Governor Signs Cutler Bills

October 7, 2013 by

Via Spidell Publishing

On October 4, 2013, Governor Brown signed both AB 1412 and SB 209. Because the Governor signed AB 1412 last, it will become operative.

This means that for taxable years 2008 through 2012, taxpayers may exclude 50% of the gain on the sale of small business stock.

The bill not only reinstates the exclusion on the gain of small business stock deemed unconstitutional in Cutler, but it also generally allows taxpayers who claimed the small business exclusion on the federal return to also claim an exclusion on the California return for all open years. This is because AB 1412 removes the 80% payroll and property in California requirements.

Among other things, the bill allows taxpayers 180 days from the date of enactment to file a claim for refund for the 2008 year.

IRS Announces Cutback in Operations

October 2, 2013 by

Via Spidell Publishing, Inc.

The IRS announced today that “due to the current lapse in appropriations, IRS operations are limited.”

The key points of their announcement are:

  • They are unable to issue refunds;
  • Taxpayers must continue to file returns and make payments and deposits on a timely basis;
  • There is no live telephone service and walk-in taxpayer assistance centers are closed;
  • Audits, Appeals, and Taxpayer Advocate Services are “assumed” cancelled. “IRS personnel will reschedule those meetings at a later date;”
  • Automated notices will continue to be mailed, but the IRS will not be working any paper correspondence;
  • Automated applications on the regular (800) 829-1040 phone line will remain open; and
  • The IRS website will remain available, although some interactive features may not be available.

More information is available at:

www.irs.gov/uac/Newsroom/IRS-Operations-During-The-Lapse-In-Appropriations

Welcome Tracy Pohlen!

September 26, 2013 by

Please join us in welcoming the newest member of our team, Tracy Pohlen, CPA.  Tracy graduated from Biola University in 2007 with a Bachelors in Business Administration with an emphasis in Accounting and received her CPA license in 2013.  Tracy has worked in the accounting industry for over six years and has experience preparing tax returns for individuals, partnerships, corporations, estates and nonprofit organizations.  Tracy is starting at our firm as a senior accountant and many of you will have the pleasure of working with her in the near future.  We are excited to have such a valuable member join our team!

Welcome, Tracy!

No California Principle Residence COD Exclusion for 2013

September 18, 2013 by

Via Spidell Publishing

The California Legislature did not extend the COD exclusion for canceled qualified principal residence debt when SB 416 was defeated.  This means that a homeowner who loses a home to foreclosure in 2013 may not use the principal residence exclusion to exclude COD income on his or her California return.

An individual who has COD income in this situation should:

  • See if the insolvency exclusion will exclude income; or
  • Plan for a California tax liability in 2013.

Federal law extended the exclusion through 2013.

Installment Sale Basics

August 20, 2013 by

By Darren Morrow, CPA

Ever heard of an installment sale?  This article will help you understand the basics of installment sales, including what you need to know to help you make the best decisions when selling property.

An installment sale is the sale of a property where both parties have agreed to terms where the payments will be made over a number of years instead of receiving the entire purchase price at the time of sale. For instance, a person may choose to sell their home to someone and receive payments over a ten year period. The technical definition of an installment sale for tax purposes requires that payments must be made in at least two separate tax years.

Calculating the taxable income to be recognized under an installment sale is quite simple. The first step is to calculate the gain on sale as you normally would (sales price less tax basis). Then a percentage is calculated taking the principal portion of payments received in the current year divided that by the total sales price.  Taxable income for the current year must include this percentage of the overall gain on the sale of the property.

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There are some benefits to taxation under the installment sale rules.  One of the most obvious benefits is the deferral of capital gains taxes. Since you are only recognizing a portion of the gain in the current year you are only taxed on that amount.  The additional tax due from the sale is deferred to future years. Another benefit that is not quite as obvious is that you could possibly be in a lower tax bracket each year since you are not recognizing a large amount of income in one year. Additionally, an often overlooked benefit of the transaction is the additional interest income that can be structured into the sale. Generally sellers will receive a higher rate of interest on the deferred funds than can be realized elsewhere, and the note receivable is secured by the real property. 

Installment sales are not always an option for every transaction. Installment sales cannot be used (for tax calculation purposes) if your sale results in a loss (sales price exceeds your basis), or if it is a sale of inventory, stocks, or securities traded on an established securities market. Additionally, if you choose to do an installment sale and defer your capital gains into future years and the tax rate on capital gains goes up, you could potentially pay a higher amount of tax in the future.

Knowing how installment sales work and how to use them to your advantage is a great tool when negotiating a sale. It will let you have more control over your income and may even earn you a little extra interest income along the way. For more information about installment sales please contact us at http://www.ntcpas.com or contact our office at (714) 836-8300.

Client Spotlight: Yates & Yates, LLP

August 20, 2013 by

yates&yates

In this issue of our Client Spotlight, we are proud to feature the firm of Yates & Yates, LLP.

Yates & Yates, LLP is a law firm located in Orange, California, whose partners consist of Sealy Yates and his sons Matt and Curtis.

Originally formed by Sealy many years ago as a general service law firm, the firm today serves as one of the nation’s premier creative counsel for top-tier authors, artists and creative organizations.  The services they provide for their clients include agency representation, expert legal advice, marketing guidance, career coaching, creative counseling and business management consulting.  They are a full service firm for creatives, providing the highest level of experience and expertise in their industry.  It is the firm’s goal to help their clients make their ideas matter.

Yates & Yates, LLP has an impressive, lengthy client list that can be found on their website, http://www.yates2.com.

Nienow & Tierney, LLP has had the great fortune to be involved with Yates and Yates, LLP both personally and professionally for many years.  We shared office space with the firm in Orange back in the late ‘90’s and the relationships we built at that time have remained strong to this day.

We count it a privilege to work with clients such as Yates & Yates, LLP.

Notary Services Now Available at Nienow & Tierney, LLP

August 20, 2013 by

Nienow & Tierney, LLP will now be offering notary services at our office.  If you need a public notary for any type of authorized notarial act including acknowledgements, jurats, or oaths/affirmations, please schedule an appointment with Katy Allen (714) 836-8300.

Nienow & Tierney, LLP Listed in OCBJ’s Top 50 Accounting Firms

August 6, 2013 by

Nienow & Tierney, LLP is proud to make our debut on the Orange County Business Journal’s “2013 OC’s Largest Accounting Firms List”.  We are honored to be included on this respected list of Orange County accounting firms that is published each year.

You can read more about the growth of accounting firms in Orange County in the latest issue of the Orange County Business Journal.  Be sure to check out our listing on Page 36!  http://www.ocbj.com

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

July 22, 2013 by

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.

Farewell to Melinda Mergelsberg

July 19, 2013 by

Nienow & Tierney, LLP would like to inform you that senior accountant Melinda Mergelsberg will be leaving our office on Friday, July 19.  Many of you know Melinda, who has worked at Nienow & Tierney, LLP since 2005.  Last year, Melinda moved to Florida and continued working for us remotely, but is now transitioning to an accounting firm that is local to her new home.  Melinda has been a valuable employee and treasured friend to all at our office and will be greatly missed.  To assist with this transition, Melinda will continue to receive emails until July 31.  If you have any questions about projects that she has worked on for you in the past, or if you would simply like to express your farewell wishes to her, feel free to send an email to melinda@ntcpas.com.  Effective August 1, please contact Katy Allen with any questions or concerns at katy@ntcpas.com or 714-836-8300 x16.

We wish Melinda the best in her new position!

Melinda and Family Easter 2013

Melinda, Bo, Brady & Earl