120 per share. At the time of this sale, each share of X stock has a fair market value of $200. E must include $11,000 (100 shares of X stock × $120 amount realized per share, less $10 price paid by E per share) as compensation for Year 3, even though the stock remains nontransferable and is still subject to a substantial risk of forfeiture at the time of the sale. I's basis in the X stock is $120 per share.''

Also note the "in connection with" language in 83. This ultimately means that even if the stock is transferred to someone else, when the restrictions lapse, the service provider is still tagged with the compensation income. This gets to the assignment of income principle. But it would only apply if said transfer was not arms' length.

In your case, however, I tend to think the corporate distribution IS an arms' length transaction seeing that it is cast as a sale or exchange at FMV.

Playing out Part I. Let's say Corp A pays $0 for the stock and doesn't make an 83(b) election, but the stock is worth $100. Upon distributing the stock out of Corp A (not at grant), we have full gain recognition by Corp A. And per the above example, such gain is treated as compensation income to Corp A. If Corp A made an 83(b) election, Corp A recognizes compensation income by virtue of said election and therefore has a stepped up basis, so no gain on the distribution out. So, either way we slice it, it seems to me, Corp A will have compensation income. So I come to your conclusion, that an 83b election isn't necessary, but for a different reason. Of course, if you want to be totally safe, Corp A should make an 83b election.

Also, the reg says that if the stock is sold or otherwise disposed of in an arms' length transaction:

''In addition, section 83(a) and paragraph (a) of this section shall thereafter cease to apply with respect to such property.''

This means that, when the restrictions ultimately lapse and the stock is worth $10m, such lapsing is not a realization event, since the realization event previously occurred on the arms' length disposition.}}

{{ForumReplyPost|UserID=PVVCPA|Date=August 27, 2013|Text=Leonard & Chris, Thank you very much for your insights and technical information. Very helpful!

I am having trouble understanding why Sec 83(a) even bothers to mention transferability as a possible condition for income recognition, whilst 83(c) says transferability doesn't exist so long as substantial risk of forfeiture still exists. Sec 83(a)(1) should just say "...at the first time the rights of the person having the beneficial interest are <s>transferable or are</s> not subject to a substantial risk of forfeiture..."
}}

{{ForumReplyPost|UserID=Ckenefick|Date=27 August 2013|Text=With your strike-out, we have a slight problem, since the sentence speaks to the rights of the person having the beneficial interest (i.e. the employee). If restricted shares are gifted from parent/employee to a child and said restrictions don't apply to the child, but still do apply to the parent, don't we still have a substantial risk of forfeiture as to parent (which would be illusory)?
}}

{{ForumReplyPost|UserID=PVVCPA|Date=August 27, 2013|Text=Chris, I did not follow you on your example. Leaving 83(a) as is, when in your example is the income recognized?

If transferred from parent/employee to child, then child is now the person with the beneficial interest. The parent is still required to perform services then restrictions on the stock still exist. Therefore, the child (the beneficiary) still has a substantial risk of forfeiture, and still no income is recognized. The ability to transfer did not accelerate the income recognition. Where am I going astray?

}}

{{ForumReplyPost|UserID=Ckenefick|Date=27 August 2013|Text=''then child is now the person with the beneficial interest.''

Not so sure you can make that leap. From the -3(d) reg:

''Transferability of property. For purposes of section 83 and the regulations thereunder, the rights of a person in property are transferable if such person can transfer any interest in the property to any person other than the transferor of the property, but only if the rights in such property of such transferee are not subject to a substantial risk of forfeiture. Accordingly, property is transferable if the person performing the services or receiving the property can sell, assign, or pledge (as collateral for a loan, or as security for the performance of an obligation, or for any other purpose) his interest in the property to any person other than the transferor of such property and if the transferee is not required to give up the property or its value in the event the substantial risk of forfeiture materializes. On the other hand, property is not considered to be transferable merely because the person performing the services or receiving the property may designate a beneficiary to receive the property in the event of his death.''

