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Category: News

New IFRs For Paycheck Protection Program Second Draw Loans

Posted January 10, 2021 in Mitchell F. Green, Robert M. Kramer, Articles, Asset Protection, Corporate and Taxation, Estate Planning and Probate, News

On January 6, 2021, the SBA issued interim final rules (“IFRs”) regarding the implementation of section 311 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the Economic Aid Act). The Economic Aid Act authorizes the SBA to guarantee loans under the Paycheck Protection Program (PPP), which was established under the Coronavirus Aid, Relief, and Economic Security Act. The Economic Aid Act adds a second temporary program to SBA’s 7(a) Loan Program titled, “Paycheck Protection Program Second Draw Loans.” The SBA may guarantee loans under the PPP Second Draw Program under generally the same terms and conditions available under to borrowers through March 31, 2021 (“Second Draw PPP Loans”) that previously received a PPP loan (“First Draw PPP Loans”) and have used or will use the full amount of the initial PPP loan for authorized purposes on or before the expected date of disbursement of the Second Draw PPP Loan. The key differences between First Draw PPP Loans and Second Draw PPP Loans are described in the IFR, which explains the loan terms, eligibility requirements, and application process for Second Draw PPP Loans. The last day to apply for and receive a PPP loan is March 31, 2021.

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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 - Summary of August 24th Interim Final Rules (“IFRs”)

Posted September 7, 2020 in Mitchell F. Green, Robert M. Kramer, Asset Protection, Corporate and Taxation, Estate Planning and Probate, News
After more than a month of silence, on the part of the SBA, they issued new FAQs on August 4, which provided some additional guidance and clarification, most of which was not borrower friendly! More recently, on August 24, the SBA issued new IFR’s, which provided additional guidance and clarification, as both borrowers and lenders prepare for the loan forgiveness process. While the IFR’s provided additional needed clarification, new guidance, as same pertains to certain related party transactions, are patently unreasonable and make little sense, whatsoever. Below are the highlights from the new IFRs. Following the highlights is a deeper dive into specific issues addressed, relative to owner compensation, limitations on forgiveness for related-party rental payments and attributable to shared and sublease rental arrangements. The highlights of the IFRs are as follows: Limits on the amount of owner-employee compensation that can count towards forgiveness only apply to shareholders who own 5% or more of an S or C Corporation. No clarity was provided for partners in a partnership. Thus, arguably, a partner owning any percentage may be subject to the owner-employee compensation limitations! As a reminder, these owner-employee compensation limits are as follows: For the 8 weeks period, the lesser of: (1) $15,385 or (2) 15.385% of 2019 compensation; and for the 24 week period, the lesser of: (1) $20,833 or (2) 20.833% of 2019 compensation. For non-owner employees, the limits are, for the 8 week period, $15,385 and, for the 24 week period, $46,154. Additionally, for owner-employees, forgiveness for retirement plan contributions for such owners are now limited to 20.833% of the 2019 retirement plan contribution amount, for those contributions made during the applicable covered period.

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