All Forum Posts by: Michael Plaks

@Roy Mitle

I like your thinking, but I'll put a damper on it. A lot (if not most) of syndications produce K1 losses throughout the holding period and only show gains when they sell the property. It is by design, because generally passive investors are trying to avoid tax increases from additional passive gains.

It may still work for you, but you will have to wait until the syndication exits out of the property. Then you will be able to offset their K1 capital gains with your suspended passive losses.

@Kevin Smith

You are not going to like my harsh opinion, but I won't sugar-coat it. 

You're a musician with very limited money looking for a roommate to help pay for your own place. It's totally fine. No need to over-complicate it.

Stop playing an investor or a businessman. Stop thinking of "tax burdens", LLCs, S-corporations and everything else. Myself, I know 5 basic chords on my cheap guitar, so I'm not shopping for fancy gear at Carter Vintage and not joining musicians communities.

@Greg O'Brien

The fault of your example is the assumption that you can maintain the same $100 revenue with or without employees. If this was the case, you don't need to have employees.

And, by the way, your examples have nothing to do with the original point you brought up: an ability to take a deduction for the $50 PPP.

Our debate is at the dead end, Greg. I'm saying the IRS followed common sense (for once) and the foundational tax law principle: you can only deduct something YOU paid for. You're saying the Congress intended to allow double-dipping but forgot to write it into the law, and how dare the IRS to not do so. And you framed this flimsy argument into a completely false but politically charged formula "OMG, they made PPP taxable!" - which they did not. Common sense v. politics - politics always win.

@Greg O'Brien

On another post, I accused you of being a lawyer. Now, worse, you're a politician :)

No, it does not make the PPP funds taxable. They remain non-taxable, as the Act prescribes. You get free money, you pay something with this money, payroll in this case, and THAT is not deductible. Which would be double-dipping, properly disallowed by the IRS. 

You can never deduct something you did not pay for. In this case, the govt paid your payroll for you. You had $0 payroll cost, but also $0 deduction for it, correctly so.

I'm rarely on the IRS side, and this is one of these rare cases.

Amen on Wild Wild West. And what if that same client also received an EIDL advance that is supposed to be deducted from forgiveness? 

Did you say "safe"? LOL. Nothing is safe when you deal with government regulations. But this is what I would recommend to my clients:

Say your 2019 Sch C net income was $52,000.  This is $1,000 per week. Your forgiveness should be limited to $8,000 based on what we know right now.

But your PPP loan is higher than that, because they give you 2.5 months worth, not 8 weeks worth. $10,833 in this case.

So, $8,000 should be forgiven and the remaining $2,833 repaid. (This is not 75%, by the way, it is 74% so I don't know how it would play out)

And I would advise my client to pull $1,000 out every week for 8 weeks. Until more guidance is released by the government to the contrary - a highly likely event, in my opinion.

That we agree on! When you kept saying "everything is clear to me" - I was envious. But when you say we have a mess - amen.

PS. So you assume that SE forgiveness would be automatic. I'd be thrilled if you end up being correct on this one. But my experience says to not count on it.

Have you completed the actual EIDL paperwork? It requires you to provide financial statements and tax returns.

See here: 
https://www.sba.gov/sites/default/files/resource_files/how_to_disaster_app_March_2020.pdf

@THU NGUYEN

There won't be any communication until your number comes up. If you applied for the advance, it just shows up in your bank account without any communication.

Correct