Monthly Archives: April 2014

2014 Tax Extenders Legislation Uncertainty Impairs Capital Expenditure Planning and Business Acquisitions

On April 3, 2014, the Senate Finance Committee favorably reported out of Committee the “Expiring Provisions Improvement Reform and Efficiency Act.” The Act has bipartisan Senate Finance Committee support, but it is uncertain when and how the House Ways and Means Committee will deal with the subject. The Act would extend the effect of certain tax code provisions which expired on 12/31/2013. Included within the business provisions that would be extended, generally for 2 years, are special depreciation rules for qualified leasehold, restaurant and retail improvements, 50% bonus depreciation provisions and first year expensing opportunities for certain capital expenditures. Also included is a reduction in S corporation recognition period for the built-in gains tax.

Included within the individual provisions that would be extended for 2 years through 2015 are exclusions from gross income of certain discharged principal residence indebtedness, deduction for state and local taxes, and tax-free distributions from IRA’s of taxpayers aged 70 ½ or older for charitable purposes.

The full Senate is expected to take up the bill shortly. On the House Side, Ways and Means Committee Chairman Dave Camp (R-Mich.), who is retiring at the end of this year, released a draft bill in February that only included certain business tax extenders. The Committee began its review of the bill earlier this month. However, Camp has said that he favors a more permanent solution and wants to further explore through the Spring and into the Summer which expired provisions should be made permanent and which should expire for good. It remains to be seen which extenders will ultimately be considered by the House, and which provisions will be extended permanently, over some period of years or allowed to stay expired. Those provisions that are extended will hopefully be applied retroactively to January 1, 2014, but planning in this uncertain environment remains challenging. It is expected that final congressional action on an extenders package will be delayed until after November’s elections.

James L. Turner

May 1, 2014 Deadline to File Annual Reports With Florida Department of State for Corporations, LLCs, and Other Business Entities

The Florida Department of State deadline for filing a 2014 Florida Annual Uniform Business Report for Florida business entities and non-Florida entities registered in Florida is May 1, 2014. A non-negotiable late fee of $400 will be added to the Department of State fee for entities that file their Florida Annual Report after May 1, 2014. Failure to file a Florida Annual Report for 2014 will result in the administrative dissolution or revocation of an entity in September 2014.

Annual Reports must be electronically filed at the Florida Department of State’s website:

Even if you have a professional registered agent, it is your responsibility to file the annual report. If you need assistance, please contact us.

E. John Wagner, II

Applicable Federal Rates for May 2014

The Internal Revenue Code prescribes minimum imputed interest rates and time-value-of–money factors applicable to certain loan transactions and estate planning techniques. These rates are tied formulaically to market interest rates. The Internal Revenue Service updates these rates monthly.

These are commonly applicable rates in effect for May 2014:

Short Term AFR (Loans with Terms <= 3 Years)                                          0.33%

Mid Term AFR (Loans with Terms > 3 Years and <= 9 Years)                     1.93%

Long Term AFR (Loans with Terms >9 Years)                                              3.27%

7520 Rate (Used in many estate planning vehicles)                                      2.4%

Here is a link to the complete list of rates:

E. John Wagner, II

Tax Planning for Foreign Investors Purchasing Real Estate

Foreigners, especially Canadians, continue to comprise a significant percentage of Florida real estate purchases. The National Association of Realtors reported that during the recent 12-month period ending July 2013 the total sales volume of Florida residential real estate purchases by foreigners was $6.4 billion (9% of total Florida residential sales volume). 30% of these foreign purchasers were Canadian. These figures do not included foreign purchases of commercial real estate. Unfortunately, many Canadians and other foreign real estate purchasers do not sufficiently consider the U.S. tax ramifications of their purchase. There are many alternatives for structuring a foreigner’s purchase of U.S. real estate, and each alternative has tax advantages and disadvantages.

Below is a link to an article that discusses the U.S. tax issues and planning techniques that can help minimize tax headaches for Canadian (and other foreign) owners of Florida real property.

Tax Planning For Canadians Purchasing Property In Florida

If you need assistance with a foreign purchaser of U.S. real estate, please contact us.

Michael J. Wilson

Do Not File Your 2013 Income Tax Return Without Asking Your Tax Advisor About a “Regrouping Election” to Avoid the Obamacare 3.8% Medicare Surtax, If You Own Closely-Held Businesses or Investments

We have previously written about a one-time income tax election opportunity that could permanently reduce your exposure to the Obamacare 3.8% Surtax.  As tax filing season comes a to a close, this is a final reminder that you must make the election on your first income tax return that implicates the Surtax. For many taxpayers, that will be their 2013 income tax returns.

Elections generally cannot be made on amended returns. The failure to make the election is automatically treated as a decision to permanently, for all future years unless your circumstances change, opt into a default classification for your businesses and investments. The default classification is unlikely to be optimal for you. It is worth the effort to get it right the first time.

Here is a link to our prior discussion regarding the election: 2013 Federal Income Tax Return “Regrouping” Election Can Permanently Reduce Exposure to the New 3.8 percent Medicare Surtax

E. John Wagner, II