millions in tax savings
"We advised a Milwaukee client with a manufacturing plant in Mexico on the restructuring of their foreign operations in a manner that allows them to take advantage of the QBI deduction and save approximately $800K in taxes annually.”
“In response to tax reform, our-in-depth analysis uncovered a significant tax saving opportunity. A net tax savings of over $68,000 was generated by converting from an LLC to an S-Corp and restructuring owner compensation.”
“We have a client that is a healthcare IT consultant. At first it was believed they were considered to be a Specified Service Trade or Business (SSTB), thus the income would not qualify for the 20% passthrough deduction. Sikich evaluated their different service lines and was able to break out the company’s different trade or businesses to maximize the 20% passthrough deduction. This resulted in a 20% passthrough deduction of $1,779,892 which equates to total tax savings of around $658,560.”
“In response to tax reform, our-in-depth analysis uncovered a significant tax saving opportunity. A client reduced their taxable income by $130,000 by doing a change of accounting method to simplify accounting for inventories.”
tax reform is now a reality.
The new tax law now applies, turning the way you file your taxes on its head. With a second look at your taxes, you may find deductions you once thought weren’t applicable to your business, additional provisions and credits for additional tax savings.
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Partnership Tax Planning for the New Qualified Business Income DeductionWe reviewed the qualified business income deduction and how it would apply to four clients. During this analysis, we determined certain cash payments made to partners were not going to be eligible for the 20% qualified business income deduction. By proactively changing their operating agreement, it made these payments eligible for the 20% deduction. This will be a tax savings which will occur each year the 20% deduction is part of the tax law, not a one-year timing difference.
Client #1$439,836 of payments (potential fed tax savings of $32,548)
Client #2$800,000 of payments (potential fed tax savings of $59,200)
Client #3$516,980 of payments (potential fed tax savings of $38,256)
Client #4$198,313 of payments (potential fed tax savings of $14,675)
Accounting Method ChangesTax reform allowed clients to make various accounting method changes in 2018 (if eligible to do so). We had a number of clients make a change in accounting method. Generally, these were either a change to elect out of the UNICAP rules (tax capitalization of inventory) or to switch from the accrual method to cash method for tax return reporting purposes. Below are clients who made one (or both) of these elections.
Client #1UNICAP change – $113,739 deduction ($42,083 potential tax savings)
Client #2Cash method – $336,754 deduction ($124,599 potential tax savings)
Client #3Cash method – $311,805 deduction ($115,368 potential tax savings)
Client #4UNICAP & Cash Method – $68,608 deduction ($25,385 potential tax savings)
Advised client on how to defer tax on a gain of $1,250,000 on the sale of real estate by a like-kind exchange for land located in an opportunity zone, and then how to qualify the improvements on the land to take advantage of opportunity zone gain deferral of other gains of $2,300,000. After holding the new property for 7 years, tax on $345,000 of the gain is avoided completely and there will be no tax future appreciation of qualified opportunity zone property if held an additional three years.
Advised family of decedent on elections and allocations allowing client to step up the basis of partnership property (including lower tier partnerships) and allowing clients to claim additional annual depreciation deductions of $50,000 per year.
Advised a client on liquidation of partnership to allow one partner with high basis to sell a parcel of land with no tax while another partner (elderly and in ill health) keeps remaining land with low basis which is stepped up at death ultimately avoiding tax on a potential gain of $19,000,000.
Advising client on how to restructure an acquisition of a C corporation to allow for deduction of interest on acquisition loan as trade or business interest not subject to investment interest limitations.