Avoiding the hot potato: Cash in like-kind exchanges – From Accounting Today

Q:

Subject: Questions on S & C Corps

I found your blog and web site trying to find via Google an answer to the following:

An S Corp business owner wants to establish a benefit plan for employees that have at least X years of service, and that benefit plan is available only to C Corps. 

 1.  Can the S Corp owner establish a C Corp and use it to provide the benefit assuming all employees of the S Corp that qualify with X years of service are included?

 2.  If Yes to #1, could the S corp simply pay the C Corp for the premium cost of the benefit so that the C Corp’s income and expenses net to $0, with no tax liability?

 3.  If No to #1, as there any other way to accomplish the desired result and still allow the bulk of the business and taxable income to be in the S Corp?

4.  Can a C Corp own an S Corp?

 5.  Can an S Corp own a C Corp?

 THANKS in advance if you can help me.

A:

There are ways in which you can use multiple corporations to achieve the desired benefit coverage.  Unfortunately,
there are far too many options to consider and possible scenarios that can be used to achieve your goals for me to even begin giving you specific advice via this medium.

You will need to work directly with an experienced tax pro who can analyze your unique circumstances. I wish I could help; but I already have too many clients to take care of; so we are still trimming back on the difficult clients and are not accepting any new ones at this time. 

Unfortunately, we don’t have anyone to whom we could refer you. If you haven’t already done so, you should check out my tips on how to select the right tax preparer for you. 

As a CPA yourself, it would be an excellent investment for you to acquire one of the excellent reference books on corporations from QuickFinders and/or TMI so that you can better familiarize yourself with the basic rules, such as who can own shares in each type of corp and what kinds of benefits each type of entity is eligible to offer its principals.  I have links to both companies’ sites on my blog.

I wish I could be of more assistance; but I wish you the best of luck.  

Kerry Kerstetter

 

I have a hunch this may have been a student’s homework question, but I gave a brief answer anyways.

Q:

Subject: allowable corporate expenses

Hello,

I was wondering if you know where I could find information on “allowable corporate expenses.” I’ve looked everywhere and can’t seem to find anything.

 

Thank you,

A:

There is no such thing as an all inclusive list of allowable corporate expenses, if that’s what you are looking for.

The general definition of an allowable corporate expense would be anything that is spent in the pursuit of the company’s business goals, which normally would include earning a profit.

If you’re not sure about something in particular, you should consult with your professional tax advisor to see if s/he thinks it would be proper.

I hope this helps.

Good luck.

Kerry Kerstetter

 

I recently received this from a new tax blogger:

Subject: Clients

Good Afternoon Mr. Kerstetter,

 

    I have frequently visited your blog and noticed the wonderful support you gave to Gina in her endeavor to start her tax practice.  In fact,  those discussions led me to start my own blog http:\\colbycpa.blogspot.com.  I was hoping to get some of your wisdom for my particular case.  I am a senior accountant with a traditional firm in Virginia and have  always has a gift for IT related tasks whether they be hardware or software based. I am the network administrator in my office, have been certified in Quick Books and  I am currently working on the Microsoft Small Business Accounting certification.  I have performed a handful of network, server and workstation installations for existing clients in addition to some Quick Books and ComputerEase consulting.  So I have gotten some IT related engagements with existing clients under my belt. As far as the partners at my firm are concerned it is a no brainer for me to go and try to get these types of engagements – especially since I have earned the CITP designation.  In fact, they are pretty much putting that challenge on my shoulders.  I have ideas about the type of IT services I want to offer but I don’t know much about rain making to bring in new clients under the tech umbrella to hopefully back into the traditional services for which I have 7 years experience.  Politically speaking I was told that since I am tech savvy that I would be the best fit for this role, so I think its pretty open.  I was told this would be a great avenue to make partner.  I am feeling a pretty fair amount of self imposed pressure to perform and bring in the clients which leads me to the venue.  How do I build a client base.  I have always heard that cold calls and direct mailings don’ t produce.  I have thought about professional organizations but the partners here pretty much have all of them shored up from BNI to Rotary.  I expect when I find a way of reaching prospects to face some rejection and fall on my face until I learn the ropes –  I think I can handle that.  It is getting to the prospects that is my biggest hurdle. I set up a blog figuring if I could get a buzz that would help as you suggested to Gina.  Any assistance or advice you could provide me would be very much appreciated! 

 

Sincerely,

 

Jim

My reply:

Jim:

I’m glad to see that Gina’s experience has inspired you to start your own blog.  That was my goal in posting it.  As many news stories over the past few weeks have discussed, the tax and accounting blogging community has a very long ways to go to catch up with the legal profession in both number of blogs and percentage of professionals who are blogging.

In spite of all the seminars and books that claim otherwise, nobody has the magic formula for quickly creating a customer base.  I can only base my opinions on what I have seen actually work with clients, as well as how I like to select new providers of products and services.

For example, when I am shopping for a new product or service, I like to use the web, normally starting with Google searches.  That puts me in control over what I look at.  Cold call info, whether via snail mail, telephone or email spam, means nothing to me and is a waste of time and money by those sending it.

As I said to Gina, the info on your blog and other related websites will do more than anything else I can think of to let potential clients see what you know and what kind of projects you are experienced with.  This obviously means that you need to attract readers for your blog.

Your new blog is a good start.  Just as I told Gina, you should set up an RSS feed to enable people to subscribe to it.  That’s pretty much the only way I read blogs any more because I can cover hundreds of blogs with very little effort. 

The other suggestion is to be sure to include personalized stories of projects you have worked on and how you have helped clients solve problems.  The answering of questions will also enable you to show off your knowledge and experience for potential clients. 

Good luck.  Let me know if there is anything else I can do to help you as you continue your journey into the blogosphere.

Kerry Kerstetter