Changes went into effect in February to ease the burden for smaller businesses seeking relief through the bankruptcy process.
Bankruptcy and Reorganization
EXECUTIVE SUMMARY Preferred stock—a class of ownership with priority over common stock— once was issued mainly by large companies but now is common in small to midsize privately held companies, too. CPA/ABVs may be engaged to value preferred stock (also called preferred shares) to assist with capitalization of a company,
Here are some of the more important developments CPAs need to make their clients and employers aware of for 2006. Executive compensation rules under IRC section 409A. The American Jobs Creation Act’s new IRC section 409A makes sweeping changes to the tax rules governing nonqualified deferred compensation arrangements such as
EXECUTIVE SUMMARY THE NEW BANKRUPTCY LAW protects tax-qualified retirement plans—pensions, profit-sharing and 401(k) plans—from creditors in bankruptcy. SEP AND SIMPLE IRAs ARE excluded from bankruptcy estates under the new law, even if they qualify as ERISA pension plans. TRADITIONAL AND ROTH IRAs that are created and funded by an individual
EXECUTIVE SUMMARY CPAs NEED TO UNDERSTAND THE IMPACT of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 so they can advise clients how their relationships with or as debtors is altered. The two most important changes are the terms of access to Chapter 7 and changes to the
EXECUTIVE SUMMARY LAWS AND REGULATIONS PROHIBIT CPAs from disclosing clients’ personal financial information, but bankruptcy statutes require that very same information to go into the public record. CPAs can’t change the law, but they can help clients get through the bankruptcy process. PUBLIC ACCESS AIDS THE ADMINISTRATION of bankruptcy cases,
There are numerous legitimate business reasons to establish a buy-sell agreement for a closely-held family business. Many of these agreements set the value for estate tax purposes when one of the shareholders dies. If the IRS rejects the price set to represent the value of the stock, a significant estate
A business that elects to be an S corporation continues to be taxed as such until the election is terminated. It can be terminated in any of three ways: (1) The shareholders revoke the election, (2) the corporation no longer satisfies the eligibility requirements or (3) the corporation has too
EXECUTIVE SUMMARY BENEFITS IN TAX-QUALIFIED RETIREMENT PLANS generally are protected from the creditors of plan participants and insulated from claims in bankruptcy. PLANS NOT PROTECTED FROM CREDITORS are those that cover only the business owner and/or the owner’s spouse and section 403(b) tax-sheltered annuity plans whose assets are held in
The Right Way to Use PowerPoint Do you use PowerPoint, the Microsoft presentation software, to make sales pitches for new clients? Or do you use it, as a consultant would, to lay out in-depth analyses in an effort to convince a client or your boss to adjust complex business strategies?
IRC section 469(a)(1) defines a passive activity as one involving the conduct of any trade or business in which the taxpayer does not materially participate. In section 469(a)(2), the statute describes a taxpayer as any Individual, estate or trust. Closely held C corporation. Personal service corporation. In general, the IRS
Determining what constitutes reasonable compensation is a long-standing issue for C corporations. IRC section 162(a)(1) allows a deduction for reasonable compensation for personal services actually rendered. The IRS views unreasonable salaries as disguised dividends, making them nondeductible by C corporations and taxable to the shareholder. This means employee shareholders are
Although there are some signs the economy is improving, many businesses continue to fail. Recently the Tax Court considered the effect of an S corporation’s selling an asset while in bankruptcy. All S corporation shareholders contemplating filing for corporate bankruptcy need to consider the potential tax outcome of such a
EXECUTIVE SUMMARY CPAs CAN USE DATA ON AUDIT MALPRACTICE claims filed with CNA, which underwrites 22,000 CPA firms in the AICPA professional liability insurance program, to help them avoid high-cost claims when they audit nonpublic entities such as private companies, governments or NPOs. MOST NONPUBLIC AUDIT CLAIMS ARISE FROM technical
EXECUTIVE SUMMARY A CPA FIRM WITH A CLIENT filing for bankruptcy has a responsibility to serve the client as well as an opportunity to compete for some of the work on the case—and through it develop a specialty. The need for bankruptcy services is expected to grow for a while.
BUSINESS CONSULTING SITES Business Advice for Mom and Pop www.efamilybusiness.com This site offers information about off-site presentations on topics such as succession and continuity, and strategy, planning and family-business policies. Free articles written by internal staff include these titles: “Supporting the Successor” and “Estate Fairness for Children In and Out
EXECUTIVE SUMMARY A PRACTITIONER FOUND ONE RISK OF A STRONG economy is that small business clients may loosen their internal controls, discovering fraud or theft only long after it has happened. THE MOST VULNERABLE ARE PRIVATE COMPANIES in the $10 million to $30 million range because they are large enough
he accounting profession has made remarkable progress since its early days, when practitioners struggled to establish credibility. An examination of some of the most important events during the first nine decades of the 20th century offers a glimpse into what has made the profession what it is today. Although it
Under IRC section 446, taxpayers generally can choose any method of accounting to compute taxable income as long as that method clearly reflects income. However, many small business taxpayers who wish to use the cash method are prevented from doing so because of Treasury regulations section 1.446-1(c)(2)(i), which states a
Individual taxpayers often engage in more than one business venture. However, when a business also involves personal pleasure or recreation, the IRS may take notice. If the operation generates large losses that offset income from other sources, a taxpayer should consider all facts and circumstances before deciding to deduct the