Office of Administrative Hearings: Sources of Procedure and Procedural Rights

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If you appealed your business license denial and your case is pending effectively in the Office of Administrative Hearings, it is essential to understand the procedural rules of this administrative court as well as your procedural rights. This means that you and/or your attorney must have a good understanding of the sources of the administrative rules and procedural rights.

There are five main sources of the administrative procedure, including procedural rights, for the cases pending in the Office of Administrative Hearings. First, the Due Process Clause of the U.S. and Minnesota constitutions. Due process rights must be afforded to parties irrespective of whether they are explicitly mentioned in a relevant statute. The two most important rights include: a right to notice and a right to a hearing. A deep understanding of the due process clause may be required to mount an effective defense against the state’s claims or to support your arguments for approval of your business license application.

Second, Minnesota Administrative Procedure Act can be found in Chapter 14 of the Minnesota Annotated Statutes. It constitutes is an important source of the procedural rules for Minnesota state agencies, and, among other things, sets up the procedures for an agency’s rulemaking and applicant petitioning.

The most direct source of the OAH procedures are the rules of the Office of Administrative Hearings(OAH). The Rules can be found in Chapter 1400 of the Minnesota Administrative Rules. Knowledge of the rules is crucial for effective pre-hearing practice as well as the conduct of the actual hearing.

Fourth, a specific statute or an agency’s procedural rules may provide for the specific procedural rules and even substantive requirements.

Finally, where an agency or the OAH has not promulgated a rule to govern unanticipated circumstances, the administrative law judge is likely to rely on the Minnesota Rules of Civil Procedure. In fact, the OAH rules specifically mention the Rules of Civil Procedure as a guide for an administrative law judge in situations where the administrative rules are silent.

I have already detailed elsewhere (click here) the great importance of timely hiring an attorney to represent you in case of a business denial appeal. Here, I will just reiterate that hiring a business lawyer knowledgeable in the OAH rules and procedures is likely to save you nerves, time, money, and even determine the outcome of your case.

Sherayzen Law Office can help you every step of the way in your business license denial appeal case. We will make the utmost use of the pre-hearing process and will provide a vigorous and creative defense of your interests during the hearing.

Call NOW to schedule the consultation!

Section 179 Deduction for SUVs and Certain Other Vehicles

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Section 179 of the Internal Revenue Code allows taxpayers to purchase certain types of vehicles for business purposes and write off the cost. Specifically, taxpayers may expense up to $25,000 of the cost of any “heavy” SUV, pickup or van placed into service during the tax year, and used for over 50% for business purposes. Both new and used vehicles may qualify for the deduction.

A heavy vehicle for the purpose of the statute is generally any 4-wheeled vehicle with a gross vehicle weight above 6,000 pounds and not more than 14,000 pounds. Certain other specified vehicles are not subject to the $25,000 limit. For qualifying heavy vehicles, taxpayers may take regular depreciation (20% for the first year) in addition to the $25,000 write-off. However any percentage of non-business use below 100% must be reduced accordingly by the same percentage.

Call NOW to get help with your business tax return!

Sherayzen Law Office Offers Skype-Enabled Video Conferences

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Using Technology to Improve Delivery of Legal Services

At Sherayzen Law Office, we are always thinking about how to use new technology to improve the delivery of legal services to our clients. For this reason, we have been investing in the acquisition of new technologies and finding better ways to use the existing ones.

Starting October 1, 2010, Sherayzen Law Office announced that it will offer Skype-enabled video conferences to its clients throughout the United States. We foresaw that the benefits of such conferences to our clients are enormous because such conferences constitute a low-cost communication tool which is one of the closest approximations to a regular meeting. Due to this almost “face-to-face” effect, the online video conferences allows for an immediate build-up of trust between our attorneys and our clients which is commonly associated with in-person consultations.

How to Set-Up a Video Conference

Setting up a Skype-enabled video conference is easy. First, you either contact Sherayzen Law Office by phone or e-mail to schedule the consultation. Second, you pay online an invoice emailed by Sherayzen Law Office through the Paypal system. This is it! The consultation will be held at the time convenient for you.

International Business and Tax Services as well as Federal Tax Services Can Be Delivered By Out-of-State Attorneys

There is a mistaken view that your attorney always has to be in your town to help you with any legal issues. In reality, the issue is much more complex. Most states allow out-of-state attorneys to deliver international business and contract services as well as federal tax services to clients in their states. Virtually all states, however, severely restrict (often prohibit) an attorney’s ability to help his clients with respect to state-regulated issues and especially litigation matters.

