OT: Business Law Issues
san_jose_guy
money was invented for handing to women, but buying dances is a chump's game
Are monies received from civil liability judgements taxable? How about if settled out of court?
https://www.irs.gov/pub/irs-utl/lawsuite…
http://www.spadealawfirm.com/taxability-…
Usually for physical injury and emotional injury resulting from that, not taxable. But usually putative is taxable. But there are exceptions and complications.
Anyone have any other related info?
Second topic, aren't there limits as to how large a portion of the shares of a corporation one can hold? Know the specific rules, any links?
Aren't there also rules as to how many companies one can be a director of, or a CEO of? Know specific rules? Any links? Likely is dependent on the size of the company?
Say someone owns all of most all of the shares of a for profit company, and it is a privately held company. Then say they donate all of their shares to a non-profit, lets say a relgious non-profit. Seems like they should be able to deduct that off of Capital Gains, so that they could be selling out on other shares of other things, without paying any taxes. Correct?
But how does one establish the valuation of the shares of the privately held company which is being donated. Since shares cannot usually be sold, any market value would seem difficult to determine.
Anyone know about things like this?
Thanks,
SJG
Beyonce -- Sweet Dreams
https://www.youtube.com/watch?v=JlxByc0-…
https://www.irs.gov/pub/irs-utl/lawsuite…
http://www.spadealawfirm.com/taxability-…
Usually for physical injury and emotional injury resulting from that, not taxable. But usually putative is taxable. But there are exceptions and complications.
Anyone have any other related info?
Second topic, aren't there limits as to how large a portion of the shares of a corporation one can hold? Know the specific rules, any links?
Aren't there also rules as to how many companies one can be a director of, or a CEO of? Know specific rules? Any links? Likely is dependent on the size of the company?
Say someone owns all of most all of the shares of a for profit company, and it is a privately held company. Then say they donate all of their shares to a non-profit, lets say a relgious non-profit. Seems like they should be able to deduct that off of Capital Gains, so that they could be selling out on other shares of other things, without paying any taxes. Correct?
But how does one establish the valuation of the shares of the privately held company which is being donated. Since shares cannot usually be sold, any market value would seem difficult to determine.
Anyone know about things like this?
Thanks,
SJG
Beyonce -- Sweet Dreams
https://www.youtube.com/watch?v=JlxByc0-…
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23 comments
I think you mean "punitive."
But, my above rule of thumb does seem to disagree with your post where you say that punitive awards ARE taxable. And I can't reconcile that, sorry, so I very well could be way damned wrong, sorry. :P
For the organization I am building, I need lawyers on board. Lack of lawyers is actually the main impediment to most of the things one might do.
If someone is paying you what might be called "reparations payments", I would say that that is not taxable, as it is an out of court agreed compensatory settlement. But convincing the IRS of this, might be difficult.
Lots of wiggle room though if people know how to do it.
SJG
https://www.google.com/search?q=injury+s…
SJG
Carry on.
Book Guy, when I spoke about compensatory damages, I was referring to civil damages law suits, and both those settled in court, and those settled without going to court. As I know, they are not taxable.
I take your point though that if it were to be for say breech of contract, then it would seem that such would be taxable, as you have explained. I was referring more to injury lawsuits.
SJG
Yes, this is like what I had read.
I still say though that when monies received where the result of an agreement reached without even filing a lawsuit, then it could be hard to convince authorities that this is not income, gift, or something which the government can respond to, and which cannot be hidden from them.
Like I said, grey areas, and best handled by experienced professionals. And lack of sufficient access to such is what restrains most people in their ventures.
SJG
Let me ask you a question. When you say to treat whores like civilians, should I treat her like you treated your wife? Should I cheat on her? Should I max out her credit cards? Should I plunge her in deep in debt? Should I blame her for all the wrongs I've created?
Can hardly wait for the answer.
http://www.investopedia.com/articles/inv…
I still think there are likely other restrictions. Again, most of us are hindered by lack of access to professional experts.
I know of a guy who runs about 46 LLC's, but mostly all there are is one shopping center each. Lots of ways that this could become more complicated.
And about taxibility of monies, not all the kinds of money one gets is income. Compensatory injury settlements are just getting back what was yours already. But still very subject to interpretation, want to know what you are doing before you set things up.
https://www.sba.gov/blogs/understanding-…
https://www.irs.gov/publications/p526/ar…
Doesn't talk about donating a corporation to charity. And then if one also controls the charity? Still should be able to do it though. But how does one establish value of a privately held corporation?
With some of these sorts of stuff, words on paper will never settle it, takes people who know how the authorities treat it.
