Dear Colleague:
This was an incredibly busy summer for me, and I hope that the summer was good for you and your business. I settled a $16M claim against one of my clients in federal court in Florida after protracted litigation. A number of new business clients retained me for tax matters, acquisitions and sales of their businesses. I recently started representing several companies that are doing "Apps" for mobile phones, and it has been interesting to learn about that business.
New Small Business Tax Breaks
The new Small Business Jobs Act of 2010 (H.R. 5297) is one of the most significant tax bills passed in the last few years. It offers substantial tax breaks to business to stimulate new investment and new hiring. Among the most significant aspects are:
(1) Section 179 Expensing--this provision increases the amount of capital expenses that can be written off each year as a current expense to $250,000, and indexes this for inflation. This allows a business to get a current tax benefit for capital expenses that otherwise would have to be written off during the period of regular depreciation.
(2) Start-Up Expense Deduction--this provision raises the amount that a start up business can deduct for start up expenses from $5,000 to $10,000, and increases the income phase-up from $50,000 to $60,000.
(3) Extended Carryback of General Business Credits--this provisions extends the carryback period to five years, a significant change.
Many of these provisions are quite complex. As you do the tax planning for your Company for 2010, you should consider possible changes that you should make in order to maximize your benefits. If I can assist you in any corporate tax matters, please contact me.
Buying Investment Real Estate in a Depressed Market
A number of my clients have consulted me about buying investment real estate, either residential or commercial, in the currently depressed market. I believe that real estate can be an excellent investment, as long as you approach it carefully, do your homework, and buy at the right price.
Here are my suggestions:
(1) Buy locally, in areas that you know and can properly assess, in terms of values and prospects for the future.
(2) Set up a separate entity for each property that you buy--this can insulate you from personal liability and has a number of other advantages from a tax perspective as well.
(3) If you don't want the problems of managing rental properties, you can hire a management agent, but be aware that this will cut into your profits substantially.
(4) If you don't feel comfortable with doing this yourself, you can find a local company that is seeking investors to pool their funds, and this may be a good technique. However, if you do this, make sure that you are aware of the reputation and experience of any company with which you invest your funds.
Please feel free to contact me if I can assist you in structuring these investments.