With respect to that large underline, contrast ''Robinson'' and ''Gunmundsson'' (cite below is from the latter):

''We also reject plaintiffs' effort to analogize the Agreement's transfer restrictions to those in Robinson v. Commissioner, 805 F.2d 38 (1st Cir.1986). In Robinson, the First Circuit concluded that the stock at issue was not transferable because it had been received subject to an agreement that contained a mandatory sell back provision prohibiting any disposal of the shares other than to the employer for one year. Id. at 39. In short, for Robinson to transfer the stock "to any person other than the transferor," Treas. Reg. § 1.83-3(d), he would be forced to breach the agreement, Robinson, 805 F.2d at 42. By contrast, here the Agreement permitted at least some transfers during the restricted period. Further—as plaintiffs stipulated below—the Agreement did not provide for the Stock to be forfeited if Gudmundsson or a transferee violated its terms. The agreement in Robinson, however, gave the employer the power to recoup the stock after an event of noncompliance. Id. at 39-40; see Hernandez v. United States, 450 F.Supp.2d 1112, 1119 (C.D.Cal.2006) (rejecting analogy to Robinson where agreement did not contain mandatory sell back provision).8 Robinson does not help plaintiffs' case and is not a reasonable analogue: individuals saddled by more complete transfer restrictions than was Gudmundsson have been held to have transferable interests under § 83. See Tanner v. Commissioner of Internal Revenue, 65 Fed.Appx. 508, ___, 2003 WL 1922926, at *2 (3rd Cir.2003) (deeming stock to be transferable despite two-year moratorium on sales where taxpayer could and did give the stock to a relative).''
}}

{{ForumReplyPost|UserID=PVVCPA|Date=August 27, 2013|Text=Chris, In your gifting example, when is the income recognized and by whom?}}

{{ForumReplyPost|UserID=Ckenefick|Date=27 August 2013|Text=There's an Example in the -1 reg, but right before that example is this:

''Dispositions of nonvested property not at arm's length. If substantially nonvested property (that has been transferred in connection with the performance of services) is disposed of in a transaction which is not at arm's length and the property remains substantially nonvested, the person who performed such services realizes compensation equal in amount to the sum of any money and the fair market value of any substantially vested property received in such disposition. Such amount of compensation is includible in his gross income in accordance with his method of accounting. However, such amount of compensation shall not exceed the fair market value of the property disposed of at the time of disposition (determined without regard to any lapse restriction), reduced by the amount paid for such property. In addition, section 83 and these regulations shall continue to apply with respect to such property, except that any amount previously includible in gross income under this paragraph (c) shall thereafter be treated as an amount paid for such property.''

Unlike arms length dispositions, non-arms length dispositions keep the income element open. So, if there's a full gift, there's no income recognition. Also, unlike arms length dispositions, where we shut off Sec 83(a) upon such a transaction, we do not do so with a non-arms length transaction, which makes sense. Thus, if dad gifts restricted stock to kid, there's no income event up front. Yet, when restrictions lapse, dad has compensation income, even though dad no longer holds the shares. This gets back to the "in connection with" language (and assignment of income principle). Even though kid performed no services, the shares were nonetheless issued "in connection with" the performance of services (by dad).

And here's the example:

For example, if in 1971 an employee pays $50 for a share of stock which has a fair market value of $100 and is substantially nonvested at that time and later in 1971 (at a time when the property still has a fair market value of $100 and is still substantially nonvested) the employee disposes of, in a transaction not at arm's length, the share of stock to his wife for $10, the employee realizes compensation of $10 in 1971. If in 1972, when the share of stock has a fair market value of $120, it becomes substantially vested, the employee realizes additional compensation in 1972 in the amount of $60 (the $120 fair market value of the stock less both the $50 price paid for the stock and the $10 taxed as compensation in 1971).
}}

{{ForumReplyPost|UserID=PVVCPA|Date=August 27, 2013|Text=OK. So income recognized when restrictions lapse. How would this answer be different if the 83(a) struck the "transferable..." ?}}

{{ForumReplyPost|UserID=Ckenefick|Date=27 August 2013|Text=''With your strike-out, we have a slight problem, since the sentence speaks to the rights of the person having the beneficial interest (i.e. the employee). If restricted shares are gifted from parent/employee to a child and said restrictions don't apply to the child, but still do apply to the parent, don't we still have a substantial risk of forfeiture as to parent (which would be illusory)?''

