Boston Bean

@AdamHKlein @fmeyrath This doesn’t make sense and sounds made up. The landlord can’t sue as there is no cause of action. The landlord could evict or raise rent, in which case the tenant would need to sue for breach of contract, and they would likely lose on the grounds that the contract wasn’t valid.

@fmeyrath I’ve seen scriveners errors on APN’s, dates, and similar, but never on a lease term. Also…I’m not an attorney, but

A landlord sent over a 3-year lease. The tenant altered it & snuck in a “2,” turning it into 23 years, then signed and returned it. Landlord missed the change and countersigned…no legal remedy available. Rents have since gone up 4x. Tenant’s been saving ~$20k/month for almost 13 years, with 10 still left. Approx $1.8mm in total cash flow… Gone. Hire attorneys y’all!

@loganallec @CPATaxTeam The correct way of looking at it is to ask, “if the owner were totally absent, is it possible for the business to generate any revenue whatsoever?” If the answer is no, then 100% of the revenue is attributable to the owner’s services

even in a one-man business, there are other factors that contribute to the business than the mere value of the services provided by the shareholder to the business…for example, the reputation of the business, technological systems developed by the business owner that perform much of the work for them, etc.

We just helped a high net worth client save over $150,000 in taxes and honestly the strategy wasn't complicated. We converted their entity from an LLC to an S-Corp. Built out a properly structured reasonable salary. Opened a Solo 401(k) to maximize pre-tax retirement contributions. And put a Cash Benefit Plan in place to create additional tax advantaged compensation. Four moves. Six figures saved. Every year going forward. And here's what that really means. It means that for years this person was doing everything right in their business and still leaving an enormous amount of money on the table simply because the planning wasn't there. That's truly the thing most growth minded entrepreneurs miss. It's not that they aren't working hard enough. It's that nobody is proactively looking at the full picture with them. Tax planning never feels urgent until the bill shows up and by then the opportunity is already gone. If you are building something and you don't have someone in your corner who is thinking about this stuff ahead of time, there's a real chance you're giving away money you don't have to give. So what would an extra $50,000, $100,000, or $150,000 back in your pocket change for you this year?

@myonlinetrust @CPATaxTeam Huh?

@CPATaxTeam @Bostonbean90 Don’t bother with this guy, Craig.

@CPATaxTeam What type of business? Is the shareholder the only one generating revenue for the business or do they have other employees/hired labor?

@Bostonbean90 Well, original CPA was a top 100 firm and the client wasn’t terribly happy to be missing out on paying extra taxes. It’s simple, overpaid salary significantly above reasonable, set up 401k and cash balance plan. Small accountable plan. All documented. What holes do you see?

@MrNQDC @CPATaxTeam The OP had nothing to do with tax planning

@CPATaxTeam Who would’ve thought that AI cannot replace a human tax planner anytime soon

Client sent email showing 8 issues that ChatGPT had with the partnership return we sent him. Every single one was incorrectly ID'd by Ai. E.g. they said the EIN was wrong on the K1 because it wanted to match the recipient EIN to the sender EIN. Ai for the win!

@ForemanTaxLaw This isn’t a new concept. Look at Utah

You can spend 365 days in Florida and still be a New York resident.

@DWoods_EA @jakecrandall And you’re ignoring the assignment of income doctrine.

@Bostonbean90 @jakecrandall Except you're applying the concept of a sole proprietor to the value of an employee. Just because an employee is the sole employee doesn't make all of the profits effectively salary due to their efforts

The IRS doesn't tell you what your S-Corp salary should be. They tell you it has to be "reasonable." For a CRE broker, a reasonable salary is usually tied to what the market pays for the services you perform. But it's also the biggest lever you can pull to reduce your taxes. Get this wrong on one side, and you're paying more in taxes than you should. Get this wrong on the other side, and the IRS may be knocking to see how you came up with a reasonable number. Getting this wrong is the most common and costly S-Corp mistake we see.

