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Archive: 2020

PPP Borrower Tax Relief Under New Act

Posted December 30, 2020 in Mitchell F. Green, Robert M. Kramer, Articles, Asset Protection, Corporate and Taxation, Estate Planning and Probate
Under the Coronavirus Response And Relief Supplemental Appropriations Act of 2021(the “Act”), passed last week by Congress and ultimately signed into law,  PPP borrowers will now be able to deduct payroll and non-payroll expenses funded with their PPP loans, and will not have to include PPP loan forgiveness in income. PPP Loan Deductibility For the majority of existing PPP borrowers, the most significant change in the PPP rules confirms that, despite recent IRS rulings to the contrary, they will not lose the income tax deduction that was originally expected to be available for payroll and non-payroll expenses funded and paid from PPP loans, which expenses are normally tax deductible. The CARES Act originally provided that the forgiveness of a PPP loan would not be included in income. Shortly thereafter, the IRS issued Revenue Notice 2020-32, which stated that expenses paid from a  forgivable PPP loan would not be deductible. The Act now clearly indicates that expenses paid with a PPP loan will be deductible! The vast majority of PPP borrowers used their loan money to pay wages, payroll tax expenses, utilities, rent, and interest, which are all normally tax deductible. 

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HAVING YOUR CAKE AND EATING IT TOO

Posted December 16, 2020 in Mitchell F. Green, Robert M. Kramer, Asset Protection, Estate Planning and Probate, News
A number of our clients have asked us about making gifts to family members in order to avoid Federal Estate Tax upon the second death. Currently each spouse can give away either during lifetime or at death, or some combination, $11,580,000 without Gift Tax or Estate Tax. This is known as the Exemption.  The fear is that the Exemption will likely be significantly reduced under the Biden Administration, perhaps to $3,500,000.  In any event, the Exemption is scheduled to be reduced in half under current law on January 1, 2026. The Federal Estate tax is currently a flat 40%. Biden want to increase the rate, probably to 45%. An underutilized technique to reduce Estate Tax is the Self-Cancelling Installment Note or “SCIN”.  Here, a couple sell assets to an irrevocable trust for the benefit of their child.  The couple has chosen to sell $900,000 of their assets plus make a gift of $100,000 in cash.  The trust now has $1,000,000 in assets with a $900,000 debt.  The note provides for principal and interest amortization over their joint life expectancy, which is 20 years.  The interest rate can be as low as 0.60% per year to pass IRS muster.  If nothing else, any income earned by the trust above 0.60% inures to the benefit of the child, free of Estate Tax.

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IRS Issues New Guidance On Treatment of PPP Loan Expenses

Posted December 1, 2020 in Mitchell F. Green, Robert M. Kramer, Asset Protection, Corporate and Taxation, Estate Planning and Probate, News
On November 18th, the Treasury released new guidance concerning the tax treatment of expenses paid with Paycheck Protection Program (PPP) loan funds. Newly issued Revenue Ruling 2020-27 provides that recipients of PPP loans may not deduct expenses paid with PPP funds in the year in which such expenses were paid or incurred.  The Ruling further states that non-deductibility applies even if the taxpayer has not submitted an Application for Forgiveness by the end of the year. The Treasury also released Revenue Procedure 2020-51 which provides a safe harbor and procedures for taxpayers to later deduct expenses paid with PPP loan funds if forgiveness is subsequently denied or the taxpayer decides to not apply for forgiveness. These pronouncements give no guidance as to whether a “Schedule C” independent contractor or sole proprietor will have loss of a deduction for the “income replacement” portion of their PPP loans not related to any payments for deductible items on those taxpayers’ Form 1040, Schedule C.

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PPP Update – SBA Issues New Simplified Forgiveness Application for Small Loans

Posted October 15, 2020 in Mitchell F. Green, Robert M. Kramer, Asset Protection, Corporate and Taxation, Estate Planning and Probate

On October 8, 2020, the Small Business Administration “(SBA”) provided a simpler forgiveness application for PPP loans of $50,000 or less. The key simplification is that the borrower can ignore reductions in either employee headcounts or of salaries or wages!

If you are eligible to use the simpler PPP loan forgiveness form, you probably want to do so. The new 3508S application form is easy to complete. The form asks for identifying information including your business name, contact information, tax identification number, the loan number and amount.

Instead of having to show your forgiveness amount calculation as you do on the 3508EZ application form, you need to certify the following seven things:

 

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