Corporate Tax Planning

Our tax code loves business owners. I see this pattern often: A retiring person owns a business worth $750k. But they used that business years ago to buy real estate now worth millions. This is how to set it up. 🧵 It's called the "OpCo / PropCo" structure... Your business is the Operating Corporation (the "OpCo"). You buy the real estate via a "Property Corporation" you create. OpCo rents your business real estate from PropCo. Why this way? IRS Sec1202/QSBS means that you often want your new OpCo to be a C-Corp if you think you'll someday sell. (QSBS says you, as an investor of a C-Corp, get the first $10mm or 10x capital gains tax-free at the sale.) But, You don't want to put real estate in your C-corp. It does all kinds of nasty tax things. It also creates a ton of risk for you. Suppose your OpCo gets sued, and you lose. The property you bought is suddenly at risk! Not good. Enter the PropCo structure. You put the properties in LLCs that you own. In the old days, each property was a separate LLC. That was a mess because each LLC had a bank account and tax return. Enter the Series LLC. Each property goes into its LLC, owned by you. The whole series has one tax return and bank account. Simple+cheaper! (One catch: your state has to support these special LLCs.) But what about borrowing/mortgages? Let's say you get a bank loan to buy your building. OpCo pays rent to PropCo. The PropCo is the borrower and makes payments. PropCo, OpCo, and maybe you personally all guarantee the loan. We use this structure even if our OpCo is an LLC. This structure has more benefits beyond Sec 1202/QSBS. Here they are! — First, this can obfuscate how much money you're making. Don't want your staff to see you making a giant salary? Pay your PropCo rent. Though the IRS will want everything to be "market rate." Second, you get flexibility. Say some idiot comes along. He wants to buy your real estate for a crazy price and lease it back. It'd be a mess if your property were held in the OpCo. Third, you limit liability. Let's say you expand to multiple locations. Someone trips and sues you at one location. You get sued and lose. This isolates your other real estate from those plaintiffs. Fourth, this can save you on taxes. For some of the federal payroll taxes, there is no limit on the amount of payroll that would be subject to taxes if you pay yourself a big bonus. Also, if you go to sell your property and it was in c-corp, it's subject to double taxation. — There's more benefits (selling your OpCo is easier! passive income! estate planning!), but I'm running out of space! If you want to own real estate tied to your business then you want to do it via an OpCo/PropCo. It will save you on taxes, maximize flexibility, set you up for retirement, and do other good things. (CAVEAT: trust your advisors, not a bald guy on Twitter!)

We saved our client £12,102 in tax without reducing her £120K income. A client running a successful consultancy came to us feeling frustrated. 👉 She was taking £120K a year (£12,570 salary, the rest in dividends). 👉 Her tax bill was way too high and she couldn’t figure out why. 👉 She was losing thousands to HMRC unnecessarily. When we broke down the numbers, the problem became clear. Here's what her original income structure looked like: 💰 Total Withdrawals: £120,000 💰 Salary: £12,570 💰 Dividends: £107,430 At first glance, it looked simple. But here’s where things went wrong 👇 ❌ Loss of Personal Allowance Earning over £100K meant she was losing £1 of personal allowance for every £2 earned over £100K. She lost her full £12,570 personal allowance which cost her an extra £2,514 in tax. ❌ High Dividend Tax Since she took all dividends herself, her taxable dividend income was £106,930 (after the £500 dividend allowance). She was losing thousands just because her income wasn’t structured efficiently. Here’s what we did to fix it: ✅ Transferred Shares to Her Husband Her husband was already helping in the business, so we made him a shareholder and director. This allowed us to use both their tax-free allowances and lower tax bands. ✅ Split the Dividends Instead of her taking all £107,430 in dividends alone, we split them equally (£53,715 each). This significantly reduced the amount of dividends being taxed at 33.75%. ✅ Restored Her Personal Allowance By reducing her individual taxable income below £100K, she reclaimed her £12,570 personal allowance, saving her £2,514 in tax. Here’s how much she actually saved: 📌 Restored Personal Allowance Savings: £12,570 × 20% basic rate = £2,514 saved 📌 Dividend Tax Savings (Before vs. After): - Old Setup (Her Taking All Dividends) Taxable dividends: £106,930 Tax calculation: £37,700 × 8.75% = £3,298.75 £69,230 × 33.75% = £23,364.13 Total Dividend Tax: £26,662.88 - New Setup (Splitting Dividends Between Both Spouses) Each spouse’s dividends: £53,715 Taxable amount per person: £53,215 (after £500 allowance) Tax per person: £37,700 × 8.75% = £3,298.75 £15,515 × 33.75% = £5,238.56 Total tax per person: £8,537.31 Total tax for both spouses: £8,537.31 × 2 = £17,074.62 📌 Total Dividend Tax Savings: Old Tax: £26,662.88 New Tax: £17,074.62 Saved: £9,588.26 📌 Total Annual Tax Savings: £2,514 (personal allowance) + £9,588.26 (dividends) = £12,102.26 The Result: 💰 Same £120K income, but £12,102 less in tax. 💰 More disposable income as a couple. 💰 A tax-efficient business setup that works for them. Don’t assume your current setup is the best one. A little planning can save you thousands every single year. Think you’re overpaying tax? Drop me a DM.