Same answer as before.

Parent would assert that a gift to kid in which there's no restrictions as to the kid (as transferee) is now irrelevant. Parent would argue that since there's no longer a transferability rule, and only a substantial risk of forfeiture rule, such substantial risk of forfeiture still applies to the parent and that's all that matters under the Revised Code Section. As such, even though the kid got the stock and sold it, and got the cash, parent has no income until restrictions lapse.}}

{{ForumReplyPost|UserID=Podolin|Date=28 August 2013|Text=''In your case, however, I tend to think the corporate distribution IS an arms' length transaction seeing that it is cast as a sale or exchange at FMV.'' It may well be arm's length, but do note that the reg. and law do not define that term. The only place that comes close is Reg. 1.83-1(c), at the end, where it specifies that, in defined circumstances, a transfer at death is not at arm's length.

Assuming that the corp. that gets the shares for performing services is closely held, and noting that the definition of "arm's length"in Black's Law includes this wording: "...without being subject to the other’s control or overmastering influence." : http://thelawdictionary.org/at-arms-length/#ixzz2dDz2ag5T, I think IRS could assert that the distribution of the restricted stock by the controlled corp. to the controlling shareholders because ''The shareholders of A Corp want to capture any future appreciation outside of... '' was not at arm's length. The tax treatment (sale or exchange at FMV) would not control.

Of course, IRS would need an incentive to make the assertion that it is not an arm's length transfer.}}

{{ForumReplyPost|UserID=Ckenefick|Date=28 August 2013|Text=That's a real stretch, Lenny.}}

{{ForumReplyPost|UserID=PVVCPA|Date=August 28, 2013|Text=In this transaction, B-Corp is a closely held corporation. The IRS could argue that the value of B-Corp is not ascertainable. One cannot make an 83(b) election if the value is not ascertainable. This would pose a problem with my partnership plan (Plan B), which was described in the 3rd post.

With Plan A, A-Corp should still do the 83(b), even though it is transferring the stock to the shareholder via a dividend. (Chris speaks to this, above.) This Plan A provides the extra insurance of capturing the value as income immediately which we do not get with just the 83(b) election in Plan B.

Of course, the IRS could argue as to the value of the stock at that time. This would most likely be the IRS' best argument rather than arguing that a dividend, in and of itself, is not an arms-length transaction.

Again, thank you Leonard & Chris for your help with this.}}

{{ForumReplyPost|UserID=Podolin|Date=28 August 2013|Text=Doesn't the not-readily-ascertainable rule apply to options? Isn't your situation stock?}}

{{ForumReplyPost|UserID=PVVCPA|Date=August 28, 2013|Text=Leonard, you are correct. I missed the word "option" when I read that you cannot do an 83(b) election if the value is not ascertainable.

However, this begs another question. Can you even do an 83(b) election on a stock option? It has always been my understanding that a stock option is not considered "property" for which an 83(b) election is possible.}}

{{ForumReplyPost|UserID=Ckenefick|Date=28 August 2013|Text=http://www.taxalmanac.org/index.php/Discussion:GE_stock_options}}

{{ForumReplyPost|UserID=PVVCPA|Date=August 28, 2013|Text=I knew one could not do the 83(b) on an option, but for the wrong reason. Thank you for straightening me out.}}

{{ForumReplyPost|UserID=Podolin|Date=29 August 2013|Text=''That's a real stretch, Lenny.'' I don't know if it's a stretch or not. I also don't know whether the distribution in the OP's facts is or is not at arm's length. I did a little looking, and have been unable to discern a clear pattern or set of rules on the point. Maybe you can. Here are some examples I found:

From Reg.1.83-1)c) - For purposes of this paragraph, if substantially nonvested property has been transferred to a person other than the person who performed the services, and the transferee dies holding the property while the property is still substantially nonvested and while the person who performed the services is alive, the transfer which results by reason of the death of such transferee is a transfer not at arm's length.

