IRS Proposes Regulations Restricting Certain Valuation Discounts Used in Gift & Estate Transfers

August 15, 2016 by Yeo & Yeo

On August 2, 2016, the U.S. Treasury issued proposed regulations under Internal Revenue Code Section 2704 that place new restrictions on the common practice of realizing valuation discounts on transfers of family-controlled entities. The Treasury believes these regulations are necessary to close a tax loophole in what it perceives to be an understatement of fair market value of family controlled interests for transfer tax purposes.

If the proposed regulations are finalized in current form, they would overturn techniques that for decades have allowed valuation discounts to be applied to these interests as part of a family's overall business succession plan. In short, valuation discounts for lack of control (minority interest discounts) would go away, ...

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Don’t Roll the Dice With Your Taxes if You Gamble This Year

August 2, 2016 by Yeo & Yeo

For anyone who takes a spin at roulette, cries out “Bingo!” or engages in other wagering activities, it’s important to be familiar with the applicable tax rules. Otherwise, you could be putting yourself at risk for interest or penalties — or missing out on tax-saving opportunities.


You must report 100% of your wagering winnings as taxable income. The value of complimentary goodies (“comps”) provided by gambling establishments must also be included in taxable income because comps are considered gambling winnings. Winnings are subject to your regular federal income tax rate, which may be as high as 39.6%.


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Buying a Used Car? Michigan Treasury Now Comparing Reported Vehicle Values to NADA Values to Determine Use Tax Due

August 1, 2016 by Yeo & Yeo

Under Michigan Sales/Use Tax Statutes, a casual seller, i.e., not a licensed new or used vehicle dealer, is not responsible for collecting and remitting sales tax on the sale of a used motor vehicle. Instead, the buyer is subject to Michigan use tax when registering the title with the Michigan Secretary of State office. 

The Michigan Department of Treasury has established a system to cross-reference amounts reported to the Michigan Secretary of State as the sales price for a used vehicle transfer to the National Automotive Dealers Association (NADA) database for the retail value of used vehicles. Under Michigan law, the use...

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To Deduct Business Losses, You May Have to Prove “Material Participation”

July 19, 2016 by Yeo & Yeo

You can only deduct losses from an S corporation, partnership or LLC if you “materially participate” in the business. If you don’t, your losses are generally “passive” and can only be used to offset income from other passive activities. Any excess passive loss is suspended and must be carried forward to future years.

Material participation is determined based on the time you spend in a business activity. For most business owners, the issue rarely arises — you probably spend more than 40 hours working on your enterprise. However, there are situations when the IRS questions participation.

Several tests

To materially participate, you...

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Awards of RSUs Can Provide Tax Deferral Opportunity

July 12, 2016 by Yeo & Yeo

Executives and other key employees are often compensated with more than just salary, fringe benefits and bonuses: They may also be awarded stock-based compensation, such as restricted stock or stock options. Another form that’s becoming more common is restricted stock units (RSUs). If RSUs are part of your compensation package, be sure you understand the tax consequences — and a valuable tax deferral opportunity.

RSUs vs. restricted stock

RSUs are contractual rights to receive stock (or its cash value) after the award has vested. Unlike restricted stock, RSUs aren’t eligible for the Section 83(b) election that can allow ordinary income to be...

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There’s Still Time For Homeowners to Save with Green Tax Credits

July 7, 2016 by Yeo & Yeo

The income tax credit for certain energy-efficient home improvements and equipment purchases was extended through 2016 by the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act). So, you still have time to save both energy and taxes by making these eco-friendly investments.

What qualifies

The credit is for expenses related to your principal residence. It equals 10% of certain qualified improvement expenses plus 100% of certain other qualified equipment expenses, subject to a maximum overall credit of $500, which is reduced by any credits claimed in earlier years. (Because of this reduction, many people who previously claimed...

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