Think the new $40,000 SALT cap solved your tax problem? Think again. For high-income business owners, the real solution is still the Pass-Through Entity Tax (PTET). Here’s why PTET remains the smarter play even with the higher cap: 1)The $40K SALT cap phases out fast: If your income exceeds $500K (joint), the cap quickly shrinks, often back to the $10K minimum. For high earners, the benefit is minimal or nonexistent. 2) PTET stays fully deductible: The OBBBA did not touch PTET. State income tax paid at the entity level is still fully deductible on the federal return, and that benefit flows to owners regardless of itemizing. 3)Works even if you don’t itemize: Since PTET is deducted before income passes through, you get the federal benefit no matter what. 4)Predictability matters: The $40K cap is temporary (2025 to 2029). PTET remains steady and reliable for long-term planning. 5)State rules differ: PTET elections vary, so you must coordinate with your CPA and review annually. For most high-earning pass-through owners, PTET still delivers far more reliable savings than the new SALT cap ever will. 📌 Bottom line: The SALT expansion helps some, but for high earners with large state tax bills, PTET continues to be the stronger strategy.

📢 Tax Audit for FY 2023-24: Key Updates and Compliance Guidelines 📢 As the tax audit season for FY 2023-24 approaches, businesses and professionals need to stay updated with the latest guidelines under Section 44AB of the Income Tax Act. This year brings key changes that every taxpayer and auditor should be aware of to ensure smooth compliance and avoid penalties. 🔍 What's New for FY 2023-24? 1️⃣ Increased Tax Audit Threshold: For businesses, the tax audit threshold under Section 44AB(a) has been increased to ₹10 crore (turnover), provided 95% of receipts and payments are digital. This shift encourages digital transactions, reducing cash dealings. 2️⃣ Presumptive Taxation Scheme (Section 44AD & 44ADA): Professionals under Section 44ADA with gross receipts up to ₹50 lakhs can declare 50% of their income as presumptive income. Meanwhile, businesses with turnover up to ₹2 crores can opt for Section 44AD with presumptive income of 8% for cash transactions and 6% for digital. 3️⃣ Reporting Requirements on Foreign Transactions: With an increased focus on foreign transactions, auditors must report all international transactions, including foreign assets and income, to ensure compliance with the black money law and FATCA regulations. 4️⃣ Additional Reporting on CSR Spending: The Companies Act mandates reporting on Corporate Social Responsibility (CSR) spending. Auditors now need to ensure that this is properly accounted for in their reports to avoid any discrepancies. 📝 Important Deadlines: Tax Audit Report Submission (Form 3CA/3CB and 3CD): The due date to file tax audit reports is 30th September 2024 for taxpayers who require a tax audit. ITR Filing Deadline: The ITR filing deadline for taxpayers covered under the tax audit is 31st October 2024. ✅ Key Areas to Focus On: GST Reconciliation: Ensure proper reconciliation between GST returns and books of accounts to avoid mismatches. Form 3CD Changes: Be mindful of new changes in Form 3CD, particularly in reporting clauses related to GST and disallowance of expenses. Loan Reporting: Disclose loans accepted or repaid in cash exceeding the prescribed limits. 📌 How to Prepare for a Tax Audit? Organize Your Documents: Make sure all financial statements, invoices, and transaction records are accurate and up-to-date. Digital Record Keeping: Utilize accounting software that integrates well with GST and tax reporting systems for seamless audits. Regular Compliance Checks: Schedule internal audits or reviews throughout the year to stay on top of compliance. Tax audits are a critical part of ensuring tax compliance for businesses. Being proactive and adhering to the updated guidelines for FY 2023-24 will save time, reduce stress, and ensure your organization avoids hefty penalties. 👨💼 As a Chartered Accountant, it's essential to stay informed and guide your clients through the latest compliance requirements effectively. #TaxAudit #FY2023_24 #TaxCompliance #IncomeTax #AuditSeason #CA