Wanting to get around this 50% limit.
https://www.irs.gov/publications/p526/ar…
Limits for high incomes
https://www.irs.gov/publications/p526/ar…
LLC's
http://info.legalzoom.com/limited-liabil…
Value of Private Corporations
http://www.investopedia.com/articles/fun…
I still don't see it as that simple, as a very closely held private company could well do things very differently than a comparable publicly held company. So the value is more, what would it be worth if you converted it to a publicly held company. But to actually have done this might have involved large changes.
more about private company value
http://equicappartners.com/PDF/How%20To%…
more about private company value
http://web.stanford.edu/dept/OOD/RESEARC…
Here we go, donating company stock to charity
https://www.hklaw.com/files/Publication/…
ONly allowed up to 30% of AIG?
But with 5 year carry forward on remaining deduction.
Only 20% if privately held foundation instead of public charity.
But donating closely held stock, they are limiting the deduction to the lower of fair market value of cost basis!
If I understand that correctly, that nullifies the reason for doing it, to be able to get a huge deduction by donating something which you paid very little for!
"If you contribute closely held stock to a public charity or a donor-advised fund, you are entitled to a deduction of
the fair market value of the stock, with the same 30% of adjusted gross income limitation and five-year carryforward
allowance, just as in the case of a contribution of marketable securities. However, you are allowed only a
deduction equal to your cost basis or fair market value, whichever is lower, for transfers of closely held stock to a
private foundation, subject to a cap of 20% of adjusted gross income with the five-year carry-forward. All closely
held securities contributed to any type of entity are limited to cost basis or fair market value, whichever is lower, if
they have been held for less than one year.
The valuation of a contribution of more than $5,000 worth of closely held securities is more demanding and is
established by an independent appraisal applying IRS rules."
This is very complicated. But at least they lay out the appraisal rules.
Also:
Another issue to be aware of when contributing stock to a private foundation is the excess business holdings rule. A
private foundation may not own more than 20% of the voting stock of a corporation (35% percent if voting control
is held by completely unrelated parties), reduced by the amount of voting stock of the corporation owned by any
"disqualified persons." An offending private foundation will be subject to an excise tax of initially 10%, and then
200% if it does not correct the excess holdings problem. A disqualified person is defined as a foundation manager
(board member, officer, etc.) or a substantial contributor to the foundation, as well as a byzantine web of related
parties.
I am sure there are ways to set things up to do what I want. Its just that it is all so very complicated.
Here also
https://www.fidelitycharitable.org/docs/…
For most people the legalities are 100x the complexities of the issues of the business itself.
And then this
https://www.hklaw.com/files/Uploads/Docu…
This only scratches the surface, if even that.
Obviously there must be ways. Keep the entity to be donated as proprietorship or LLC? Need to get around any % of AIG issues.
The recipient, public charity, private foundation?
I am sure there are ways to set it up to work. But just very very complicated. Need professional experts.
In the organization I am building, we will have this expertise in residence, and we will help those who want to build their own companies and get all incumbent benefits.
Should read this:
https://www.hklaw.com/files/Uploads/Docu…
How about this?
How to pay zero taxes, 2017 / Jeff A. Schnepper
https://www.amazon.com/How-Pay-Zero-Taxe…
SJG
Pat Metheny, Joni Mitchell, Jaco Pastorius, Michael Brecker - "Shadows And Light"
https://www.youtube.com/watch?v=bLKb9Ms6…
Glitter
https://s-media-cache-ak0.pinimg.com/736…
And NaturalSelection, your nose sticks out way to far in front of your face. We need to do something about that.
SJG
50% Limit
"
The 50% limit applies to the total of all charitable contributions you make during the year. This means that your deduction for charitable contributions can't be more than 50% of your adjusted gross income for the year. But there is a higher limit, discussed later, for certain qualified conservation contributions. "
Need a way to get around this 50% AGI limit! There must be such a way. Need 100% AGI, and also that carry over to futures years would be helpful, but not mandatory
To Be Continued
SJG
http://www.nolo.com/legal-encyclopedia/a…
Need to itemize. Does this mean necessary to keep track of every expenditure for the sales tax? I think no. Think they still offer you a standard number to use.
https://www.1040.com/tax-guide/tax-savin…
https://www.startchurch.com/
Donating private Chapter-S and Chapter-C stock, and LLC interests
https://www.fidelitycharitable.org/givin…
Get out of Capital Gains Tax by giving all kinds of stock, even private stock and LLC interests, and most other stuff!
https://www.irs.gov/publications/p526/ar…
Limits on high income giving. But what about that 50% AGI limit?
https://taxmap.ntis.gov/taxmap/pubs/p526…
Almost everything subject to this 50% AGI limit.
Only exception seems to be a 100% limit for farmers and ranchers and qualified conservation contributions.
https://www.law.cornell.edu/cfr/text/26/…
So is that they way to do it?
Give for instance private stock to a church ( mine ), upto 50% of AGI. Private stock has to be carefully appraised withing last 60 days. Probably the company would be worth more if taken public. But no matter, donate to church, get deduction upto 50% of AGI, and with carryover of upto 5 years. And understand that this company basically cost me nothing other than sweat.
