Author Archive

The Nienow & Tierney, LLP Blog as Moved!

February 6, 2016

The Nienow & Tierney, LLP blog has a new home at our website (ntcpas.com).  For the latest accounting, tax and business news from Nienow & Tierney, LLP please visit our blog here: http://www.ntcpas.com/blog/.

Thanks!

New Federal and California Developments on Cancellation of Indebtedness from Short Sales

January 15, 2014

On September 19, 2013, the IRS issued a Chief Council Letter where it stated that the short sale of a California principal residence converts the mortgage to a nonrecourse loan and is treated as a sale, not Cancellation of Indebtedness.  Under California law, when agreeing to a short sale, the bank may not go after the borrower for any shortfall on the debt.  The letter stated that, under the anti-deficiency provision of Code of Civ. Proc. §580e, the debt would be a nonrecourse obligation, and for federal income tax purposes the homeowner will not have COD income. Instead, the full amount of the nonrecourse indebtedness is treated as the sales price.

The California Franchise Tax Board has just updated their website to include information about mortgage debt relief for taxpayers who sold their principal residences through a short sale in 2013.  The FTB guidance confirms that California will follow this treatment.  The FTB clearly states that the IRS guidance is limited to California short sales only, and that the IRS guidance did not specifically address other types of real estate transactions, such as non-judicial foreclosures and mortgage loan modifications.

The information posted by the FTB can be found here.

U.S. Manufacturing and Construction Sectors Extend Gains

January 6, 2014

Via Reuters

The Institute for Supply Management’s index of national factory activity, a key gauge of U.S. manufacturing, hit its highest point in November since April 2011, with a reading at 57.3, up from 56.4 in October. Meanwhile, the Commerce Department reported a 0.8% rise in construction spending in October, hitting the highest annual rate since May 2009. Both figures reinforced recent data pointing to continued U.S. recovery.

Out of State Taxpayer Sues California FTB on LLC Doing Business Issue

July 22, 2013

Via Spidell Publishing

An out-of-state corporate taxpayer has filed suit against the California Franchise Tax Board (FTB) to recover taxes, penalties, and interest assessed by the FTB for being a passive member in a California LLC. (Swart Enterprises Inc. v. Franchise Tax Board, filed July 9, 2013, Case No. 13CECG02171)

This case makes public the FTB’s position that a taxpayer’s passive interest in a California LLC is sufficient to determine that the taxpayer is “doing business in California”, and trigger the minimum franchise tax under R&TC §23153.

In Swart, the corporation’s principal place of business is in Iowa. The corporation did no business in California but owned a 0.02% interest in a California LLC that acquired, held, leased, and disposed of capital equipment and interest in capital equipment in various states.

This case will be of great interest to our clients with out-of-state investors and with out-of-state investments.  Especially real estate development and investment partnerships.  We will continue to monitor this case.

Watch House Hearing on Organizations Targeted by the IRS

June 4, 2013

Today the House Oversight committee is holding hearings about the IRS targeting of exempt organizations with specific political ideology.  You can watch the hearings at this link here.

 

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Real Estate Investment “Promoters” Could Face an Unintended Drastic Tax Increase from the “Carried Interest” Provisions of the President’s 2014 Budget Proposal

May 21, 2013

Over the past years there have been many discussions in Washington of taxing Carried Interests at ordinary tax rates, and we at Nienow & Tierney, LLP have been consistently monitoring this issue facing our real estate clients.  The President’s 2014 budget blueprint issued in April includes such a provision.

Carried interests can loosely be defined as interests in partnerships and funds held by the investment organizer based on their efforts to put the venture together. These arrangements are often referred to as “promote interests” as well.  The Internal Revenue Code contains provisions that tax “carried interests” at the more favorable capital gain tax rates when the underlying assets are disposed of for a profit.

In an effort to target large investment fund managers that utilize this provision, the President’s latest budget proposal aims to treat the income from the eventual success of the venture as compensation for services, taxed at ordinary tax rates.  The result is a potential tax rate increase from 20% to 39.6% on such income, or approximately twice the tax they pay now.

Many of our clients are Southern California real estate investment “promoters”, that engage in the business of finding poorly operated and undervalued commercial real estate properties that they feel they can bring value to.  Typically they will raise capital through private investment (so called “friends and family equity”), or institutional investors, and share in the profits generated in excess of a preferred return to the investors.  It appears that the President’s budget proposal would (unintentionally?) lump these ventures in with the multi-billion dollar Wall Street investment funds he hopes to raise revenue from.

Because this is an important issue to our clients in the real estate industry, we will continue to monitor these legislative developments, and we will contact our clients to help proactively plan should this legislation become law.

Beware of Bogus IRS Emails

February 23, 2013

The IRS is warning taxpayers and practitioners about potential e-mail scammers who claim to be the IRS. Scammers use the IRS name or logo to make the message appear authentic so you will respond to it. In reality, it’s a scam attempting to trick you into revealing your personal and financial information.

The IRS does not initiate contact with taxpayers by e-mail or social media channels to request personal or financial information. Never share confidential information via e-mail with someone alleging to be the IRS. If you receive a suspicious e-mail claiming to be from the IRS, or directing you to an IRS site, do not reply, do not open any attachments, and do not click on any links.

For more information on these scams and what to watch for, go to:

www.irs.gov/uac/Newsroom/Beware-of-Bogus-IRS-Emails

President Obama Takes Campaign for Manufacturing Revival to Factory Floor

February 14, 2013

President Barack Obama took his campaign for strengthening manufacturing in the U.S. to the floor of an engine factory in Appalachia on Wednesday. He called upon Congress to support job training and the creation of manufacturing institutes that he proposed in his State of the Union address. The cost of doing business offshore is rising, and many companies are finding it less expensive to open manufacturing facilities in the U.S., Obama said.

Complete coverage here by The Washington Post

2013 Health Care Reform Compliance Checklist

February 11, 2013

We are pleased to share with you the excellent compliance checklist forwarded to us by our friend and client Blane Peters of Wood Gutmann & Bogart Insurance Brokers.

This checklist is for employers for 2013, to ensure compliance with the requirements of the Affordable Care Act.  You can download the checklist at this link here.

Nienow & Tierney, LLP has had a 20 year relationship with Blane Peters, and would highly recommend him if your business has liability and business insurance needs.  You can learn more about Blane here.

Client Spotlight: Catalina Home

January 30, 2013

We are pleased to highlight this quarter our client Catalina Home. 

Catalina Home was originally founded in 1978 as Catalina Carpet Mills, as a high-end nylon carpet manufacturer.  The company is still owned and operated by the original founders, and they have ventured into wool carpet, rugs, porcelain tile and hardwood flooring.

Catalina is known throughout the industry for its uncommetropolitanpromising, superior quality products engineered for beauty and performance. Distinctive styling and colors that are continuously updated keep Catalina in concert with today’s design trends. Catalina’s distinctive California styling has always offered a unique choice of different and unusual products.

Catalina’s product development often leads to original styling through the creative use of raw materials and manufacturing techniques. From the finest quality yarns and woods, Catalina products are constructed to meet the expectations of the high-end residential marketplace.

You can learn more about Catalina Home at their website here.

We are proud to have the opportunity to work with long time clients such as Catalina Home.