So, you have a Trust which is a member of an LLC and holds interests in real property. Does a distribution of trust LLC interests terminate the LLC and trigger a deemed sale capital gain. If the Trust has a fractional share formula clauses (equal distributions), there is no capital gain on the distributions even if one person gets land and another gets the partnership interest. So, if you are a Trustee wrapping up a trust and run into this situation, you may be able to make people happy and not trigger bad tax results.
Let’s say you buy or manufacture stuff made in the old US of A and you sell it overseas to folks who will pay an arm and a leg for U.S. made stuff. If you took your plain old business and sold the stuff overseas, you’d pay taxes at your tax rate. If you’re an LLC, it would not only be taxable business income but also self-employment income taxable at a combine rate of 35% up to 50%. Well Uncle Sam wants to even out trade, and there is an entity known as an Interest Charge DISC. It sits between your business and your customer and gets a commission on sales equal to get this THE GREATER OF 4% of gross export sales or 50% of the net taxable export income. This is taxed at the qualified dividend rate of 20%. So, you save 4% to 15% on your taxes. What is even better is you can defer recognizing the income by merely paying interest on the taxes you would have paid at Treasury rates (currently about 1.5%). There are some limitations on these benefits, but for a small exporter, it might be worth the expense. But hold on before you go charging off to set one up there are expenses. Lawyers will have to draw up the documents needed to put the regime in place, that’s about $3,000-10,000 depending on business structures used and lawyers used. You’re going to need to hire accountants, because this is not something you want to try on your tax software. That will cost you as well. So assume that if you have export sales in the $200,000 and up range you will justify the costs of setting it up and the costs of compliance.
For a smaller business, this is a cheap way to save taxes on your export sales. Otherwise, you get into overseas corporations and non-domesticated income which doesn’t put money actually in your pocket and as a small or medium sized business, you want to put money actually into your pocket.
My partner, John Braswell, passed away last week. He had been practicing tax, real estate and estate planning law in Alexandria for 30 years. His conservative tax strategies coupled with his creative abilities served his clients well. He was a great friend to me and a great sounding board when there was a particularly tough tax issue facing me. My prayers go out to his wife and daughter.
You may be at risk if you donated to a 527 Organization. For example a PAC which can make independent expenditures in Federal Elections. The most famous one was the Swift Boat Veterans. Another may be some Tea Party Groups. If you donated to a political organization (other than a candidates campaign or a National political party) you should check with the IRS to see if your social security number was leaked.
This is a potential budget buster. Those are deemed disclosures. According to the Code, there is a $1,000 fine that the Government has to pay to the Taxpayer for illegal disclosures. Tens of Thousands of Social Security Numbers disclosed at $1,000 per number equals about $100,000,000 per ten thousand. And if its proved that the disclosure was intentional the fine is $5,000. And if a taxpayer suffers an identity theft, the Government is liable for those damages. Now that would be a class action worth filing.