Hi and welcome back to the tax implications podcast.

I’m a CPA and tax advisor. 

This is your short form podcast covering the items that affect your bottom line.

Thank you for tuning in. Today I’ll be discussing opportunity funds as an investment strategy to defer and potentially avoid taxable gains.

Recently, a proposed budget from the White House was released that would drastically increase the amount some would have to pay in capital gains taxes, luckily provisions in the Tax Cuts and Jobs Act included the creation of opportunity zones as tax incentives,

This is an economic development tool that allows people to invest in distressed areas. This incentive's purpose is to increase economic development and job creation in targeted communities by providing tax breaks to investors. Areas qualify as opportunity zones if their local government nominates them for that designation and the U.S. Treasury department certifies the nomination.

A taxpayer may elect to defer the taxation of capital gain realized from the sale or exchange of property to an unrelated party by reinvesting the capital gain in a qualified opportunity zone fund (QOF). The taxpayer is required to reinvest the proceeds within 180 days of the sale or exchange. The reinvestment may be made by transferring cash or property to the QOF. A taxpayer may choose to defer taxation on only a portion of the capital gain. It is not necessary to reinvest all of the capital gain from the sale or exchange that generated the capital gain.

If the taxpayer reinvests any capital gain into a QOF within 180 days after the sale, tax on the gain is not due until December 31, 2026 or earlier if the investment in the fund is ended. Additionally, if the taxpayer does not sell their investment for ten years, any appreciation in the value of the investment is not taxed at all.

This is important to separate, the gain that is deferred is still included as taxable income in 2026 but the new investment in the opportunity fund could be tax free if held for at least 10 years.

So what is a Qualified Opportunity Fund (QOF)

A qualified opportunity fund (QOF) is a corporation or a partnership that holds at least 90 percent of its assets in qualified opportunity zone property.

What is Qualified Opportunity Zone (QOZ) Property

QOZ business property is tangible property that a qualified fund acquires by purchases and uses in a trade or business:

Several hundred zones have been designated by the IRS. Investors don’t have to live in the zones to qualify for the benefit, they only have to invest into them.

You should consult with experienced tax and legal professionals before making any decisions for your business.

Thank you for listening.

If you have any questions that you’d like discussed on a future episode please contact me at [email protected].

I’m Sam Hicks, I’m a CPA and tax advisor 

This is your short form podcast covering the items that affect your bottom line

Thank you for tuning in. Today I’ll be discussing the deductibility of start-up and organization expenses for a new venture.

If you've recently started a business, or are in the process of starting one now, you should be aware that the way you treat some of your initial expenses for tax purposes can make a big difference in your tax bill.

Generally, expenses incurred before a business begins don't generate any deductions or other current tax benefits.

However, taxpayers, whether they are individuals, corporations or partnerships, are permitted to elect to write off $5,000 of “start-up expenses” in the year business begins, with the costs not written off deducted ratably over a period of 180 months, this begins with the month the business starts. The $5,000 figure is reduced by the excess of total start-up costs over $50,000.

You will be deemed to have made the election unless you opt out.

Start-up expenses include, with a few exceptions, all expenses incurred to investigate the creation or acquisition of a business, to actually create the business, or to engage in a for-profit activity in anticipation of that activity becoming an active business. To be eligible for the election, an expense also must be one that would be deductible if it were incurred after the business actually began. An example of a start-up expense is the cost of analyzing the potential market for a new product.

A similar $5,000/180-month/over-$50,000-phase-out election is available to corporations and partnerships for their “organization expenses.” To qualify as an organization expense, the expense must be incident to the creation of the corporation or partnership, be an expense that, in the absence of the election, would be capitalized, and be an expense that, if it had been incurred in connection with a corporation or partnership that had a limited life, would have been eligible to have been written off over that limited life. Examples of organization expenses are legal and accounting fees for services related to organizing the new entity (such as fees for drafting the corporate charter or partnership agreement) and filing fees (such as fees paid to the state of incorporation).

As you can see, it's important to keep a record of these start-up and organization expenses, and to make the appropriate decision regarding the write-off election. As mentioned above, if you opt out of the election, there is no current tax benefit derived from the eligible expenses covered by the election. Also, you should be aware that an election either to deduct or to amortize start-up expenditures, once made, is irrevocable.

