2011 Q2 | Deduct, Don’t Depreciate

2011 Q2 | Deduct, Don’t Depreciate

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of2010 focused mainly on personal income and estate tax. Nevertheless, some additional provisions may be helpful to businesses. In particular, the new law enhances the Section 168(k) bonus depreciation provisions by temporarily allowing 100% first~year bonus depreciation of new business equipment that qualifies for bonus depreciation. That is, a company that purchases qualifying depreciable assets may deduct the entire cost of the assets right away. First~year deductions will immediately boost a company’s cash flow, compared with taking depreciation deductions over several years. No limits exist on the amount of qualifying equipment purchased that is eligible for the 100% deduction. This 100% deduction provision is effective for qualifying equipment placed in

2011 Q1 | Lower Taxes May Mean More Jobs

2011 Q1 | Lower Taxes May Mean More Jobs

In some ways, the title of the Small Business Jobs Act of 2010 says it all. This new federal law aims to create jobs within the United States, with small companies acting as engines of growth. Among the multiple provisions of this act, several provide tax benefits for small businesses. The authors of the new law hope that lower taxes will make many small and thus more to add employees. Equipment deductions One provision of the new law expands Section 179 of the tax code, which allows small companies to buy business equipment and take a first-year tax deduction. Ordinarily, companies must depreciate the equipment they buy, thus spreading deductions over several years. From 2008 through 2010, Congress passed a

2011 Q1 | Choices for Holding Investment Property

2011 Q1 | Choices for Holding Investment Property

Now that prices are off sharply from their peak levels of a few years ago, you may want to invest in real estate. If so, you are looking for a promising property at the right price. Assuming you find such an opportunity, you’ll have to make still another crucial decision: how to hold your property. Outright ownership The simplest option is to hold the property in your own name. You’ll have absolute control and flexibility. You can make the decisions on capital improvements, tenant selection, and so on; you can sell the property or refinance it. You’ll face some disadvantages with this form of ownership, however. Depending on the amount of capital you’re willing to invest, you might be limited

2011 Q1 | You and Your Company Can Avoid the Disguised Dividend Tax Trap

2011 Q1 | You and Your Company Can Avoid the Disguised Dividend Tax Trap

If you are the owner or part owner of a C corporation, you might think that your compensation plan is relatively straightforward. You pay yourself a salary to cover your living expenses during the year. At year end, if your company has made money, you pay yourself a bonus. Your company deducts the salary and bonus so it winds up with little or no net income and pays little or no corporate income tax. In such a scenario, you might be in for a shock. The IRS could say that your compensation is unreasonable. Part of your compensation may be recast as a dividend, subject to both corporate and personal income taxes. Example: Grace Moran owns 100% of ABC, a