#tax-planning
Strategic tax planning to minimize liability and maximize savings
The Section 1375 sting tax hits an S corporation with a 21% corporate-level tax when it has C-corporation E&P and passive investment income above 25% of gross receipts; three consecutive years of that combination terminates the S election. This guide shows who is exposed, how excess net passive income is calculated, and how to defuse the trap.
Section 414(b), (c), and (m) treat related businesses as one employer for retirement-plan testing. This guide explains controlled-group and affiliated-service-group rules, the spousal and minor-child attribution traps, and the steps multi-business owners should take before opening a 401(k).
A new 401(k) can be nearly free for small employers — Section 45E reimburses up to 100% of startup costs for three years plus $1,000 per employee in contribution credits for five years. Here is who qualifies and how to claim it on Form 8881.
SECURE 2.0 turned Section 45E into a 100% refund of pension plan startup costs—up to $5,000 per year for three years—for employers with 50 or fewer employees, stacked with a per-employee contribution credit worth up to $1,000 and a $500 auto-enrollment credit, all claimed on Form 8881.
A disguised sale under Section 707(a)(2)(B) collapses a partnership contribution and a related cash distribution into a taxable sale. Transfers within two years are presumed a sale; the deemed-sale fraction equals consideration received divided by property FMV.
Section 707(a)(2)(B) recharacterizes paired property contributions and cash distributions to LLC members as taxable sales when they occur within two years. A walkthrough of the two-prong test, the rebuttable two-year presumption, the four regulatory exceptions, debt-financed distribution mechanics, and the Form 8275 disclosure that keeps partners out of audit trouble.
Section 7508A lets the IRS postpone almost any tax-related deadline by up to one year after a federally declared disaster. This guide explains who qualifies as an affected taxpayer, how postponement interacts with Form 4868, what happens to penalties already accruing, and when to elect a prior-year casualty loss under Section 165(i).
Section 7874 imposes a 10-year inversion-gain floor when former U.S. shareholders own 60-80% of a new foreign parent and reclassifies the parent as a domestic corporation at 80%. The only escape is the substantial business activities safe harbor, which requires clearing a 25% bright-line threshold on employees, tangible assets, and gross income in the foreign country.
Section 7874 treats a foreign parent as a U.S. corporation when former U.S. owners hold 80% or more, and penalizes inversion gain for 10 years at 60-80%. The substantial business activities safe harbor requires 25% of employees, assets, and income in the foreign country.
A Voluntary Employees' Beneficiary Association under Section 501(c)(9) lets small and mid-sized employers pre-fund retiree medical, severance, and other welfare benefits tax-free — but Section 419 deduction caps, the 100% Section 4976 excise tax on disqualified benefits, and listed-transaction rules in Notices 95-34 and 2007-83 punish mistakes. Here is how a single-employer VEBA actually works, what it can fund, and the three IRS exams it has to pass every year.
A VEBA is a Section 501(c)(9) trust that lets employers pre-fund tax-free health and welfare benefits, but Sections 419 and 419A cap the deduction and Section 4976 imposes a 100% excise tax on reversions. Here is how a legitimate plan differs from an IRS-listed tax shelter.
A working guide to ILITs and Crummey powers — covering Section 2042 incidents of ownership, the annual gift tax exclusion, the 5-or-5 rule, hanging powers, the Section 2035 three-year lookback, and the administrative discipline that keeps life insurance death benefits estate-tax-free.
