Economic Substance Principle
The taxpayer must prove that the underlying economic transaction was not concocted to avoid or reduce tax liability. In the Gregory Vs. Helvering case, the Supreme Court actually uses the word ‘sham’.
Recourse Debt
Recourse debt is a legal right drafted into a loan agreement allowing the lender to seek the right for damages in case of default on the loan. Recourse debt identifies the party for recourse and this party must sign the document in order to bind itself to the lender. In most situations, the recourse is to a third party that will derive some form of benefit from the loan.
Long Term Debt – Explanation and General Understanding
In the arsenal of capitalizing a business operation, long term debt serves as one of the primary sources of capital. If you are an owner of a small business, you need to understand the relationship this source has to the overall financial status of the company. Too much debt and the owner is burden by the cash outlays to service.
Real Estate Investment Trusts – REITs
Real Estate Investment Trusts are corporations, trusts or associations that act as agencies in real estate and associated mortgages. This is a specialized tax segment and it requires recognition by the Internal Revenue Service to operate as a Real Estate Investment Trust (REIT).
Crowdfunding in Small Business
The process of collecting a large pool of investors, each contributing or investing a small amount of dollars for a highly focused project is referred to as crowdfunding. The crowd is financing the project or goal. This is very similar to how large non-profits address significant events worldwide. A good example is the American Red Cross addressing disaster relief in the aftermath of a major natural tragedy.
Form 1099-C: Cancellation of Debt
If you received a 1099-C, the first question you ask is: ‘Do I have to include this in my taxable income?’ Well, the answer is ‘it depends’. Not what you want to hear but there are a lot of variables involved in answering this question.
Recourse and Nonrecourse Types of Loans
When a lending institution loans money they mostly fear nonpayment of the debt. Often these loans were implemented due to a third party’s endorsement. To qualify the endorsement the bank may require the third party guarantee the debt. This is known as having ‘Recourse’ in getting the debt paid