From FSA 200005006 (relating to transfer from H to W as part of divorce, and held to be at arm’s length). - Generally, transactions between related individuals appear to be non-arm’s length transactions. See Treas. Reg. § 1.83-1(c).

In PLR 200835019 and PLR 200615007, substitution of ISOs and substitution of restricted stock were treated as being at arm’s length in the context of corporate spinoffs.

PLR 9533008, in context of sale of profits interest to trust for children, says = Specifically, no opinion is expressed on whether the sale of the rights to the trust is in fact an arm's length transaction ...

From PLR 200219016, in context of a s/h transferring his stock option on a parent company back to that co., after which the option is re-issued to an employee of a subsidiary of the parent, as compensation. - The proposed transaction would not be a typical arm’s length transaction in that Shareholder X would not be transferring the property for any direct money or other similar consideration. However, the transaction also would not resemble a typical non arm’s length transaction in that Shareholder X does not intend the transfer to be a gift to Employee Y, or that Employee Y will provide nonexistent or inadequate consideration for the stock option. Instead, Shareholder X intends that Employee Y provide consideration for the stock option in the form of services as an employee of Company B. Viewed in this respect, the transaction resembles the transfer of property by a shareholder to a corporate employee addressed in sections 1.83-6(d) and 1.1032-3 of the Income Tax Regulations. See section 1.1032-3(e), example 9.

Reg. 1.422-1(b)(2)(ii), regarding ISOs, has this language: “Thus, for example, if a disqualifying disposition is a ... gift (or any other transaction which is not at arm's length) …”

In the OP, a corp. is giving (distributing) restricted stock that it just received and that may provide corp. significant future income, to its shareholders. What consideration is it getting for doing so?

}}

{{ForumReplyPost|UserID=Ckenefick|Date=29 August 2013|Text=Ok, I agree that with a lack of guidance, "deeming" certain things might be unsafe. In which case, shareholder can pay FMV to the corp for the stock (in cash), then the corp can distribute said cash right back out to the shareholder (in a separate 'dividend' transaction). (Or better yet, leave the cash in the corp...at least for a while). On the one hand, it seems silly that this check writing scenario would apparently be okay, when the "deeming" scenario (no check writing), wouldn't be. You see, it gets very complicated in terms of parsing. As Lenny says, "Show me the consideration!" And he's right, if we collapse, s/h ends up with the stock and corp gets zero (but only because corp was deemed to pay the deemed cash in, back out to the s/h). Of course, taxpayer would argue that we should slow down the transaction and stop it after the deemed sale by the corp to the shareholder. Then we should wait. And then move on to the dividend part. Taxpayer would assert that there's no way possible for him to have a stepped up basis absent a tax recognition (sale) event. But I'm more and more leaning to Lenny's line of thinking.

That language - "arms length" - I think gives us all pause. Especially in light of that example in the Regs involving a sale to the guy's wife. What? A tax triggering event upon a sale to one's spouse? Well, it was a non-arms length transaction, right? Indeed, it was. Note that 1041 involves "gain or loss," not compensation income. So I think there may be some (solid) credibility to the argument that "arms length" means "arms length" - as in, you must physically pay cash or other property - despite how some other code section might cast it. Normally, instead of seeing language like "non---arms length," we'd expect language like, "a transaction where the basis of the property to the transferee is determined in whole or in part by reference to the basis of the transferor." But we don't see that language here. Perhaps part of the reason is, again, that we are dealing with possible compensation income, not possible gain.}}

{{ForumReplyPost|UserID=Podolin|Date=29 August 2013|Text=The FSA I cited regarding a divorce preceded 1041, I think.}}

{{ForumReplyPost|UserID=Ckenefick|Date=29 August 2013|Text=I was referring to the example in the regs. I quickly checked the sequencing of dates, but maybe I didn't get it right. I think the Reg came out in 1978, and Sec 1041, in 1984. Nonetheless...does it matter? Hard to say...

