At Buckingham & McGuire, LLC our Denver tax attorneys assist clients in resolving IRS debts, audits and other matters, as well as applying the tax laws to our client’s individual and business issues. All of our tax attorneys have obtained an additional degree in taxation known as an LL.M. Our additional knowledge and education in taxation not only helps resolve IRS issues, but allows us to better assist our clients regarding their business transactions, estate planning and overall tax planning.

Foreign Account Tax Compliance Act (FATCA)

Foreign Account Tax Compliance Act (FATCA) Denver Tax Attorney

As a Denver tax attorney, John McGuire works with clients to ensure their compliance with the Foreign Account Tax Compliance Act.  The article below outlines compliance issues and considerations.

The Foreign Account Tax Compliance Act and related provisions became law in 2010.  The act targets United States taxpayer who may be using foreign accounts and not reporting income or gain from these foreign accounts and therefore not complying with the Internal Revenue Code.  Under the Internal Revenue Code and federal law, United State citizens are taxed on world-wide income.  Although, credits exist from foreign earned income, all income must be properly reported and accounted for on the 1040 Individual Income Tax Return.

The primary focus of FATCA is to encourage United States citizens to report certain foreign financial accounts and foreign assets.  Further, FATCA focuses on reporting by foreign financial institutions to report financial accounts held by United States taxpayers and/or foreign entities in which United States taxpayers hold a substantial economic interest.  Therefore, the provisions of FATCA impact individuals holding foreign accounts or assets, in addition to economic interest in certain foreign entities.

Individual taxpayers must report foreign accounts and other offshore assets on Form 8938, and attach Form 8938 to their 1040 Individual Income Tax Return.  If a taxpayer’s total foreign assets are below a threshold, the individual does not need to file Form 8938.  If an individual’s value of foreign assets is $50,000 or less at the end of the tax year, and never exceeded $75,000 during the tax year, the individual does not have to file Form 8938.  This threshold may be higher for individuals who live outside the United States, and the threshold can change depending upon a taxpayer’s filing status.  It is important to note that the reporting requirement for Form 8938 is different than the reporting requirement to comply with the FBAR rules (Report of Foreign Bank and Financial Accounts).  The Internal Revenue Service is also expecting to issue regulations that would require an entity holding foreign financial assets above the threshold to file Form 8938.  However, until these regulations are issued by the Internal Revenue Service, the reporting requirement under Form 8938 only applies to individuals.

The Internal Revenue Service has initiated voluntary disclosure programs for individuals to disclose foreign assets and accounts, whereby the penalties that can be assessed to the individual are significantly lessened.

Contact The McGuire Law Firm to discuss FATCA issues with a tax attorney.

Formation of the Partnership: Contribution of Property & Basis by Denver Tax Attorney

Formation of the Partnership: Contribution of Property & Basis Denver Business Attorney

At The McGuire Law Firm a Denver tax attorney and business attorney can assist clients with the formation of their partnership and the tax consequences based upon the property contributed by the partners.  The article below has been drafted by a tax attorney may be useful when property is contributed to a partnership for a partnership interest.

When a partnership is formed, the partners will generally contribute property to the partnership.  Under Internal Revenue Code Section 721, the partners will recognize neither gain nor loss when they contribute property to the partnership in exchange for a partnership interest.

There are exceptions to IRC Section 721.  The non-recognition rule of Section 721 does not apply to, the receipt of an interest in partnership capital in return for services that are performed for the partnership or for services to later be rendered, and when the deemed money under IRC Section 731(a)(1) exceeds the sum of the adjusted basis in the property contributed.  Further, Section 721 would not apply to a disguised sale under IRC 707(a)(2)(B) where a partner contributed property and received a priority distribution of cash and property within 2 years from the time the original contribution was made to the partnership.  You must always consider whether the value of the property contributed is equal to the value of the partnership interest received by the partner.

What constitutes property for purposes of IRC 721?  Property includes both tangible (money, personal property & real property) and intangible property.  Intangible property would be goodwill, contract right, accounts receivable, patent rights, secret processes and other types of intangible property, but the property must be owned by the partner who transferred the property (transferor) on their own behalf.  When looking at property transferred to a partnership, if the property has value separate and apart from the partnership, the property should be considered Section 721 property.

What is the partner’s basis?  When a partner contributes property in exchange for a partnership interest, the partner’s basis is the amount of money contributed and the adjusted basis of the property contributed.  Thus, a partner receives a carryover basis in their partnership interest for the property they contribute.

When a partner receives a partnership interest for services performed, this service partner’s basis in their partnership interest is the sum of money paid by the partner for their partnership interest and any amount included in income in connection with the interest transferred.  This recognition of income will only increase the partner’s basis in the partnership if the gain resulted from the non-applicability of Section 721.