𝗧𝗮𝘅 𝗧𝗿𝗲𝗮𝘁𝗶𝗲𝘀 𝗶𝗻 𝗧𝗿𝗮𝗻𝘀𝗶𝘁𝗶𝗼𝗻: 𝗪𝗵𝗲𝗻 𝗦𝘂𝗯𝘀𝘁𝗮𝗻𝗰𝗲 𝗕𝗲𝗰𝗼𝗺𝗲𝘀 𝗡𝗼𝗻-𝗡𝗲𝗴𝗼𝘁𝗶𝗮𝗯𝗹𝗲 Recent developments indicate that scrutiny assessments of Mauritius-based entities for FY 2023–24 (AY 2024–25) have witnessed a shift in approach. In several cases, instead of concluding assessments at the field level, matters appear to be getting referred to the FT&R division, with possible exchange-of-information requests being initiated with the Mauritius authorities to examine commercial substance. While this may seem like something within the law only, it reflects a broader and more deliberate focus on aligning treaty benefits with demonstrable economic presence. This trend can be viewed in the context of evolving judicial and regulatory thinking, including the Supreme Court’s ruling in the Tiger Global case, which has reiterated that treaty entitlement cannot rest solely on documentation such as a Tax Residency Certificate. The emphasis is clearly moving toward a “substance over form” paradigm, where factors like decision-making, control, financial capacity, and operational footprint are becoming increasingly relevant in determining eligibility for treaty relief. From a practical standpoint, this should not be seen as a cause for concern, but rather as a timely reminder. Structures involving Mauritius, and potentially other jurisdictions, may increasingly be subject to deeper scrutiny, including cross-border verification. For taxpayers and advisors alike, the message is clear: substance is no longer optional. Proactive review, robust documentation, and alignment of commercial rationale with legal form will be critical in navigating this evolving landscape. #InternationalTax #TaxTreaty #SubstanceOverForm #TaxCompliance #CrossBorderTax #MauritiusTax #ExchangeOfInformation #TaxScrutiny #GlobalTax #TaxAdvisory #TaxRiskManagement #EvolvingTaxLandscape #BEPS #TaxGovernance #Scrutinyassessments

“I’d Sell the Property, But the Tax Will Eat Me Alive.” Ever had that thought? But let me tell you something no one explains properly. Meet Raj. Back in 2001, Raj bought a house for ₹1 crore. It was a big deal. His first major investment. Fast forward to 2025, Raj gets an offer he can’t refuse: ₹10 crore for the same house. He thinks, “This could change everything, retirement, kids’ future, maybe even that Goa cafe dream.” But then comes that voice, "₹9 crore profit? You’ll lose a fortune in tax." And just like that, Raj pauses. The Fear Is Real This is where most people stop. They want to sell. They should sell. But the fear of getting slammed with tax holds them back. And here’s the tragic part: most of that fear is based on wrong math. What No One Talks About — CII Let’s break this down. CII stands for Cost Inflation Index. Literally the thing that protects you from being taxed unfairly. It adjusts the original price of your asset based on inflation, because money changes over time. ₹1 crore in 2001 could build a bungalow. ₹1 crore in 2025? Maybe a 2BHK in a decent city. So why should you pay tax like nothing’s changed? Raj’s CA Breaks It Down: “Relax. You’re not paying tax on ₹9 crore. You’re paying tax on ₹6.24 crore.” Here’s the math: CII in 2001 = 100 CII in 2025 = 376 That means the ₹1 crore Raj spent back then is worth ₹3.76 crore in today’s terms. So: ₹10 crore (sale price) – ₹3.76 crore (adjusted cost) = ₹6.24 crore (actual gain) Taxed on ₹6.24 crore, not ₹9 crore. He just saved tax on ₹2.76 crore, legally. The Real Problem? Most people don’t know this. They hear “capital gains tax” and immediately think they’ll lose their shirt. So they hold onto the property, keep postponing the decision, and miss the window when the market is hot. This hesitation, this fear of the unknown tax hit, quietly stalls so many real estate deal, especially among older owners sitting on legacy property. But Here's the Thing: CII is the law. It's built to make sure you're taxed on real gains, not inflated ones. You’re not “saving” tax. You’re paying what’s fair, no more, no less. What Does This Mean For You? If you’ve been holding onto a house, land, or long-term asset and thinking: “I want to sell, but the tax will be massive…” “It’s not worth the hassle right now…” “Maybe I’ll just wait a few more years…” Stop. Run the numbers with CII. You might realize the tax hit is way smaller than you feared. You might actually be in the perfect position to sell, reinvest, or unlock that next chapter in your life. Bottom Line: For FY 2025–26, the CII is 376 If you bought property long ago, adjust your original cost using CII Pay tax only on real, inflation-adjusted profits Raj almost walked away from a ₹10 crore deal because of a number he didn’t understand. You don’t have to make the same mistake. Ask the right questions. Run the right calculations. And if you need help? Let’s talk. #kamalkisoch