Sell stock in other public company, to get my AGI. So 50% of that would be taxable, after beind handled on the Capital Gains form.
But, then use more stock to by land for conservation, and give it to new qualifying conservation org.
This gets me deductibility up to the second 50% of AGI.
So just using roundnumber
Say a $1Meg company donated to a church.
Stock in other public company sold and then processed on Capital Gains form, so that I have $2Meg AGI. But I use more stock sales to buy 1 Meg worth of land to give to my new conservation org. And I am also a soybean farmer to qualify for this. So now this is covered under the 100% AGI rule.
So this leaves me paying zero tax. It also leaves me with bags of tax free money, what ever it took to get to that 2meg AGI from the Capital Gains form.
Is it that simple? What about the Self Employment Tax (SE), very complex when I have tried to understand this before. And what about Alternative Minimum tax?
https://en.wikipedia.org/wiki/Adjusted_g…
https://en.wikipedia.org/wiki/Capital_ga…
IRS 1040 /2016
https://www.irs.gov/pub/irs-pdf/f1040.pd…
Capital Gains goes on line 13, from schedule D
Okay, so capital gains goes 1 for 1, onto AGI. And AGI does not have subtracted from it dependent exemptions or the standard deduction.
Okay, so this is line 37 AGI, and then copied onto the back page, line 38. Then from this dependent exemptions are subtracted, then the standard deduction or the itemized.
I think if you itemize you still get to use some standard sales tax number, as I remember.
Then you figure your tax. But you also have to figure your SE and Alt Min tax, and if that is something, add that in.
Schedule D /2016
https://www.irs.gov/pub/irs-pdf/f1040sd.…
Okay, so they want 28% of short term, less than one year.
And to use a capital loss to cut tax in wages, $1.5k max for single, $3k for married.
******** This is confusing, as they have lots of other forms, especially for long term, over 1 year.
https://en.wikipedia.org/wiki/Capital_ga…
Yeah, when you get over $400k in income, stand tax is almost 40%, but long term capital gains only 20%.
But I think it still gets added to AGI dollar for dollar, after subtracting cost basis.
Well, this is extremely complex, but like being able to donate say $1M in a privately held corp to a church, and then to be able to sell $2Meg of stock in a public corp, having cost me only sweat, then deduct $1Meg, then pay 20% on the remaining $1Meg, leaves me with $1.8Meg!
Going further, to get the 100% AGi benefit, would have to be farmer or rancher donating to qualified conservation charity, but to make this work the way I want, it would have to be giving the QCC a business, so that it gets around all taxes, and hence soaks up the rest of my AGI. Not sure if one can do that, give business to QCC, and avoid capital gains. They talk of giving land to QCC. That is entirely different. How about land appreciated by development, and then being able to subtract original cost basis?
Not sure about this. But the new Schedule D, using so many other forms, and then SE and Alt Min, are all very complex!
SJG
I guess the idea of this qualifying conservation charity is that a farmer or rancher would donate their land, like at retirement. And usually it should be all of their land, or all of their interest in it. Then by raising the limit on AGI to 100%, they pay zero tax.
But can you donate other things, like the shares of a private corporation? Probably, consistent with the idea, NO.
But the 50% for churches, and that long term capital gains goes only up to 20%, and given that you want to strengthen the recipient church / charity, you could donate a $1Meg appraised private corp, and then sell $2Meg of public stock, and pay only $200k in tax. Pocketing $1.8Meg of mad money. Not bad.
But SE and AM. Still need to know much more.
The whole idea is that you are donating something of large value which cost you next to nothing. And same for the other stock.
This does not work with real estate or real estate contributions.
And of course the last thing anyone wants are wages, salary, or business profits, as these get taxed at the full rate, and sometimes payroll taxes too.
I'm sure this Qualified Conservation Charity law, 170, does have some interesting uses.
http://www.conservationtaxcenter.org/art…
https://www.law.cornell.edu/uscode/text/…
Yeah, capital gains tops out at 20% tax, maybe plus another 3.8% medicare tax. But then being able to cut it in half by giving 50% AGI in another privately held company to charity. Not a bad deal at all. But lots of other complexities, and maybe other tax reduction opportunities too.
Very complex.
SJG
Many such firms get bought out by large firms, without even having to go public. So getting a huge cash wad, subject to Capital Gains taxation, can be very easy.
But with farming, I don't think it works this way. The value of the farm as a business is not really much more than the value of the land. And that value is tied to its use as a farm. So you can't really just put in some money and have it multiply quickly, like in using the proceeds to buy more land. Actually a rather tough biz, especially if bank financed. Lots of farmers go into the red and lose their land. Ends up getting concentrated into these agribusinesses.
Still, that qualifying conservation charity provision could have its uses. At least it stops the exurban middle-class from eating away at it. And the conservation charity can still use the land for agricultural production, which could be used to provide education and employment for a body of people.
SJG