William Byrnes' Tax, Wealth, and Risk Intelligence

This week, we examine the new October regs (subscribers received this analysis the next day) on the process of establishing an ABLE account. The new rules provide increased flexibility in terms of who can establish the account, which may be an important factor when support for the beneficiary comes from multiple family members. We also have additional clarification on the Small Business Exemption to the Business Interest Deduction rules and a new online resource from the IRS that assists those who are closing a business. . .

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

Final ABLE Account Regulations Offer New Flexibility

The IRS final ABLE account regulations broaden the range of parties who are eligible to establish an account.  Under the new rules, the beneficiary can designate any person to establish an account on their behalf.  If the beneficiary is unable to designate a person, the account can be set up by an agent under a power of attorney, a conservator, legal guardian, spouse, parent, sibling, grandparent or representative payee appointed by the Social Security Administration (in that order of priority).  The ABLE program itself is entitled to rely upon the person’s certification that he or she is authorized to set up the account for the benefit of a disabled person, and that there is no person with a higher priority who is willing and able to set up the account.  Similarly, the person who establishes the account will generally have signature authority over the account.  For more information on the ABLE Account rules, visit Tax Facts Online. Read More

IRS Clarifies Small Business Exemption to Business Interest Deduction Rules

The 2017 tax reform legislation changed the general rules for deducting business interest.  While the 2020 CARES Act relaxed the new limitations, the new rule generally limits the business interest deduction.  Small businesses that are not tax shelters are not subject to the new limits if they pass the gross receipts test (by having average annual gross receipts of no more than $26 million for the past three tax years).  Related entities are generally aggregated if they’re aggregated for other tax code purposes.  In past years, some small businesses were uncertain whether they fell into the definition of “tax shelter” because there was some uncertainty in the way “syndicate” was defined–multiple definitions apply in different tax code sections.  The IRS clarified this by releasing proposed regulations specifying that “syndicate” is defined using the Treasury Regulation Section 1.448-1T(b)(3) definition.  Because of this, only small businesses that have passive investors who are actually allocated losses are treated as tax shelters that are ineligible.  For more information, visit Tax Facts Online. Read More

IRS Creates Online Resource for Closing a Business

Unfortunately, many small business owners have been forced to close due to the economic fallout of the Covid-19 pandemic.  The IRS has now created an online resource giving business owners step-by-step information about how to close a business.  The website reminds taxpayers that they are required to file a final tax return for the year the business closes.  The relevant form will depend upon the type of business entity involved.  Employers are also required to pay employees all compensation that they’re owed—and must pay related employment taxes on those wages.  They must also report any payments in excess of $600 made to independent contractors.  The business should also close all business accounts and cancel their EIN by sending a letter to the IRS.  For more information on the tax obligations of employers, visit Tax Facts Online. Read More

Texas A&M University School of Law’s online wealth and international tax risk management graduate curricula for industry professionals has attracted over 160 enrollment this fall semester. Apply now for courses that begin January 11 spring semester. See the international tax course list by > weekly topic here. < Texas A&M, annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

• Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
• #1 endowment for U.S. public universities, #7 overall
• #1 of U.S. public universities for a superior education at an affordable cost
• #1 for most CEOs employed by Fortune 500
• Rank 11th “Best Public Colleges” Money’s Best Colleges Report, 2019
• Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20