There is quite a bit out there regarding stock options and what happens when they get transferred in a divorce, and who ultimately has to recognize the income upon exercise. RR 2002-22. But that might be slightly different.}}

{{ForumReplyPost|UserID=PVVCPA|Date=August 29, 2013|Text=Chris, is this the example in the regs that you are referring to?

Reg §1.83-1(c)
''...For example, if in 1971 an employee pays $50 for a share of stock which has a fair market value of $100 and is substantially nonvested at that time and later in 1971 (at a time when the property still has a fair market value of $100 and is still substantially nonvested) the employee disposes of, in a transaction not at arm's length, the share of stock to his wife for $10, the employee realizes compensation of $10 in 1971. If in 1972, when the share of stock has a fair market value of $120, it becomes substantially vested, the employee realizes additional compensation in 1972 in the amount of $60 (the $120 fair market value of the stock less both the $50 price paid for the stock and the $10 taxed as compensation in 1971). ...''

What is it that makes this transaction not at arm's length? Is it the transfer to his wife or is the transfer at below market value?}}

{{ForumReplyPost|UserID=PVVCPA|Date=August 29, 2013|Text=Let's recast this example by (1) removing the $50 purchase price and (2) having the employee selling the stock to his wife at $100. What would be the result?

a) If the transaction is now deemed to be at arm's length, then there is no additional income to be recognized by the employee in 1972.

b) If the transaction is still deemed to be not at arm's length, then the employee would have to recognize $20 of income in 1972

If (b) is the correct answer, then what would be the result if the employee had made the 83(b) election in 1971?
}}

{{ForumReplyPost|UserID=Ckenefick|Date=29 August 2013|Text=''What is it that makes this transaction not at arm's length? Is it the transfer to his wife or is the transfer at below market value?''

I think it's that it was for below FMV, which supports IRS' generality that you noted above:

''Generally, transactions between related individuals appear to be non-arm’s length transactions. See Treas. Reg. § 1.83-1(c).''

Of course, this is just a generality. In PV's case, we have a corporate distribution to a "related party" (maybe). Even though each C-shareholder might now own the requisite % to constitute relatedness under 267, they're still "related" under a layman's definition of that word...but I don't think it matters much. The 83 stuff doesn't hinge on "related." Hence the use of the words "person" and "non-arms length" and "arms length."

}}

{{ForumReplyPost|UserID=PVVCPA|Date=August 29, 2013|Text=Chris, then your answer to my recast of the example would be (a). Correct?}}

{{ForumReplyPost|UserID=Ckenefick|Date=29 August 2013|Text=I don't know if I have an answer...wouldn't it depend on whether or not 1041 definitively over-rides this husband-wife transaction?}}

{{ForumReplyPost|UserID=PVVCPA|Date=August 29, 2013|Text=Let's re-recast this example by (1) removing the $50 purchase price and (2) having the employee selling the stock to his daughter at $100. What would be the result?
a) If the transaction is now deemed to be at arm's length, then there is no additional income to be recognized by the employee in 1972.

b) If the transaction is still deemed to be not at arm's length, then the employee would have to recognize $20 of income in 1972

If (b) is the correct answer, then what would be the result if the employee had made the 83(b) election in 1971? }}

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Thu, 29 Aug 2013 16:22:54 GMT

PVVCPA:

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Thu, 29 Aug 2013 15:28:00 GMT

PVVCPA:

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Thu, 29 Aug 2013 15:14:18 GMT

PVVCPA:

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Wed, 28 Aug 2013 20:41:59 GMT

PVVCPA:

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Wed, 28 Aug 2013 18:40:58 GMT

PVVCPA:

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Wed, 28 Aug 2013 16:55:58 GMT

PVVCPA:

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Wed, 28 Aug 2013 16:55:05 GMT

PVVCPA:

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Wed, 28 Aug 2013 16:53:50 GMT

PVVCPA:

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Tue, 27 Aug 2013 21:54:36 GMT

