Until recently, investors had to report details about capital gains and losses on IRS Form 8949. For heavy traders, this potentially meant a lot of work. In 2013, the IRS quietly changed the rules, although many people remain unaware of the change.
Under current rules, Form 8949 is not required for a transaction if 1) you received a Form 1099-B from your broker showing that basis was reported to the IRS (without any adjustments in box 1g); and 2) you don’t need to make adjustments to the basis or type of gain or loss reported on Form 1099-B. For these transactions, you may aggregate gains and losses, and enter the totals on Schedule D.
Estate tax relief for family businesses
If a family business makes up a large portion of your wealth, you may worry that your heirs will be forced to sell all or a portion of the business to cover the estate tax bill. Fortunately, Internal Revenue Code Section 6166 provides some relief.
If the value of a qualifying closely held business interest exceeds 35% of your adjusted gross estate, your executor may defer the portion of your estate’s taxes that are attributable to that interest for up to 14 years. The estate pays interest only for four years and then pays 10 annual installments of principal and interest.
To qualify for an estate tax deferral, you must meet certain ownership requirements and the business must conduct an active trade or business. Check with your advisors to see if your business meets these requirements. If it doesn’t, it may qualify by increasing your ownership percentage or level of activity.
Time for a cost segregation study?
Businesses that acquire, construct or substantially renovate buildings or other real property often enjoy significant tax benefits by conducting cost segregation studies. These studies apply engineering and tax accounting principles to identify building components that qualify for accelerated depreciation, allowing a business to reduce its current tax bill or claim a refund for missed depreciation deductions in previous tax years.
If you decided against a cost segregation study in the past — for example, because you felt that the potential benefits didn’t justify the cost — it may be time to reconsider. The recently finalized tangible property regulations may enhance the benefits of a cost segregation study for some taxpayers.