As the world turns, a major tax bill is being crafted; What is a HUBZone; Does it pay to incorporate a home-based business as a C Corp.
1. C-Span is the greatest.
Watching the learned ones, the Senate, argue over the Death Tax Repeal, H.R. 8 "Elimination of the Death Tax," was real drama on C-Span for a tax lawyer but pretty dry for most. One thing is clear, the stakes are very high, if you believe all the noise, including whether the Forbes 400 were going to save $250B over the NEXT 20 years. [If the difference is between $300B (Democratic Plan) and $750B (Republican/Democratic Plan) over 20 years, that is $450B or $22B per year out of a $2T and growing annual tax revenues, or peanuts, as someone once said.]
If you did not watch, you missed the best part, the discussion of the elimination of the stepup in basis at death, which is one of the main components of the bill, at least for estates above $1.3M and transfers to spouses of $3M or less after December 31, 2009.
This is a very interesting issue since in community property states like California it has generally been the rule that both halves of community property gets a stepup in basis when one spouse dies. Here it is clear that only the decedent's property is going to get the stepup in basis on the $1.3M and $3M amounts respectively. [We can already see the insurance industry gearing up to sell policies covering the capital gains costs of selling assets after death, and the creative ones revising their estate/ death tax planning practices to business reorganization practices.]
Will the nursing homes be busy in the latter part of 2009 making sure everyone lives to see January 1, 2010? The celebration at Times Square will be real meaningful, and champagne will be flowing for all to see. We can see some interesting issues: did someone die on December 31 or January 1, for tax purposes?
Moreover the shots taken at high price tax advice and the insurance industry were not very subtle, there is blood in the water and the sharks are in the pool, if you believe the numbers, 9 to 15 Democrats could join in with 55 Republicans to pass total repeal over 10 years, with the biggest part coming after the last phase in year, 2009.
Add to that is pension reform and the numbers are even more interesting "...But sponsors -- 90 Democrats and 90 Republicans as of Tuesday -- hope its chances of moving through Congress and getting signed into law by President Clinton will be improved because it is not encumbered by other, more controversial items..." Read more here.
Finally is the Marriage Penalty Reform which could be wrapped up with prescription drugs relief for seniors [The Senate Finance Committee, like the House Ways and Means Committee has jurisdiction over Social Security/Medicare and Taxes]; and what you are seeing is major tax legislation in action, a.k.a. the sausage factory to some, all in living color because of C-Span.
Will Distressed Communities be coming next, only the shadow knows, but it will be interesting to see if the publically traded Dot-Com Incubators start running to the capital gains free zones to get their excitement back.Read about it here.
2. Orange County, California does not know what they have.
Distressed Communities legislation does not get much attention in Orange County, or the Los Angeles Times, but it could jump start something real special. If you check out Orange County in the HUBZone locator you will find that the UCI Research Park near Newport Beach at Highway 73 and McCarthur Blvd., that is discussed in this front page Los Angeles Times [in addition to the Highway 55 corridor between I-405 and I- 5, the Irvine Spectum Area near the I-5/I-405 and the El Toro Marine Facility in Irvine] article is within a federal HUBZone, and as such all businesses within the area will qualify for special financing programs, including 39% Investment Tax Credits under pending legislation. Wake up and smell the tax credits.
3. Incorporating a home-based business is becoming a hot issue.
Pension Reform, as noted above is coming, and the numbers that someone may put away into a retirment plan will be significantly increased for tax years beginning after December 31, 2000. If a home-based business is run as a sole proprietorship or as an S Corp. you must have a December 31 year-end, but with a C Corp. you can elect any year-end on the corporation's first return. That is one of the major advantages of incorporating and using a C Corp.
We suggest that you can get advice and other helpful tips in the recent new Dummies Book, "Home-based Business for Dummies," by Paul and Sarah Edwards and Peter Economy. It is all laid out for your easy reading, with many helpful hints, page by page.
Jim Schneider, LL.M.
The Taxman86 Speaks... is copyright 1998-2010 by James E. Schneider, LL.M. Inc.