The IRS vs. the KKK

By Sam Brunson

My family’s summer vacation has already given me two posts (here and here), and it still promises a couple more, including this one.

As we drove across Alabama, we stopped by the Birmingham Civil Rights Institute. The BCRI is, in large part, a museum of the civil rights movement; it is not only interesting and informative, but it is deeply powerful and affecting to see how white Americans (mis)treated African Americans, what motivated civil rights activists, and what they faced in their activism.

I didn’t go in looking for taxes, but the Institute handed them to me anyway: Continue reading “The IRS vs. the KKK”

The Amazing Section 1202

By: David Herzig

I was fortunate enough to present to the Chicago Estate Planning Council about a week ago.  I rearranged a presentation that I gave at the Notre Dame Tax and Estate Planning Institute. (As an aside, both of these forums are great sources of continuing cutting edge eduction for the practicing bar).  I spent the majority of the hour I was allotted describing section 1202 the Qualified Small Business Stock Exemption.  To my shock, most of the 300 in attendance either were not familiar with the provision or had not thought about it for a decade.  After a quick twitter exchange, I thought I would do a short post explaining the code section as well as why it should be used or at least discussed more.

First, can everyone in Silicon Valley please stop laughing. I get it. You have been using 1202 since the 1990s.  Almost every VC agreement requires the target to qualify as 1202.  For the rest of us, let me catch you up on why 1202 is maybe one the largest give aways in the tax code today.

The QBSB Election came in existence in 1993. Why was the section so forgettable?  Well, if I told you there was a tax credit if you formed a C corp that lowered your rate from 28% to 14% but still had an AMT phase-out – I probably lost you at C Corp.  Even if I had your attention, as capital rates lowered to 20%, the QSBS stayed steady at 14% so why set a C Corporation to save 6%? Yes, 6% is a large savings but, not, when the Code required that 7% of the amount excluded from gross income be treated as a “preference” item and subject to AMT.

Continue reading “The Amazing Section 1202”

Trump’s Emolument Tax Problem

By: David J. Herzig (photo from Vox.com)

When a businessperson who runs many active businesses runs and wins for President, clearly there would be many second order problems associated with inherent conflicts between running corporations and the country.  When President-elect Trump won the office, many of these conflicts have bubbled to the surface.

For example, to avoid a conflict of interest between benefiting one’s personal holdings and the Country’s best interests, assets of the President are placed in a blind trust.  As many have pointed out, this works only when the President does not know the nature of the holdings.  Putting existing businesses into a blind trust does not stop the President for knowing the underlying assets of the trust.  The conflict is not ameliorated by trust structure.  Nor, by the way, would it be fixed if President elect Trump divests but the family continues to own the assets.

For this post, I want to consider the current discussion related to the blind trust problem called emolument.  Many prior to the election probably have not heard much about the idea of emolument.  Larry Tribe and others believe that President elect Trump’s ownership of active business assets, even in a blind trust, would violate, Article I, Section 9, Clause 8 of the Constitution which prevents the President from accepting “presents” or “Emolument” from foreign states.  Others, like Andy Grewal, do not believe that mere ownership of assets triggers the Emolument Clause.

If the solution to the blind trust and Emolument Clause problems is a divesture of President elect Trump’s assets as many advocate, this would trigger (to borrow a catch phrase of President elect Trump’s) huuuuuuge tax problem.

Continue reading “Trump’s Emolument Tax Problem”