You should consult with experienced tax and legal professionals before making any decisions for your business.

Thank you for listening.

If you have any questions that you’d like discussed on a future episode please contact me at [email protected].

Hi and welcome back to the tax implications podcast with Sam Hicks

This is your short form podcast covering the items that affect your bottom line

Thank you for tuning in. Today I’ll be discussing a current issue revolving around the taxability of unemployment compensation AND refunds that should be issued by the government for previously filed taxes.

For those who have already filed 2020 returns, IRS has announced that it will automatically recalculate taxable income (excluding any unemployment compensation eligible for the exclusion) and refund any overpayment.

It's expected that the IRS will issue incorrect refunds for many married couples in community property states, understating the amount of the refund.

This is why it is highly recommended, that if you received unemployment compensation in 2020 and you’re a married resident of Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington and Wisconsin; you should review your tax filing to see if more of your unemployment income can be excluded, and if the IRS is truly providing you with the refund you qualify for.

You should consult with experienced tax and legal professionals before making any decisions for yourself.

Thank you for listening.

If you have any questions that you’d like discussed on a future episode please contact me at [email protected].

Hi and welcome to the tax implications podcast with Sam Hicks

This is your short form podcast covering the items that affect your bottom line

Thank you for tuning in. Today I’ll be discussing how an C Corporation might be the most suitable form of business for a new venture.

You should consult with experienced tax and legal professionals before making any decisions for your business.

Thank you for listening.

A C corporation allows the business to be treated and taxed as a separate entity from you as the principal owner. A properly structured corporation can protect you from the debts of the business yet enable you to control both day-to-day operations and organic corporate acts such as redemptions, acquisitions, and even liquidations.

In order to ensure that the corporation is treated as a separate entity, it is important to observe various formalities required by your state. These can include filing articles of incorporation, adopting by-laws, electing a board of directors, appointing a resident agent, holding organizational meetings and keeping minutes of those meetings.

Since the corporation is taxed as a separate entity, all items of income, credit, loss, and deduction are computed at the entity level in arriving at corporate taxable income or loss.

A C corporation can also be used to provide fringe benefits and fund qualified pension plans on a tax-favored basis. This is subject to certain limits, but the corporation can deduct the cost of a variety of benefits such as health insurance and group life insurance without adverse tax consequences to you. Similarly, contributions to qualified pension plans are usually deductible but are not currently taxable to you.

A C corporation also gives you considerable flexibility in raising capital from outside investors. A C corporation can have multiple classes of stock—each with different rights and preferences that can be tailored to fit your needs and those of potential investors.

Hi and welcome to the tax implications podcast with Sam Hicks

This is your short form podcast covering the items that affect your bottom line

Thank you for tuning in. Today I’ll be discussing how an LLC might be the most suitable form of business for a new venture.

You should consult with experienced tax and legal professionals before making any decisions for your business.

Thank you for listening.

A limited liability company (LLC) is somewhat of a hybrid entity in that it can be structured to resemble a corporation for owner liability purposes and a partnership for federal tax purposes.

The owners can operate the business with the security of knowing that their personal assets are protected from the entity's creditors.

An LLC that is taxable as a partnership can provide special allocations of tax benefits to specific partners.

LLCs are not subject to the restrictions the Internal Revenue Code imposes on S corporations regarding the number of owners and the types of ownership interests that may be issued.

An LLC would give you corporate-like protection from creditors while providing you with the benefits of taxation as a partnership.

Hi and welcome to the tax implications podcast with Sam Hicks

This is your short form podcast covering the items that affect your bottom line.

Today I’ll be discussing how an S corporation might be the most suitable form of business for a new venture.

You should consult with experienced tax and legal professionals before making any decisions for your business.

Thank you for listening. 

The biggest advantage of an S corporation over a partnership is that as S corporation shareholders you would not be personally liable for corporate debts.

S corporation shareholders can deduct their share of business losses on their personal tax filing.

To the extent the income passed through to you is qualified business income, you can be eligible to take the 20% Code Sec. 199A pass-through deduction.