Monday, April 21, 2014

Expired Research & Development Tax Credit Clips Google's Profit

For a large company, tax rates and applicable credits can have a major impact on profitability.  The expired research and development tax credit that Google lost shaved 2% off its profitability.  For a company with billions in revenue and profits, 2% is not insubstantial.  Proper tax planning and knowing your business's tax planning is a must.


Wednesday, April 16, 2014

Funding ESOPs with S Corp Profits

Below is a link to an interest article from the WSJ that discusses a corporate structure to use S Corp profits to fund ESOPs.  Obviously, the ESOP that wholly owns a profitable S Corp can provide a large funding opportunity for an owner's retirement. Planners need to watch the Austin v. Comm'r case development closely and pay attention Rev. Ruling 2004-4 to avoid potential challenges.

Sunday, April 13, 2014

Post and Courier Article on Cooper Client in Latham Case

Latham case co-defendant may get pre-trial diversion

  • Posted: March 28, 2014
One of the co-defendants in a Charleston murder-for-hire case that targeted a former bank executive’s estranged wife might not go to prison. Rachel Palmer of Louisville, Ky., was recommended for a pre-trial diversion program, according to court records. Her boyfriend, 38-year-old Samuel Yenawine, also of Louisville, also was charged in the case.
Yenawine was accused of being hired to kill Nancy Cannon, who was married to Chris Latham, 51, of Charleston at the time. Yenawine killed himself at the Georgetown County jail while awaiting trial.
Yenawine sent Palmer, who was pregnant at the time, a suicide note apologizing to her and expressing his love, according to a State Law Enforcement Division report.
Palmer was indicted with three counts for her alleged involvement in the scheme. She did not travel to South Carolina but was aware Yenawine had been hired for the plot to kill Cannon, according to court testimony. It remains unclear what other involvement she may have played but during Moore and Latham’s trial, she did not testify and little was mentioned of her.
Latham and his girlfriend, 38-year-old Wendy Moore were convicted for their roles in the plot. Another co-defendant, Aaron Wilkinson, 40, of Louisville, Ky., whose impromptu confession in April 2013 foiled the plan, was sentenced to four years in prison Wednesday.
Palmer’s attorney, Lindsey Cooper, of Charleston, requested Wednesday that Palmer, be removed from house arrest and electronic monitoring, according to court records.
Palmer has been on house arrest since May 28, 2013, and “has been completely compliant and cooperative,” the request stated.
In his request, Cooper stated Palmer is the only defendant left in the case and has been recommended for pre-trial diversion.
If Palmer is approved to enter the pre-trial program, the court would decide the level of supervision, which could include employment, counseling, education, job training or psychiatric care, according to the U.S. Department of Justice.
Many courts have required restitution or forms of community service as part of the pre-trial program.
If Palmer were to successfully complete the program, the U.S. Attorney’s Office would then decline prosecuting her.
Cooper could not be reached for comment Thursday.
Reach Natalie Caula Hauff at 937-5594 or

Friday, April 11, 2014

Taxpayer Don't Forget to Report Foreign Financial Assets and Accounts:

With the tax return filing deadline fast approaching, taxpayers should not forget to report any foreign income or financial assets on their tax returns.  Foreign dividends and interest must be disclosed on by checking the box on your Schedule B, and foreign income from trusts and gifts should be disclosed on the Form 3520.  Even certain foreign assets totaling greater than $50,000.00 that are income producing or not must be disclosed on the Form 8938, Statement of Foreign Assets. Many tax return preparers in the past failed to ask clients if they had foreign income and assets, and such mistakes are less common with the prevalent media of the IRS's collection efforts against foreign assets.  However, don't get unwittingly caught because the penalties for non-reporting are stiff.

Moreover, FBAR disclosures must be made this June 30th electronically to the U.S. Treasury through the following website:  It is not much comfort that the website is entitled, "Financial Crimes Enforcement Network."

If you have questions about foreign income or asset issues, feel free to contact us.

Wednesday, April 9, 2014

No Taxpayer Refunds: Supreme Court Rules that Severance Payments Are Subject to FICA

If you have followed this blog, we have been writing on the closely watched Quality Stores case involving the taxability of severance payments (United States v. Quality Stores Inc. (In re Quality Stores Inc.), 6th Cir., No. 10-1563, petition for rehearing filed 10/18/12).  The Sixth Circuit held that payments a company made to employees as part of the company's severance program were not subject to tax under the Federal Insurance Contributions Act (FICA) .  This decision was appealed, and the Supreme Court decided to resolve the issue because of the Circuit split.

Unfortunately, on March 25, 2014, the Supreme Court ruled that severance payments (or SUB payments) were subject to FICA tax and withholding.  Even the Supreme Court did not take pity on those who were, are or will be severed from their employment.
Manufacturing Exception to Subpart F Income Is Extended to Products that Are Grown.

In Private Letter Ruling 201340010, the IRS extended the manufacturing exception for Subpart F income and applied the exception to products that are grown.  The PLR specifically discusses the planted, harvesting and selling of corps by a controlled foreign corporations ("CFC"). Logical extensions of this ruling would be livestock or aqua-culture because the product is "grown."  

If anyone ever wanted to own a vineyard in Argentina, this may be news you were waiting for.