Sherayzen Law Office offers its international contract and business services as well as federal and international tax services to its clients throughout the United States and the world. In fact, on November 18, 2010, Sherayzen Law Office announced that it will expand its Skype-enabled video conferences to its clients throughout the world. This provides our clients with an opportunity to obtain high-quality legal services at reasonable prices.

Call or e-mail us NOW  to set-up a Skype-enabled video conference with an experienced lawyer to discuss your international business, contract or tax issues!

International Tax Lawyers | Passive Foreign Investment Company

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Congress enacted the Passive Foreign Investment Company provisions (PFIC) as part of the Tax Reform Act of 1986 in order to deter U.S. investors from deferring or avoiding payment of U.S. taxes by investing in offshore entities. The PFIC rules are structured to provide a disincentive for U.S. investors to defer investment income taxes by owning passive investments in foreign companies that do not regularly distribute their earnings. If it is determined that a U.S. investor is a PFIC shareholder, there can be severe tax implications for the taxpayer.

U.S. taxpayers who are shareholders of PFIC are likely to pay a significant additional tax on realized gains from sales of PFIC shares, and on PFIC dividends that meet the definition of “excess distributions” (an “excess distribution” applies to gains or distributions that exceeds 125% of the average distributions for the previous three years, or less if applicable). In both cases, the tax is applied at the taxpayer’s ordinary income tax rate, regardless of whether capital gains rates would typically apply. Further, an interest charge may be imposed, to offset the years of tax deferral in holding the offshore investment. As an additional disincentive, PFIC shares may not receive a stepped-up cost basis at the shareholder’s death.

Definition of a PFIC and Two-Part Test

In general, a foreign corporation that is determined to be neither a “controlled foreign corporation” (CFC) as defined in IRC section 957, nor a “foreign personal holding company” (FPHC) as defined in IRC section 552, will be determined to be a PFIC if it includes at least one U.S. shareholder and meets either one of the two tests found in IRC section 1297. If at least 75% or more of its gross income is passive income (based upon investments as opposed to operating income), or if at least 50% of the average percentage of its assets are investments that produce, or are held for the production of passive income, the foreign corporation will meet the definition of a PFIC. Passive income generally includes interest, dividends, rents, capital gains, and similar items. There is no requirement of ownership of a certain minimum percentage of shares, as there is with CFCs or FPHCs. Thus, if the test is met, PFIC status will apply, even if a shareholder owns a minimal percentage of shares with no ability to influence the business decisions of the company.

The PFIC rules apply to each U.S. person (the precise definition of who constitutes U.S. person is beyond the scope of this article, but it may become an issue in many situations) regarding who a shareholder of a PFIC is. PFIC rules, however, do not apply to foreign shareholders or the foreign corporation itself. PFICs may include different types of entities such as various investment vehicles and foreign-based mutual funds.

Two options are commonly suggested by the U.S. tax lawyers to the shareholders in order to avoid PFIC taxation burden: Qualified Election Fund and Mark-to-Market. Both of these options, however, have their own peculiar characteristics and impose different types of tax obligations on the shareholders.

Qualified Electing Fund

In general, U.S. shareholders who own shares either directly or indirectly in a PFIC may be able to avoid the burdensome standard PFIC taxation provisions by electing to treat the PFIC as a Qualified Electing Fund (QEF) on Form 8621. Shareholders making this annual election are taxed on their pro rata share of the PFIC’s ordinary earnings as ordinary income, and their pro rata share of the net capital gains as long-term capital gain. A shareholder’s basis in the stock of a QEF is increased by the earnings included in gross income and decreased by a distribution from the QEF to the extent of previously taxed amounts. Finally, U.S. shareholders interested in making this election must also be able to obtain the required information from the PFIC.

While treating a PFIC as a QEF may be beneficial in that it allows taxpayers to opt out of the standard PFIC tax and interest rules, it also forces shareholders to pay taxes currently on undistributed income earned by a foreign corporation. Thus, QEF may be of limited use to taxpayers who lack adequate liquidity to pay taxes. Another important point about a QEF is that, due to the complexity of the rules and possible additional tax amounts, if the decision is made to elect QEF treatment of PFIC, it may be advisable to elect a QEF in the first year of holding an offshore investment.

Mark-to-Market

Another option for U.S. shareholders of a PFIC (who do not elect to treat a PFIC as a QEF), is to elect the mark-to-market method. This election is only available if the shares are considered “marketable stock”. Marketable stock is regularly traded stock with an ascertainable value on recognized exchanges as defined in the IRC regulations. If the shareholder elects to mark the stock to market, he will annually report, as ordinary income, the amount equal to any excess of the fair market value (FMV) of the PFIC stock as of the close of the taxable year over the adjusted basis of the shares (i.e. as if the shares had actually been sold at FMV). If the adjusted basis of the PFIC shares exceeds its FMV as of the close of the taxable year, the shareholder may generally deduct an ordinary loss (subject to certain statutory limitations).