What is the partnership’s basis in the contributed property?  The partnership’s basis in the property contributed would be the adjusted basis of the property in the hands of the contributing partner under IRC Section 723.  The contributing partner’s basis would be measured or calculated at the time the partner made the contribution to the partnership.

A Denver tax lawyer and business lawyer at The McGuire Law Firm can assist you regarding the formation of partnerships, tax implications of partnership contributions & distributions and partnership transactions.

Contact The McGuire Law Firm to schedule a free consultation with a tax attorney!

IRS Action During Government Shutdown

IRS Action During the Government Shutdown Denver Tax Attorney

As we all know, the U.S. federal government “shutdown” on October 1, 2013 due to the house and senate’s inability to pass a short term spending bill that would continue to keep the government funded.  As a Denver tax lawyer, John McGuire has been paying close attention to the impact the shutdown will have on IRS action.

This government shutdown has impacted federal agencies including the IRS.  As tax attorneys, we represent a number of individuals and businesses before the Internal Revenue Service regarding tax audits, tax debts and other federal tax controversies.  Thus, we have received a number of inquiries from our clients regarding what the IRS is doing in terms of collection, enforcement and tax audits during the shutdown.  Additionally, in many circumstances, we have been unable to contact Internal Revenue Service revenue officers, and Internal Revenue Service departments such as the automated collection division and tax practitioner hotline.

In regards to IRS federal tax liens, the IRS announced that federal tax liens are not being issued and filed during the shutdown by revenue officers and nor are they being automatically generated.  Additionally, IRS bank levies are not being issued during the shutdown.  However, certain taxpayers may have received these notices with October 2013 dates, but these federal tax lien and IRS levy notices were issued prior to the shutdown.  Certain notice that a taxpayer may be subject to a federal tax lien or IRS levy may be automatically generated and issued to the taxpayer during the shutdown.

Regarding IRS enforcement action, the only enforcement action currently occurring in non-criminal cases involves cases and situations where action must be taken now to best protect the government’s interest.  For example, if a taxpayer owes a tax debt, and the collection statute on the tax liability is in jeopardy of expiring in the immediate future, the IRS may be taking enforcement action at this time.  Regarding criminal cases, the majority of criminal tax cases continue to be prosecuted by the applicable criminal investigative departments and units.  This corresponds with the fact that most federal law enforcement agencies have continue to operate and function during the government shutdown.

If you have a tax debt with the IRS or an ongoing tax audit and have questions regarding the impact of the government shutdown, it is recommended that you contact a tax attorney to discuss your situation and circumstances.  A tax attorney at The McGuire Law Firm can assist you with  tax matter or tax problem before the Internal Revenue Service.

Contact The McGuire Law Firm and schedule a free consultation with a Denver tax attorney to help resolve your IRS tax matters.  A free consultation is offered to all potential clients.

C Corporation Considerations When Selling Your Business

C Corporation Considerations When Selling Your Business Denver Business Attorneys

As a business and tax attorney, John McGuire at The McGuire Law Firm is commonly asked, “how should I sell my business, and what are the tax implications?”  This question brings about many issues; way too many to be discussed in a short article, but the owners of a C corporation should understand the basics behind a stock sale versus and asset sale and the advantages and disadvantages to each.

When the business owner is considering the sale of their business they must determine whether they wish to sell the stock or the assets of the business.  A shareholder or seller would usually prefer a stock sale and a buyer would usually prefer an asset sale.  When the stock of a C corporation is sold sale or exchange treatment is given to the transaction and therefore the shareholder will receive capital gain treatment on the amount received above the basis in their stock.  The buyer prefers an asset sale because the purchase of the assets allows for a step up in basis, and the buyer does not carryover the seller’s depreciation schedule.  This generally will afford the buyer greater deductions and less tax.  Furthermore, when the stock of a corporation is purchased, the seller is relieved of liabilities and liabilities or exposures to such are transferred to the buyer.

The above issues show why the sale of C corporation assets is not favorable due to the fact there are not capital gains rates for corporations.  A C corporation selling appreciated assets will pay corporate level tax even if a capital gain is generated.  If cash is distributed to the shareholders after the sale of corporate assets, this is also a taxable event likely to be treated as a dividend or receive capital gains treatment.  Regardless, double taxation has occurred.

A C corporation may be able to mitigate some or all of the double taxation based upon the current tax attributes of the corporations.  For example, the corporation may have a net operating loss or certain credits that carry forward.

Any business considering liquidating or the sale of stock or assets should contact their business attorney and/or their tax attorney to discuss the full implications of the transfer.  A Denver tax attorney or business attorney at The McGuire Law Firm can assist you with your tax or business questions or issues.

Contact The McGuire Law Firm to schedule a free consultation with a tax attorney or business attorney.