@TKopelman It can’t even be the main reason. And it’s only the main reason in the first place cause people like you peddle misinformation

@Bostonbean90 Lol well of course it can't be the only reason but let's be real, it's the main reason people set them up

My favorite tax planning moves that most high income diyers are missing: 1. S Corp - reducing self employment tax - utilizing PTET - maxing out QBID 2. Solo 401k - maxing this out pretax at $70k - needing less wages or profit than SEP IRA due to employee side - less QBID reduction since employee side - employing spouse and adding them - mega backdoor Roth ability 3. PTET - paying state taxes through the beginners which is huge for high tax people in high tax states 4. QBID optimization - 20% of wages or 50% of profits, whichever is less. Needs to be maximized yearly 5. C Corp - so impactful for my QSBS eligible businesses. Can now get $15mil excluded and expand that 2-5x through trusts 6. Cash balance plan - Great way to defer even more per year and then roll to an Ira and convert to Roth in early retirement 7. 401k profit share - allows you to add more to 401ks - less employees you have and more wages to yourself, makes it the best 8. Roth conversions - defer at top brackets, convert through low - allows you to lower your effective lifetime tax rate 9. Backdoor Roth IRA and mega backdoor Roth 401k - can max all pretax accounts first then stack tax free dollars above that 10. R&D credits - can offset a lot of tax for the dollars put into research 11. Maximizing charitable giving - DAFs - CRTS - all about lumping giving into your highest earning years and donating before a sale to avoid the capital gains tax too 12. Owning the real estate your business operates in - allows you to take those losses and use them to offset business income based on how much of the building your business uses - can use cost seg to accelerate losses and use that to offset income in your highest tax years 13. 529 - can superfund and cover college when young and avoid all the capital gains taxes These are all things we proactively help our clients on. You need a team doing this type of planning for you

@Pv20008 @bradncpa The IRS lost those cases because all the prongs of section 269 were not met, NOT because section 269 can’t be applied to an S corp

@Pv20008 @bradncpa The S election is relevant because it constitutes an incorporation for federal tax purposes, placing it within the reach of section 269. There are court cases where the IRS applied 269 to an S corp. the IRS lost, but the court has never ruled that 269 doesn’t apply to an S corp

At $80,000 to $120,000 in profit, an S-Corp starts making more sense than a Schedule C. The self employment tax savings alone can be significant depending on what a reasonable salary looks like. Some owners will wait on this switch because they think it is complicated. The entity change is straightforward when the books are clean going in. If you are in that profit range and still on a Schedule C, it's likely that you are overpaying on self employment tax. That is money leaving every year with no structural reason for it.

@Pv20008 @bradncpa I said there are many cases where the initial incorporation constitutes an “acquisition” within the reach of section 269. So I’m not sure what your argument is at this point. Are you arguing that an S election is not an incorporation for federal tax purposes?

@Bostonbean90 @bradncpa Agree on the SE avoidance not being congressional intent, but was unable to find a case where this specific section was applied to an s-corp and resulted in the gov winning the case! You mentioned you know of many, share so we can educate ourselves!

@Pv20008 @bradncpa Also, your understanding of “incorporation” is also bad. For an entity to fall within the reach of sec. 269, it must be a corporation (C or S) for federal tax purposes, not necessarily under state law. ie, a state law partnership taxed as a corporation would be subject to sec 269

I would like to see at least one case where S-election was disallowed based on sec. 269! Please share! 2553 and 8832 elections determine tax classification(treatment) not the legal creation of the corporate entity. Incorporation is a state-level legal process, while these elections are IRS federal tax processes. “Modern Home Fire & Casualty Insurance Co. v. Commissioner, 54 T.C. 839 (1970): The Tax Court explicitly held that Section 269 does not apply to disallow an S election, even if the sole motivation was to offset corporate income against the owner’s losses. The court reasoned that enjoying Subchapter S benefits is “consistent with the intent of Congress” and thus not tax avoidance.”

@Pv20008 @bradncpa It covers S elections. Plenty of case law out there confirming that the initial incorporation of an entity constitutes an “acquisition” for purposes of section 269. And an S election constitutes an initial incorporation.

@Bostonbean90 @bradncpa To my understanding, Sec. 269 is irrelevant here! It covers acquisitions, not S elections! Feel free to correct me if I am wrong, but I do not find language in the statute addressing entity elections.

@benruss501 @bradncpa Ur wife must like nerds

@Bostonbean90 @bradncpa Nerd.

@StrangeWill @TheNFTCPA Lol who is going to do the audits?

@TheNFTCPA I don't know how you can trust it, I do a lot of our accounting, I've had frontier models make massive mistakes. There's going to be a lot of audits and people getting in trouble this year, but sucks to suck. Stop trusting the machine blindly.

Today's episode of AI taking over Tax. Client: Your draft says 9k refund, AI told me 111K refund. You did something wrong. Me: Oh boy. send me what you are seeing. Me: This is wrong, just wrong. You don't qualify for any of the tax credits, you don't have 3 kids... #TaxTwitter