🚨 Attention Privately-Held Business Owners 🚨 I recently came across this The Wall Street Journal article about the Supreme Court's decision in Connelly v. United States and felt it was important to share how it could impact many of you with privately held businesses. The ruling affects the way life insurance-funded buy-sell agreements are treated for estate taxes, potentially leading to significant tax liabilities. 🔍 What Happened? In this case, the Court ruled that life insurance payouts used to buy out a deceased owner’s shares must be included in the company’s value for estate tax purposes. This decision could mean a hefty, unexpected tax bill for many business owners. 💡 Here’s What You Should Know: 1. Check Your Buy-Sell Agreements: Ensure they’re up-to-date and include regular independent valuations. 2. Reevaluate Your Insurance Policies: Understand how they might affect your estate taxes. 3. Explore Alternatives: Cross-purchase agreements or using LLCs to hold life insurance might offer better tax outcomes. 📈 Why This Matters: Overlooking these details can lead to financial surprises that could burden your business and family. Proactive planning and consultation with experts are crucial. 🛠️ Next Steps: 1. Review Your Current Agreements and Policies: Make sure they comply with the new legal landscape. 2. Consult Professionals: Work with tax and estate planning advisors to understand the impact of the Connelly decision. This ruling highlights the need for ongoing attention to succession planning. Don’t let this catch you off guard—take steps now to protect your business’s future. #FamilyBusiness #SuccessionPlanning #EstateTax #SupremeCourt #BusinessStrategy #TaxPlanning https://lnkd.in/eXwJ95vj

Are Family Offices Prepared to Adjust Before the Tax Rules Change Again? The latest tax proposal from the House includes several important changes. These updates favor direct real estate ownership and long-term planning for Family Offices! Some of the benefits include: ➤ Return of 100 Percent Bonus Depreciation Tax Code Reference: IRC Section 168(k) What Changed: The proposal brings back full bonus depreciation for qualifying real estate and equipment. This applies from 2025 through 2029. What It Means: You can fully deduct the cost of new improvements or property purchases in the year they are placed in service. This can significantly reduce taxable income. What Family Offices Should Do: • Focus on industrial, multifamily, and medical office properties, which are already preferred for stability. • Plan capital improvements or acquisitions now to be ready by the 2025 start date. • Work with tax and legal advisors to ensure the timing and structure meet eligibility requirements. ➤ Section 199A Deduction Increase from 20 Percent to 23 Percent Tax Code Reference: IRC Section 199A What Changed: The deduction for Qualified Business Income (QBI) from pass-through entities may increase to 23 percent. What It Means: More income from LLCs, partnerships, and S corporations will be shielded from tax. Family Offices Should: • Review all operating entities to confirm QBI eligibility. • Adjust ownership models if needed to increase tax efficiency. • Update tax projections for each major holding. ➤ Possible Expansion of Opportunity Zones Tax Code Reference: IRC Sections 1400Z-1 & 1400Z-2 What Changed: The bill suggests the creation of new Opportunity Zones. What It Means: Family Offices may have a second chance to invest gains in tax-advantaged projects. Holding qualified OZ assets for 10 years may lead to tax-free growth. Family Offices Should: • Track new zone OZ designations. • Consider how new investments can align with estate and legacy planning. • Reassess earlier OZ investments that may not have met timing or structure goals. ➤ The Larger Message What Changed: The policy direction supports long-term real asset investment, cash flow, and stability. What It Means: This is not just technical tax reform. It is a signal that well-structured real estate plays will continue to be a core tool for wealth preservation. Family Offices Should: • Revisit entity structures and estate planning strategies. • Align legal, investment, and tax teams to ensure the portfolio is optimized. • Avoid the trap of waiting. The advantage lies in acting before changes are fully implemented. What does it all mean? This is the moment for Family Offices and other real estate investors to revisit their portfolios, assess their structure, and make decisions that can protect and grow wealth for the next decade. This is how I see the opportunity. Are there other benefits you’re seeing? Smart tax strategy is proactive. And right now, the window is open.

