Tax Relief Tools in Time for Your Next Family Business Tax Returns

Posting by Geoffrey D. Brown, CPA, Principal

A CPA down to my soul, I decided to focus on a few tax items for my blog post this month – I just can’t help myself.  There were a couple tax relief items for businesses that were passed into law last year and may be of some interest to family businesses.

Nothing but Net – Net Operating Loss Carryback

The first tax change is for Net Operating Loss Carryback.  This measure, to get a refund of tax monies back to small businesses carrying losses, had been limited to two years, but has now been extended to five.  The carryback to the fifth year is limited to 50% of the income for that year.  This is an attempt to provide businesses that suffered losses an opportunity to recover back taxes paid and boost cash flow.  Another relief item is the change in “Section 179” expensing.  This provision allows you to write off tangible personal property in the year placed in service, instead of depreciating it over several years.  For tax years beginning in 2009 the write-off amount is now $250,000, which is double the amount allowed in 2008.

Should I or Shouldn’t I?  A New Twist to the IRA versus Roth IRA Debate

There has been a lot of talk about converting traditional IRAs to Roth IRAs now that the adjusted gross income limitation has been lifted.  There isn’t a pat answer to the question of “Should I or Shouldn’t I?” – each case needs to be reviewed for its own circumstances.  The Roth IRA can be, however, an effective estate planning tool.  They have no minimum required distributions once you reach age 70 and a half, and they can be inherited.  For the individual who would not need the income from the IRA, they can convert to a Roth and upon their death the Roth IRA would pass to the beneficiaries, and would then continue to grow in their estate(s) tax-free.

The Wait Still Great for News on Tax to Estate

No movement so far on any changes in the estate tax rules.  All of us assumed that the rules in place for 2009 would be extended – and they still may be – but for right now, there is no estate tax.  I’m sure there will be some changes on that soon, but all focus is still on health care as President Obama wants that completed by time of the State of the Union address later this month.

Taking “Series LLC” Advantages Seriously

On another note, there is a one page article in the January issue of the Journal of Accountancy concerning “series LLCs.”  Currently eight states allow series LLCs, with Delaware being the closest to our area.  The article defines a series LLC as a “master LLC with one or more series of members, managers, interests or assets.”  Each different series may have its own business purpose and objective.  The idea is that you can have more than one business interest in the “series LLC” and that creditors of a series can only go after the assets of that series.  The article also states that once the IRS issues some classification guidance, it’s likely that more states will allow them.  At this point, it’s too early to tell how well they will work, but they could become another planning tool in the family business arena.

– See more at:

Share this post