PVVCPA:

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Tue, 27 Aug 2013 21:02:30 GMT

PVVCPA:

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Tue, 27 Aug 2013 17:51:27 GMT

PVVCPA:

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Tue, 27 Aug 2013 15:59:50 GMT

PVVCPA:

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Tue, 27 Aug 2013 15:59:31 GMT

PVVCPA:

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Tue, 27 Aug 2013 15:55:43 GMT

PVVCPA:

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Tue, 27 Aug 2013 04:54:23 GMT

PVVCPA:

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Tue, 27 Aug 2013 04:53:14 GMT

PVVCPA:

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Tue, 27 Aug 2013 04:49:15 GMT

PVVCPA:

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Tue, 27 Aug 2013 04:46:36 GMT

PVVCPA:

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Tue, 27 Aug 2013 04:45:58 GMT

PVVCPA:

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Tue, 27 Aug 2013 04:44:53 GMT

PVVCPA:

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Tue, 27 Aug 2013 04:39:50 GMT

PVVCPA:

{{Advanced Tax Questions}}


{{ForumNewPost|UserID=PVVCPA|Date=August 26, 2013|Text=A, a C-Corp, receives restricted shares of B, another unrelated C-Corp, as payment for services to be provided by A to B. A immediately makes an 83(b) election and then transfers shares of B to the shareholders of A as a dividend at same FMV that was declared on the election. The shares of B in the hands of the shareholders of A remain restricted pending services to be provided by A to B.

Are there any issues with this structure?

Has the LTCG on the B shares begun ticking for the shareholders of A? Do they also have to make an 83(b) election since the shares of B remain restricted?}}

{{ForumReplyPost|UserID=Podolin|Date=27 August 2013|Text=First issue I see is that 83(a) applies to the corp. unless corp. disposes of the restricted stock in an "arm's length transaction". Is the distribution you describe an arm's length transaction? I don't know.

Nest issue is that 83(b) can only be elected by a person who performs services in connection with which property is transferred. Unless the recipient shareholders, rather than the corp., performed the services, they cannot make the 83(b) election.

Why didn't the customer just hire the shareholders and transfer the stock to them?}}

{{ForumReplyPost|UserID=PVVCPA|Date=August 27, 2013|Text=''Why didn't the customer just hire the shareholders and transfer the stock to them?''

There is cash, IP and equipment that is owned by A Corp that will be used during the provision of services to B Corp.

Another option is to form a partnership and give A Corp an interest and the shareholders of A Corp the remaining interest. Do the 83(b) in the partnership, and then liquidate after the project is done. However, this idea comes with the costs and burden of a new entity. It also requires due diligence in deciding how much interest to give to A Corp for what it is contributing to the venture. In addition, there are 2 shareholders of A Corp that aren't doing jack, so why do they get an interest?}}

{{ForumReplyPost|UserID=PVVCPA|Date=August 27, 2013|Text=Leonard, I am not sure what you mean by 83(a) 'being an issue' if the A Corp is planning on making the 83(b) election, anyhow. Can you please elaborate for me?

However, in this particular deal, B Corp will allow its restricted shares to be transferred to the shareholders of A Corp. Due to this ability to transfer, then it seems that 83(a) will require immediate income recogntion by A Corp on the grant date. Therefore, no 83(b) will be required, and they get what they want by virtue of the transfer provision.}}

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Tue, 27 Aug 2013 04:37:38 GMT

PVVCPA:

{{Advanced Tax Questions}}


{{ForumNewPost|UserID=PVVCPA|Date=August 26, 2013|Text=A, a C-Corp, receives restricted shares of B, another unrelated C-Corp, as payment for services to be provided by A to B. A immediately makes an 83(b) election and then transfers shares of B to the shareholders of A as a dividend at same FMV that was declared on the election. The shares of B in the hands of the shareholders of A remain restricted pending services to be provided by A to B.

Are there any issues with this structure?