Shareholders who directly own shares in a PFIC electing the mark-to-market method may increase their adjusted basis in PFIC shares through income recognized, and decrease the adjusted basis through deductions taken.

Conclusion

The tax issues surrounding PFICs are very complex and should be handled by a tax professional. Sherayzen Law Office can help you analyze your tax situation, determine whether PFIC rules apply, identify the alternatives in light of your whole tax situation, and implement the tax strategy most suited to your business and investment needs.

Contact Sherayzen Law Office to discuss your tax situation with an experienced tax lawyer!

Capital Gains and Losses: Tax Implications for Individuals and C-Corporations

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Capital gains and losses defined

Capital gains and losses result from the taxable realized sale or exchange of capital assets. In general, capital assets include investments (such as stocks and real estate) and fixed assets, as opposed to personal-use property.

Capital gains result when the sale or exchange price is greater than the adjusted basis of the capital asset. Conversely, capital losses occur when the adjusted basis is higher than the sale or exchange price, and certain expenses associated with the sale may be added to the loss. The holding period of the capital asset being sold or exchanged will determine whether the capital gain or loss is long-term (held for more than a year) or short-term (held for less than a year).

Netting Capital Gains and Losses (Individual taxpayers)

Each taxable year, capital gains and losses are aggregated or “netted” on Schedule D. First, long-term capital gains and losses are netted. Second, short-term capital gains and losses are netted. Four possible scenarios will result from this two-step process:

Scenario A: A long-term gain and short-term gain
Scenario B: A long-term gain and short-term loss
Scenario C: A long-term loss and short-term gain
Scenario D: A long-term loss and short-term loss

In scenario A, the short-term gain will be taxed with the taxpayer’s ordinary income at his or her marginal rate. For the long-term capital gain, the favorable long-term capital gains tax rate will apply, depending upon the taxpayer’s tax bracket.

In scenario B, there are two possible outcomes depending upon which result is larger, the loss or the gain. If the short-term loss is greater than the long-term gain, a net short-term loss will result, and up to $3,000 can be used to offset other income, with additional amounts can be carried forward to subsequent tax years. Alternatively, if the long-term gain is larger than the short-term loss, then a net long-term gain will result, and the favorable long-term capital gains tax rates will apply.

In scenario C, there are two possible outcomes depending upon which result is larger, the loss or the gain. If the long-term loss is larger than the short-term gain, then a net long-term loss will result, and (as with scenario B) up to $3,000 can be used to offset ordinary income. Any unused amount above $3,000 can be carried forward to subsequent years as long-term loss. Alternatively, if the short-term gain is larger than the long-term loss, then a net short-term gain will result, and it will be taxed at the taxpayer’s marginal rate.

In scenario D, there are several possible outcomes. First, if the total long-term and short-term losses combined total $3,000 or less, then the amount may be used to offset ordinary income. However, if the total amount of short-term losses exceed $3,000, then the first $3,000 of short-term loss will be applied to offset other income, and any remainder will be carried forward to subsequent years as a long-term loss. If the short-term loss is less than $3,000, then that amount will be applied to offset ordinary income, and any amount of available long-term loss making up the difference between the short-term loss applied and $3,000 will also be used to offset ordinary income (with the additional, unused amounts carried forward).

Capital Gains and Losses (C Corporations)
C corporations, unlike individuals, do not receive favorable tax rate on capital gains. Capital gains must be included as part of ordinary income, in their entirety.

Further, capital losses must be used only to offset capital gains, and are non-deductible against ordinary income for C corporations. Net capital losses can be carried back to the three preceding years (and are applied in chronological order, beginning with the earliest tax year) provided the corporation has capital gains to offset. Additionally, corporate taxpayers may carry forward the capital loss five years from the year of loss, again provided that there are capital gains to offset. Carryforwards expire after the fifth year. Importantly, all losses carried back or forward are considered to be short-term.

Offsetting Capital Gains and Losses
Are you a taxpayer interested in benefiting from the capital gains and losses tax rules? Do you have questions about selling capital assets such as stocks or real estate for tax purposes, and how to best time your transactions in order to pay less taxes? Are you concerned about how new capital gains and loss tax changes may affect your situation?

Sherayzen Law Office can guide you with all of your capital gains and losses questions, and help you plan ahead so that you pay less taxes.

Call NOW to discuss your case with an experienced tax attorney!