Running a business can be one of the most powerful wealth building and tax planning tools available But only if you do it right I see the same early mistakes over and over, even from very successful business owners If you want to set yourself up correctly from Day 1 (or fix it before it gets expensive), here’s what matters most 👇 1. Get your entity election right This is foundational. The right structure can dramatically reduce taxes and expand planning opportunities The wrong one can mean: - Unnecessary self-employment taxes - No access to PTET - Reduced or eliminated QBID - Limited retirement contribution options - No QSBS - Less tax efficient for reinvesting and growing the business This decision should be proactive and can change as your business evolves 2. Keep business and personal finances completely separate Commingling accounts is one of the most common and costly mistakes It can: - Create audit risk - Destroy LLC liability protection - Turn tax prep into a nightmare - Cost you far more in professional fees and your time Clean separation from Day 1 saves money, time, and stress. 3. Track all your expenses Most business owners leave money on the table simply because they don’t track well Good tracking: - Maximizes legitimate deductions - Makes tax planning actually work - Gives you clarity on real cash flow The easiest time to do this is before the business gets “busy.” 4. Save for taxes monthly This is non-negotiable I see too many high-income business owners fall behind, then have to scramble to make things work Treat taxes like a fixed expense, not a surprise This is a huge reason we give clients new tax updates at every call 5. Understand safe harbor taxes and pay your estimates Underpayment penalties are completely avoidable. You need to Know: - Your safe harbor number - Your quarterly payment schedule - What you will get in from withholding - How income volatility affects estimates If you don’t know these numbers, you’re guessing And guessing is expensive 6. Do real tax planning 2–3x per year (not just in April) One of the biggest advantages of business ownership is tax flexibility But it only works if you plan: - Mid-year - Again in Q3 - Then finalize in December Tax planning is proactive. Tax prep is reactive 7. Setup the right retirement accounts Set up the right retirement accounts Not all retirement plans are created equal. In most cases: - Solo 401(k) > SEP IRA - 401(k) > SEP IRA and Simple's The wrong setup can cost you tens of thousands per year in missed contributions And limit Roth strategies Owning a business gives you incredible leverage... if it’s structured correctly But I see so many overpaying in taxes because they do not invest in tax planning

₹26 Crore Capital Gain. Zero Tax. Legally. A recent ITAT Kolkata ruling has reinforced an important principle under Section 54F. A taxpayer sold listed shares and earned ~₹26 crore in long-term capital gains. She invested in the construction of a residential house and claimed exemption under Section 54F. The department denied it on three grounds: • She allegedly owned more than one residential house • Construction had begun before the date of sale • Sale proceeds were not directly used for construction The Tribunal rejected all three objections. Key takeaways: 1️⃣ Joint ownership of a house does not amount to exclusive ownership for disqualification under Section 54F. 2️⃣ Vacant land with a tenant-constructed factory is not a “residential house.” 3️⃣ Construction need not begin after the date of transfer. The law only requires completion within 3 years. 4️⃣ There is no requirement that the exact sale proceeds must be directly utilised for construction. Result: ₹26 crore exemption allowed. Tax demand deleted. The larger lesson? Tax planning within the framework of law is not tax evasion. Interpretation matters. Documentation matters. Substance matters. When you comply with the conditions, the law protects you.