Has the LTCG on the B shares begun ticking for the shareholders of A? Do they also have to make an 83(b) election since the shares of B remain restricted?}}

{{ForumReplyPost|UserID=Podolin|Date=27 August 2013|Text=First issue I see is that 83(a) applies to the corp. unless corp. disposes of the restricted stock in an "arm's length transaction". Is the distribution you describe an arm's length transaction? I don't know.

Nest issue is that 83(b) can only be elected by a person who performs services in connection with which property is transferred. Unless the recipient shareholders, rather than the corp., performed the services, they cannot make the 83(b) election.

Why didn't the customer just hire the shareholders and transfer the stock to them?}}

{{ForumReplyPost|UserID=PVVCPA|Date=August 27, 2013|Text=''Why didn't the customer just hire the shareholders and transfer the stock to them?''

There is cash, IP and equipment that is owned by A Corp that will be used during the provision of services to B Corp.

Another option is to form a partnership and give A Corp an interest and the shareholders of A Corp the remaining interest. Do the 83(b) in the partnership, and then liquidate after the project is done. However, this idea comes with the costs and burden of a new entity. It also requires due diligence in deciding how much interest to give to A Corp for what it is contributing to the venture. In addition, there are 2 shareholders of A Corp that aren't doing jack, so why do they get an interest?}}

{{ForumReplyPost|UserID=PVVCPA|Date=August 27, 2013|Text=Leonard, I am not sure what you mean by 83(a) 'being an issue' if the A Corp is planning on making the 83(b) election.

However, in this particular deal, B Corp will allow its restricted shares to be transferred to the shareholders of A Corp. Since that is the case, it seems that 83(a) will require immediate income recogntion by A Corp on the grant date. Therefore, no 83(b) is required.}}

Discussion:Corp receives restricted shares and immediately distributes to shareholders

PVVCPA — Tue, 27 Aug 2013 04:37:24 GMT

PVVCPA:

{{Advanced Tax Questions}}


{{ForumNewPost|UserID=PVVCPA|Date=August 26, 2013|Text=A, a C-Corp, receives restricted shares of B, another unrelated C-Corp, as payment for services to be provided by A to B. A immediately makes an 83(b) election and then transfers shares of B to the shareholders of A as a dividend at same FMV that was declared on the election. The shares of B in the hands of the shareholders of A remain restricted pending services to be provided by A to B.

Are there any issues with this structure?

Has the LTCG on the B shares begun ticking for the shareholders of A? Do they also have to make an 83(b) election since the shares of B remain restricted?}}

{{ForumReplyPost|UserID=Podolin|Date=27 August 2013|Text=First issue I see is that 83(a) applies to the corp. unless corp. disposes of the restricted stock in an "arm's length transaction". Is the distribution you describe an arm's length transaction? I don't know.

Nest issue is that 83(b) can only be elected by a person who performs services in connection with which property is transferred. Unless the recipient shareholders, rather than the corp., performed the services, they cannot make the 83(b) election.

Why didn't the customer just hire the shareholders and transfer the stock to them?}}

{{ForumReplyPost|UserID=PVVCPA|Date=August 27, 2013|Text=''Why didn't the customer just hire the shareholders and transfer the stock to them?''

There is cash, IP and equipment that is owned by A Corp that will be used during the provision of services to B Corp.

Another option is to form a partnership and give A Corp an interest and the shareholders of A Corp the remaining interest. Do the 83(b) in the partnership, and then liquidate after the project is done. However, this idea comes with the costs and burden of a new entity. It also requires due diligence in deciding how much interest to give to A Corp for what it is contributing to the venture. In addition, there are 2 shareholders of A Corp that are doing jack, so why do they get an interest?}}

{{ForumReplyPost|UserID=PVVCPA|Date=August 27, 2013|Text=Leonard, I am not sure what you mean by 83(a) 'being an issue' if the A Corp is planning on making the 83(b) election.

However, in this particular deal, B Corp will allow its restricted shares to be transferred to the shareholders of A Corp. Since that is the case, it seems that 83(a) will require immediate income recogntion by A Corp on the grant date. Therefore, no 83(b) is required.}}