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gifting

Why Gifting During an Economic Downturn May Be Right for You

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Janelle Tokunaga, CPA, MST

Wright Ford Young & Co., CPAs

 

While it may seem like there has been a shortage of good news lately, we wanted to bring your attention to a few bright spots that have come about during our current economic downturn.  With the extra time you have at  sheltering in place, it may be a good time to revisit your current estate and gift plan.

To recap: the 2020 Federal lifetime exemption is $11.58 million per person, including inflation, and the 2020 annual Federal gift exclusion is $15,000 per donee and donor.  The current economic market is showing decreased values in the public securities arena and lower overall real estate values in light of the COVID-19 environment.

The current lifetime exemption gives you the opportunity to make larger gifts of assets. But when combined with lower current asset values you can gift now with less exemption utilization, it leaves more exemption available for future gifts.  So, now, may be a good time to think about gifting those depressed value assets that are expected to increase considerably in the future. Then, when the markets eventually recovers and your gifted asset values increase, they will already be outside of your taxable estate.

If you aren’t ready to gift assets directly, setting up and transferring ownership of real estate and marketable securities into closely held entities (such as FLPs and LLCs) may be a good option as well.

We encourage you to use this unique time to reflect on your current estate plan. Considering whether gifting is something for you may benefit you and your loved ones now and in the future.  WFY advisors are available to discuss the tax benefits of gifting during our economic downturn and look forward to hearing from you. If you’d like to contact us, click here.

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ppp

Non-Deductibility of PPP Related Expenses to the Extent of Forgiven PPP Funds (IRS Notice 2020-32)

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Janet Kim, CPA, MST

Wright Ford Young & Co., CPAs

 

The IRS released Notice 2020-32 on April 30, 2020, which provides guidance on the deductibility of expenses paid with Paycheck Protection Program (PPP) loan proceeds that are forgiven and excluded from the borrower’s income. The IRS has determined otherwise deductible expenses that are paid with PPP funds may not be deductible for federal income tax purposes to the extent the expenses were reimbursed by a PPP loan that was then forgiven.

The PPP was created by Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Under the PPP, the borrower can receive forgiveness of indebtedness in the amount equal to the sum of payments made for the following expenses during the 8-week “covered period” beginning on the covered loan’s origination date: payroll costs, mortgage interest, rent, and utilities during the COVID-19 crisis. The forgiven amount is excluded from gross income under the PPP. The IRS notice explains that to the extent that Sec 1106 excludes from gross income the amount of a covered loan forgiven, this results in a “class of exempt income” under Sec. 265 which disallows otherwise allowable deduction for the amount of covered loan forgiveness because such payment is allowable to tax-exempt income. This treatment prevents a double tax benefit.

The CARES Act did not address whether deductions otherwise allowable under the Code for payments of eligible Section 1106 expenses paid by the PPP borrowers are allowable if the covered loan is subsequently forgiven as a result of the payment of those expenses. According to Senate Finance Committee Chairman Chuck Grassley “the intent was to maximize small businesses’ ability to maintain liquidity, retain their employees and recover from this health crisis as quickly as possible, this notice is contrary to that intent.” It may take clarification in a future bill if the original intent of Congress is that these expenses remain tax deductible.

We continue to monitor all newly issued legislation and guidance to assist you in making informed decisions.  If you have any questions or concerns regarding this latest guidance, please contact your WFY advisor or contact us here.

coronavirus

Avoid Phishing in the Time of COVID-19

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As the uncertainty of the coronavirus pandemic continues, scammers are using different ways to gather your information and use it for ransom.

Some websites are offering information on COVID-19 relief programs in exchange for signing up through them as a subscription or requesting a fee. With this, the websites hold your basic information ransom and could possibly cause you problems in the near future.

WFY wants to make sure there aren’t any more problems for our clients who are already going through an ambiguous period of time. Fraud will only increase as the coronavirus pandemic goes on. Therefore, we advise you to only work with sources you know are safe and whom you’ve worked with before. On our WFY website, we have provided a COVID-19 relief page with safe links that can help you with any questions on resource programs at https://staging.cpa-wfy.com/dev//staging.cpa-wfy.com/dev/covid-19-resources/

If you have any questions or concerns on a COVID-19 relief program, please contact your WFY tax advisor.

coronavirus enacted laws

Summary Analysis of Coronavirus Enacted Laws

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By Richard A. Huffman, CPA, MST

With the recently enacted laws to help companies with the current Coronavirus pandemic, there has been confusion regarding which benefit programs will apply to what companies.

In our efforts to assist you in which benefits can help you and your company, WFY has created a breakdown summary spreadsheet and flowchart below.