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  • October 4, 2022

THE BUSINESS BUYER’S BEST FRIEND: The Section 338(h) Election

Every purchase and sale of a business is structured as either a sale of assets or a sale of equity (stock or membership interests).  In an asset sale, the buyer usually creates its own company and purchases the assets (including equipment, inventory, accounts, and intangible goodwill), while the seller takes cash into its existing company and liquidates it.  In an equity sale, the buyer is purchasing the stock or membership interests of the seller and continuing the existing entity. As a general rule, buyers want to structure the transaction as an asset purchase, while sellers want the transaction to be…

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  • August 16, 2022

FSB WINS ON CHURCH TRANSFER TAXES ISSUE

Maryland and its counties impose transfer and recordation taxes on the transfers of real property.  Sales of property from one religious corporation to another can be subject to such taxes.  But is there a tax imposed when a church disbands, the religious corporation dissolves, and its property is transferred to another institution?  That was the question recently addressed when Baltimore County challenged the recording of a deed transferring a church building upon the dissolution of one church to its chosen successor.   Ferguson, Schetelich & Ballew was legal counsel in this transaction, and secured the transfer of the property with…

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  • March 23, 2020

IRS Issues Notice 2020-17 and Notice 2020-18 and Extends Payment Deadline and Filing Deadline for Taxpayers Affected by Ongoing Coronavirus

On March 13, 2020, the President of the United States issued an emergency declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act in response to the ongoing Coronavirus Disease 2019 (COVID-19) pandemic (Emergency Declaration). The Emergency Declaration instructed the Secretary of the Treasury "to provide relief from tax deadlines to Americans who have been adversely affected by the COVID-19 emergency, as appropriate, pursuant to 26 U.S.C. 7508A(a) ." On March 18 & 20, 2020 and pursuant to this mandate, the IRS issued Notices 2020-17 and 2020-18 extending the date for making tax filings and payments due April…

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  • October 15, 2019

Charitable Giving Falling Due to New Tax Law

In 2017, the Tax Cut and Jobs Act gave charities great concern that donations would be falling.  This is because the standard deduction was doubled (to $24,000 for married couples filing jointly) and other deductions (such as State taxes and mortgage interest) were capped.  Fewer people would itemize deductions on their 2018 tax returns, and without a tax benefit to their charitable contribution, they would give less.  New data shows that those fears were well-founded. In 2018, a year of record employment and sustained economic growth, the number of taxpayers who itemized dropped from 46 million to 19 million.  Individual…

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  • March 4, 2019

The Form 990 as Public Relations

Form 990 is the Internal Revenue Service filing required annually for most nonprofits. Since 2009, it has included questions that have little to do with the tax rules, but rather concern the organization’s purpose, activities, and governance.  This makes the 990 Return not simply an accounting function.  Instead, the 990 can be a strong public relations statement, or it can be full of damaging disclosures for anyone to read. Unlike almost all other tax returns, Form 990 is a public disclosure document. It is a substantial form, requiring several schedules.  All Form 990s are available for public inspection, and available…

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  • April 3, 2018

Donor Advised Funds Top Planning Tools Under New Tax Law

The Tax Cuts and Jobs Act (TCJA) went into effect on January 1, 2018. Economists argue over the winners and the losers, but one obvious loser was charitable donations and the charities that depend on them. The new tax law nearly doubles the standard deduction in 2018 — to $12,000 for singles and $24,000 for joint filers younger than age 65 — while capping or eliminating other deductions. This means it will no longer make sense for as many taxpayers to itemize deductions. In 2017, 30% of taxpayers itemized; under the new tax law that is expected to drop to…

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  • November 30, 2016

Employee Benefit Plans and the Voluntary Fiduciary Correction Program

The Voluntary Fiduciary Correction Program (“VFCP”), sponsored by the Employee Benefits Security Administration of the Department of Labor, provides relief from civil liability and an exemption from excise taxes under the Internal Revenue Code (“IRC”). VFCP is designed to encourage self-correction of certain violations and fiduciary breaches of the Employee Retirement Income Security Act of 1974. VFCP covers many different transactions. One of the most commonly violated transactions that it covers is delinquent contributions. Plan sponsors have a fiduciary responsibility to ensure that participant contributions are deposited in a plan’s trust on a timely basis. Participant contributions are defined as…

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  • November 16, 2015

Correcting Retirement Plan Errors: 2015 IRS Guidance Favors Employers

The Internal Revenue Service (IRS) has modified the Employee Plans Compliance Resolution System (EPCRS), which is the IRS correction program for retirement plans. In general, EPCRS allows retirement plan sponsors to correct plan mistakes and continue to provide retirement benefits on a tax-favored basis. It includes self-correction without IRS involvement, voluntary correction with IRS approval, and correction during audit under a closing agreement. The recent modifications to EPCRS are found in Revenue Procedure 2015-27 and Revenue Procedure 2015-8. They are a welcomed relief to employers who have discovered and need to correct past errors. Revenue Procedure 2015-27: Rev. Proc 2015-27…

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  • June 10, 2015

U.S. Supreme Court Declares Maryland Income Tax Provision Unconstitutional

On May 18, 2015, the United States Supreme Court declared a provision of Maryland’s State Income Tax unconstitutional as discriminatory against interstate commerce, and thereby in violation of Article I, Section 8 of the United States Constitution. The case is Comptroller v. Wynne. The specific and technical issue is that Maryland’s personal income tax has (as all Maryland taxpayers know) both a State and a County tax. Maryland taxes the personal income of its residents, regardless of whether that income is earned in Maryland or in other states. The Maryland tax code then grants a credit for taxes paid to other states,…

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  • January 16, 2015

An IRS Tax Audit of Your Business – The Basics

A tax audit is an accounting procedure where the IRS examines your business financial records to make sure you filed your tax return accurately.  If you receive an IRS audit notice, here are the basic steps you can take to assist in resolving the situation. 1. Determine Why Your Return Was Selected For An Audit. It is the IRS’s obligation to inform you as to why your return was selected.  However, you must be diligent in making the inquiry.  Taxes may be audited for several reasons, including: Specific activity on your return, such as cash wages, 1099 and W-2 forms that…

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