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What is Collateral?

What is collateral?  Typically, collateral would be property pledged as security for a loan or note.  For example, if a bank loaned me $25,000 I may use a car or house as collateral to secure the loan.  The video below discusses collateral.

You can contact The McGuire Law Firm to speak with a tax attorney and business attorney in Denver, Colorado or Golden, Colorado.

Passive Activity Losses

What is a passive activity loss?  This can be a common question when individuals invest as a passive investor or perhaps for individuals that own and rent real estate.  Your passive activity loss is would generally be to the extent your passive activity deduction exceed passive activity gross income.  Moreover, this passive activity loss will generally be disallowed, although some exceptions such as the $25,000 special allowance for passive real estate activity are allowed.

So what happens when your passive deductions exceed your passive income and you have a passive loss?  How are your disallowed passive losses allocated?  When all of your passive losses or part of your passive losses are disallowed for the tax year, a ratable portion of the loss from each of the passive activities is disallowed.  This ratable portion of your passive losses will be calculated by multiplying the passive activity losses that are disallowed for the year by the fraction that is obtained by dividing the loss from the activity for the applicable tax year by the total sum of losses for the applicable tax year from all activities that had a loss for the year.  You can use Form 8582 to calculate the ratable portion of the loss for each activity in which the passive activity is disallowed. 

To illustrate the above, we can use example.  Let’s assume that John has an interest in three passive activities.  Two of the activities have losses, ($10,000) and ($15,000), while the other interest has a gain of $5,000.  The $20,000 passive loss for the year is disallowed, and thus a portion of the losses from the two loss activities is disallowed.  The disallowed portion of the losses would be calculated as follows: $20,000 x $10,000/$25,000 and $20,000 x $15,000/$25,000. 

When all or a portion of a passive loss is disallowed, a ratable portion of each of the passive activity deductions, other than a deduction that would be excluded from the applicable activity is disallowed.  Thus, it is important to define and understand what would constitute an excluded deduction.  An excluded deduction would be defined as a passive activity deduction that is taken into account when computing your net income from an item of property for a taxable year where an amount of the taxpayer’s gross income from the property is treated as if it is not from a passive activity.  When identifying disallowed deductions or excluded deductions, you do not always need to account for a separate deduction.  Form 8582 can also be used if you have deductions for a passive activity that needs to be identified separately.

f you have passive losses and have tax questions related to these passive losses, you can speak with a tax attorney and business attorney at The McGuire Law Firm.  You can schedule a free consultation with a tax attorney and business attorney in Denver, Colorado or Golden, Colorado.

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Subpart F and Controlled Foreign Corporations

Subpart F of the Internal Revenue Code deals with controlled foreign corporations (sometimes referred to as a CFC), and does not necessarily apply to every United States person or business entity that owns stock in a foreign corporation.  Subpart F applies to United States shareholders of controlled foreign corporations.  See Internal Revenue Code Section 951(a).  Thus, as a shareholder of a controlled foreign corporation, Subpart F may apply to you or a business you are affiliated with.  It is also important to note that the code covering controlled foreign corporations is different than the sections dealing with Passive Foreign Investment Companies (sometimes referred to as a PFIC).  The PFIC rules apply to all U.S. owners not just U.S. owners of controlled foreign corporations.

An initial issue to consider when looking at Subpart F and controlled foreign corporations is how is a United States shareholder defined?  Generally, under Internal Revenue Code Section 951(b) a U.S. shareholder could be defined as a U.S. person who owns, or is considered to own 10% or more of the total combined voting power of all classes of stock of which are entitled to vote in a foreign corporation.  Thus, you look at voting  power regarding a U.S. shareholder, and a U.S. person is generally defined as a U.S. citizen or resident, or a domestic entity.  See IRC Sections 957(c) and 7701(a)(30) regarding the definition of a U.S. person.

When determining whether a foreign corporation is a controlled foreign corporation, it is important to remember that only the stock of U.S. shareholders is considered.  Generally, a controlled foreign corporation would be a foreign corporation whereby U.S. shareholders own or are considered to own more than 50% of the total combined voting power of all classes of stock that are entitled to a corporate vote or the total value of the stock of the corporation.  For “look back” purposes the ownership percentage can be any day during the applicable taxable year of the corporation. 

To be subject to Subpart F, the shareholder of a foreign corporation must be a United States person, or to be used when determining whether or not the foreign corporation is in fact a foreign corporation.  Internal Revenue Code Section 7701(a)(30) defines a U.S. Person as a citizen or resident of the United States, a domestic partnership, a domestic corporation and any estate or trust (apart from a foreign trust or estate).  Thus, a U.S. Person as defined by the code does not include nonresident aliens, foreign corporations and foreign partnerships.  Thus, Subpart F is really limited to shareholders who are persons and business entities already likely to be subject to taxation by the United States.

