20September
2018
The Concept of Asset Allocation

If you live in or have visited a big city, you’ve probably run into street vendors — people who sell everything from hot dogs to umbrellas in carts on the streets and sidewalks. Many of these entrepreneurs sell completely unrelated products, such as coffee and ice cream. At first glance, this approach seems a bit odd, but it turns out to be quite clever. When the weather is cold, it’s easier to sell hot cups of coffee. When the weather is hot, it’s easier to sell ice cream. By selling both, vendors reduce the risk of losing money on any…

20September
2018
Business Sale: Who Owns Professional Goodwill?

When a professional corporation sells its assets or liquidates, one important tax issue is whether the corporation or the shareholder-employees own any appreciated professional goodwill (with a fair market value in excess of tax basis). For tax purposes, goodwill is an intangible asset. It represents the value of a trade or business based on expected continued customer patronage due to its name, reputation and similar factors. Such goodwill often does not appear on the corporate balance sheet, because it was developed by the corporation or by its shareholder-employees without any historical cost assigned to it for either financial accounting or…

20September
2018
Revising Estate Strategy Assumptions

When the rules of the game change, tactics should follow in response to the new landscape. While estate tax exemptions have ridden an uncertain roller coaster in recent years, the rules appear to be stabilizing, prompting many to reconsider conventional estate strategies.¹ A few years ago, Congress raised the estate and gift tax exemption to $10 million per person, and has adjusted for the rate of inflation since then. By 2017 it had risen to $5.49 million. Then the Tax Cuts and Jobs Act raised it much higher, to $11.18 million through 2018 and the top rate is 40%.² This…

11September
2018
The Fine Points of a Buy-Sell Agreement

A buy-sell agreement provides family business co-owners with protection so they don’t lose control of their ventures. It restricts each shareholder, partner or member of a business from unilaterally transferring an ownership interest to anyone outside the group. It also ensures there will be a willing buyer for each co-owner’s interest when he or she retires, dies, becomes disabled or another “triggering event” occurs. Obviously, business owners need sources of money to finance the buyouts of withdrawing co-owners when triggering events occur under a buy-sell agreement. The death of a co-owner is the most common, and most catastrophic, event. For…

06September
2018
How the Risk of Detection Reduces Fraud

Do your employees feel like they’re being watched? If they don’t, they may be emboldened to steal. In the same way that putting more police officers on streets tends to reduce crime, making your company’s anti-fraud activities more visible can discourage fraud perpetrators. Good internal controls are critical to preventing fraud. But many companies have learned the hard way that employees bent on fraud can find their way around internal controls if the incentive outweighs the risk. You must, therefore, make sure that your employees — including senior managers — understand that the risks of committing fraud are greater than…

06September
2018
Let Logic, Not Emotion, Prevail Over Your Portfolio

Imagine this scene: You’re at your favorite clothing store when you see a shirt. You pick it up, consider it, then put it back. It’s not your color. As you move away, you notice another customer picking up that same shirt. Suddenly, you think that maybe it would look good on you. But it’s the last one. You can’t wait for the other customer to set it down so you can snatch it up. It’s a fact of human nature that emotions can wreak havoc on our decision-making abilities. A growing field of study called behavioral finance seeks to identify the…