On August 1, accounting and business advisory firm Margolin, Winer & Evens and law firm Rivkin Radler led a joint program covering the new tax reform law, its implications and overall opportunities for maximizing tax efficiency.
The conversation took place at The Yale Club in Manhattan and covered topics ranging from the Act’s impact on corporations and individuals, real estate and estate planning. Attendees included business executives from throughout the New York area.
“Never before has there been so much to talk about in the tax world,” said MWE Tax Partner Lance Christensen as he opened the discussion with a general overview of the reform bill. “This new act is a behemoth.” According to Christensen, the most significant change is the corporate tax rate deduction. Prior to reform, the United States had among the highest corporate tax rates in the world. Now it is positioned to be more competitive with other countries. Lance also discussed choice of entity – highlighting the positive, negatives, and secondary taxes that can result from structuring as a C-corp versus an S-corp. He also noted the impact of the loss of the State and Local Tax (SALT) deduction on individuals, advising that despite ongoing litigation against this change, the loss of the deduction is likely here to stay.
Rivkin Radler Partner and Tax Attorney Kate Heptig then delved into the topic of the newly enacted 20% pass-through deduction (Code Section 199A), highlighting potential techniques for qualifying for this deduction, including business spinoffs, forming administrative entities, aggregating related companies and making reasonable adjustments to compensation. She also talked briefly about other opportunities that were not newly created by the Act but which taxpayers sometimes overlook when structuring business arrangements, including deferral opportunities relating to qualified small business stock and Code Section 83(b) elections.
Real estate is one of the industries left with the most uncertainty following tax reform. MWE Tax Partner Wayne Olson touched on strategic opportunities in the sector such as 1031 exchanges, which can be beneficial for property owners but should be used with caution. He also discussed the use of cost-segregation studies and bonus depreciation. Olson advised property owners to be sure to segregate costs every time a building is purchased as it can speed up annual depreciation deductions by shifting lives from 39 years to 7 years.
To close the event, Dennis Wiley, Partner in Rivkin Radler’s Trusts & Estates Practice Group, covered low-hanging fruit in estate planning that individuals should consider. “Now is the time to reevaluate estate plans and trusts,” he said. “It’s possible that old plans just won’t work under the new law.” Wiley predicted there may be additional changes in estate tax in the next three to four years, so individuals should be careful and conservative with their planning. He recommends considering up-gifting, and gifts of appreciated property for individuals with charitable inclinations. “It’s never cost so little to give away so much,” he said.
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