The above article was drafted by John McGuire, a tax attorney in Denver, Colorado and the founding partner of The McGuire Law Firm.  You are welcome to contact The McGuire Law Firm to discuss your tax questions and issues with a tax attorney.

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Asset Purchase Video by Denver Business Attorney

When a business is purchased or sold, the acquisition could be through an asset purchase agreement.  Under an asset purchase agreement, the actual assets of the business are purchased.  This could include the inventory, accounts receivable, furniture, equipment, fixtures and intangible assets such as copyright or trademark rights, or patent rights & licenses.  An asset purchase also has tax implications to both the seller and purchaser, which you may want to discuss with your business attorney and/or tax attorney.

The video below has been prepared by a business attorney and tax attorney from The McGuire Law Firm.  If you are considering selling your business or buying  a business, consult with a business attorney or tax attorney regarding your specific issues.

The McGuire Law Firm provides a free consultation for all potential clients.

What is a Subsidiary?

What is a subsidiary?  These may be a common question a business owner would ask their attorney when looking at the structure of their business or another businesses structure.  In short a subsidiary is a company that is owned or partially owned by another business, and generally the ownership would be such that the business owning the interest could control the other entity.  Thus, a subsidiary would have a parent business that owns and controls it.

The video below has been prepared by a Denver business attorney to provide additional information regarding a subsidiary.  If you have questions regarding the formation of a business, your current business structure or other business questions, talk with a Denver business attorney at The McGuire Law Firm.

You can schedule a free consultation with a Denver business attorney by contacting The McGuire Law Firm!

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What is a Parent Corporation?

In general, a parent corporation is a corporation that would own the stock or interests in another corporation or business such that the entity can control the other business.  As a business attorney, I am often asked, what is a parent corporation?  Further, many business owners will inquire as to whether a business structure with a parent corporation could be beneficial to their business for tax purposes, business purposes and/or asset protection purposes.

The video below has been prepared by a Denver business attorney to provide information regarding a parent corporation.  You can contact The McGuire Law Firm to schedule a free consultation with a Denver business attorney.

Call 720-833-7705 to schedule a consultation with a business attorney in Denver or Golden Colorado.

Free Consultation Denver Business Attorney

The McGuire Law Firm provides a free consultation with a Denver business attorney.  If you own a business or are considering forming a business, we can help you.  From business formation and structure all the way to the sale or purchase of business, and business contracts, a Denver business attorney at The McGuire Law Firm can help you!

Contact The McGuire Law Firm to schedule a free consultation with a business attorney in Denver, Colorado or Golden, Colorado.

Denver Business Start Up Attorney

As a Denver business attorney, John McGuire has assisted many businesses as start up businesses.  Multiple issues and concerns should be considered when starting a business.  The video below provides additional information regarding starting a business.  You can contact The McGuire Law Firm to speak with a Denver business attorney.

Schedule a free consultation with a business attorney in Denver- 720-833-7705

Denver Sales Tax License

In previous articles, we have discussed the types of taxes that are assessed and collected by the City and County of Denver.  One such tax that applies to many businesses is sales tax, and many business owners have questions related to sales tax licenses.  The article below has been drafted by a tax attorney and business attorney at The McGuire Law Firm to provide additional information related to sales tax license issues in Denver.

When a business is located in Denver, Colorado and makes retail sales, leases or even rentals of tangible personal property, the city and county of Denver requires that the business have a sales tax license.  Under certain circumstances, a sales tax license may not be required, but the business may be subject to the Denver use tax, and this may require the business to have a Denver consumer use tax registration.  Often a business owner will ask: What if my business is not located in Denver, do I need a sales tax license?  If a business is located outside of Denver, but makes retail sales, leases or rents tangible personal property in Denver, the business is required to obtain a Denver retailer’s use tax license.  Other common questions and issues are outlined below regarding sales tax in Denver.

Does Denver have an annual special event fee?  At this current time, there is no current annual event fee.

What if I am only selling my product for a couple of days in Denver?  When a business participates in an event that is 2 weeks or less, you may be required to pay a special event fee, which would only be valid for the specific event.  Any sales tax due from the special event would be due by the 20th day of the following month.

I operate my business from my home so do I need a sales tax license?  Yes, any business located in Denver making retail sales, leases or renting tangible personal property must have a sales tax license.  Again, if a business is not subject to sales tax, businesses located in Denver are subject to the consumer’s use tax, which may require a Denver use tax registration.

My business sells products on the web from my web site, do I need a sales tax license?  Yes, if you are located or have a physical presence in Denver, your business is required to obtain a Denver sales tax license, as well as collect and remit Denver sales tax on sales made in Denver.

What is the fee for a Denver sales tax license?  The current fee for the sales tax license is $50 per location, which covers a 2 year period.  You can click this link for an application, but please check to make sure it is current.

If you additional questions relating to sales tax in Denver, contact a Denver tax attorney from The McGuire Law Firm.  The McGuire Law Firm provides a free consultation with a tax attorney so you can discuss your questions and issues.

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