Knowledge Library
Articles and practitioner guidance organized around this planning area.
Insight
Deductibility and substantiation are separate questions. Business purpose, amount, time, place, attendees, travel status, reimbursement, and record quality should be preserved.
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A profitable Schedule C can be a planning trigger. It is not, by itself, a reason to elect S corporation status. The analysis should integrate reasonable compensation, QBI, retirement plans, benefits, state tax, administration, financing, basis, and eventual exit.
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Education costs may be deductible when maintaining or improving skills in an existing trade or business, but not when meeting minimum requirements or qualifying for a new trade or business.
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Reasonable compensation is a fact-based professional determination that should be supported, documented, and revisited as the shareholder’s role and the business change.
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Family employment can create useful tax and retirement opportunities only when the job is real, pay is reasonable, payroll is correct, and entity-specific FICA/FUTA rules are respected.
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Retirement-plan selection should reflect employee coverage, cash flow, compensation, ownership, plan administration, business goals, and the owner’s broader planning objectives—not merely the largest theoretical contribution.
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Succession requires coordination of ownership, management, successor readiness, valuation, financing, tax structure, customer continuity, employee continuity, and the owner’s post-transition role.
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The choice between §179 and bonus depreciation can change federal timing, state treatment, taxable income, QBI, passive losses, basis, financing metrics, and future deductions.
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The practitioner should identify why value is needed, the valuation date and interest, distinguish enterprise from equity value, normalize earnings carefully, and use qualified valuation professionals when a formal appraisal is required.
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The excess business loss limitation can defer an otherwise real business loss. The practitioner should separate current limitation, NOL consequences, basis, at-risk, passive activity, and state treatment.
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Buy-sell agreements coordinate triggers, valuation, funding, redemption or cross-purchase tax treatment, insurance, basis, estate consequences, and business continuity. Existing insured redemption arrangements deserve post-Connelly review.
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QBI is an output of taxable income, entity structure, wages, property, business classification, retirement contributions, and other facts. It should not drive entity or compensation decisions in isolation.
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Entity choice should be revisited as profitability, owners, employees, financing, state footprint, benefits, and exit plans change. Conversion is a structural decision, not merely a rate comparison.
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Asset versus equity structure, basis, recapture, goodwill, purchase-price allocation, installment terms, state sourcing, charitable planning, and seller objectives should be modeled before documents become binding.
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Installment treatment can defer eligible gain, but seller credit risk, interest, recapture, ordinary-income items, security, state sourcing, and estate consequences still matter.
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Business and rental losses can be limited separately by basis, at-risk, passive activity, and other rules. Each limitation requires its own history and release event.
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A properly operated reimbursement process can move legitimate business expenses from the owner to the business without turning reimbursements into wages. Substance, substantiation, return of excess, entity type, and consistent operation matter.
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Fringe-benefit treatment depends on entity, ownership, employee status, nondiscrimination rules, payroll reporting, and the specific benefit. Owner status must be identified before the benefit is characterized.
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