If you Sell the Farm, Sell it to a Farmer.

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In The One Big Beautiful Bill, Congress added Section 1062. This section allows a person who sells farmland to a farmer to defer the tax on the gain over 4 years. The election must be made one the due date of the return. There are some restrictions on income levels. Additionally, you must put a covenant in the deed restricting the use to only farming for 10 years. You also must have been using the property for farming (or leasing it to a farmer) for ten years. But if you own a farm and want to sell it, this is a great opportunity to do so.

Trump Accounts – Don’t shoot the messenger

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Starting July 1, 2026, if you have a newborn from 2025-2028, that baby gets $1,000 in a Trump account free from the Government. It grows tax deferred and at age 18 its turns into a traditional IRA, if the child doesn’t take it out. You or the grandparents can contribute up to another $5,000 per year to the account. This is a great way to grow money for your children in the future.
Even if you don’t have a newborn, but have a child under 18, you can still open the account and donate up to $5,000 per year. Even that onetime give will grow without tax.

You are limited to specific mutual funds for investments which the Treasury Department designates. So despite the name, this is a good deal for your children. Use it.

No tax Deadlines from January 20, 2020-July 10, 2023

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The US Court of Federal Claims ruled that due to COVID pronouncements in conjunction with Section 7508A of the Internal Revenue Code which deals with tolling statutes during disasters. President Trump’s declaration for COVID was made January 20, 2020 and was not removed until done so by President Biden on May 11, 2023. Add 60 days to it and you have July 10, 2023 as the operative date for filing any return during that period. The IRS has not and probably will not acquiesce to this decision. However, if you have a client being audited for 2019-2022 years or paid those taxes late, they might get a break from this decision. You can state that the interest for that period 1/20/20-7/10/23 is unagreed and any penalties are not assessable if accruing during that period of time.

Income in Respect of a Decedent

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When a decedent enters into a contract prior to his death, and it settles after his death, there is no step-up in basis. It is considered income in respect of a decedent. In such a case, the old basis is used and decedent’s estate or heirs pay the capital gains tax.
What are some of the solutions? 1. The Buyer defaults on the contract, the decedent’s family keeps the deposit, and a new contract is entered into. In such a case, the old contract is dead and a new contract with a stepped up basis is done. And to make matters worse, the contract is an assets of the estate and will bear estate taxes (if decedent’s estate is worth more than the exemption equivalent for estate taxes). So, this is a huge problem.

Let’s say, family enters into a binding contract whereby they sell a portion of decedent’s closely held corporation prior to his death to New and give New an option to purchase the rest after the death of the decedent. This would cause income in respect of a decedent and if Decedent was over the exemption equivalent there would be an estate tax as well.

Back-up Withholding

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So, you’re a contractor and you hire a bunch of contractors. You need to get W-9’s from them with their social security numbers or EIN’s. So, you do that, but let’s say, they give you false numbers. When you file their 1099’s, the IRS may contact you saying that you need to back-up withhold 24% from their gross payments.

DON’T IGNORE THAT LETTER. Failure to do that incurs liability for your company to the extent of the back-up withholding. Now if you’re lucky, the offending contractor actually paid their taxes and reported the income. If so, then you have a defense that the IRS cannot collect a tax twice. But if they didn’t you’re likely to face a pretty big liability.

And if these guys want their 24% back, they can always file a tax return and get it back. Most won’t, because 24% is less than what they really owe.