In the last few years, the State of New York has attempted to make major reforms to the state’s corporate income tax system. In the spring of 2014, Governor Cuomo signed into law the state’s annual budget which contained many provisions that some experts have said are the most significant in the state since the corporate tax was first enacted in 1944. Many of the new provisions attempt to reduce business tax complexity, while another important change was the simple reduction of the corporate tax rate for New York businesses, thus diminishing their tax burden.
Makric Enterprises, Inc. v. Commissioner: When Tax Mistakes Are Costly
Not knowing the details of a business transaction sounds preposterous on its face, especially when the ignorant taxpayer is the party which formulated the transaction. In the case of Makric Enterprises, Inc. v. Commissioner, TC Memo 2016-44, a failure to make sure that the right corporation was sold as part of the agreement literally proved costly to the taxpayers involved, to the tune of $2,839,780.
This tax matter involved two corporations. One of which was a holding company (Makric Enterprises, Inc.) which owned only one asset, the stock of a wholly owned subsidiary (Alpha Circuits, Inc.). A third party expressed interest in purchasing the business conducted by Alpha.
Losses, Expenses and Interest between Related Taxpayers – Know The (Tax) Code: 26 U.S.C. §267
Congress, aware that related parties could create fictitious tax losses lacking economic substance based upon the related parties continued enjoyment of the property subject to the loss, enacted § 267 of the Internal Revenue Code to disallow certain losses and deductions on transactions between related taxpayers.