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six new hires

Six New Hires Join WFY Team

Wright Ford Young & Co. is proud to announce we are adding six new hires to our team. We have Cheryl Shelton joining our estates & trusts department, and Brody Alcanter, Marzeh Khanjari, Rajbir Singh, Linh Trinh and Diane Waxler-Milne joining our tax department. WFY is pleased to welcome these new hires to our team.

Cheryl Shelton

In January, Cheryl Shelton started with WFY as an Estates & Trusts Supervisor in our estates & trusts department. She graduated from Cal State Fullerton and continued her education at Western State Law School. Cheryl has worked in accounting for over 15 years. In her spare time, she volunteers with a local dog resue doing adoption events and fostering dogs.

Brody Alcanter

Brody Alcanter joined WFY in January as a Tax Senior. He graduated from Northwood University with a Bachelor’s degree for Business Administration, Accounting, and moved to Orange County shortly after graduating. In his spare time, he enjoys playing golf.

Marzeh Khanjari

In January, Marzeh Khanjari started with WFY as a Tax Senior.  She received her degree in Business Administration with emphasis in Accounting, and has been working as a tax professional for almost 15 years. While she’s away from the office, she likes to travel, watch movies, and play ping pong.

Rajbir Singh

Rajbir Singh joined WFY as a Tax Staff in January.  He graduated from University of California, Riverside, with a degree in Business Administration and Psychology. Rajbir’s hobbies are working out and traveling with his family.

Linh Trinh

Joining us again at WFY as a tax intern is Linh Trin.  She is graduating from Cal State Fullerton this Spring and will become a full-time Tax Staff at WFY after she graduates.  During her free time, she likes to play the piano.

Diane Waxler-Milne

Diane Waxler-Milne joins WFY for this upcoming tax season as a tax intern.  She is currently attending Cal State Fullerton as a senior and will graduate with a Bachelor’s degree in Accounting and Finance. When she’s out of the office and away from school, Diane enjoys time with her husband and three daughters.

 

Interested in joining WFY in one of our departments? f you are interested and qualified for the position above, please email your resumes careers@cpa-wfy.com or go to our Careers page.

 

bruin professionals

Tax Director Melodie Reguero on Tax Planning at Bruin Professionals

On Wednesday, November 20th, our WFY Tax Director Melodie Reguero presented at the Orange County Bruin Professionals meeting.

Ms. Melodie Reguero spoke on tips about year-end tax planning along with Cheryl Gee from UBS. Year-end tax planning is especially critical this time of year to proactively reduce a taxpayer’s risk exposure and tax liability before the new year. If you are interested in tips about year-end tax planning, read our article on Year-End Tax Saving Moves for Individuals.

Reguero regularly attends Bruin Professionals meetings, which is diverse group of UCLA alumni who are established in business. The group focuses on commerce, camaraderie, and community. They have several chapters spread all over California. If you are interested in learning more about Bruin Professionals, click here.

 

savings

Year-End Tax Saving Moves for Individuals

Since 2019 is coming to a close now is the time to take action to proactively reduce your tax liability before the new year.

Included are a few strategies that may help with your tax situation:

  1. Harvest stock losses while substantially preserving one’s investment position. This can be accomplished by selling the shares and buying other shares in the same company or another company in the same industry to replace them, or by selling the original shares then buying back the same securities at least 31 days later.2.
  2. Apply a bunching strategy to deductible contributions and/or payments of medical expenses. The increased standard deduction and limited itemized deduction of state and local taxes to $10,000 will cause many taxpayers to lose the benefit of their itemized deductions.  By bunching multiple years of charitable contributions and medical expenses into one year, a taxpayer may create a taxable benefit that would not otherwise exist.  For example, a taxpayer who expects to itemize deductions in 2019 and usually contributes a total of $10,000 to charities each year, should consider prefunding 2020 and 2021 charitable contributions by contributing a total of $30,000 into a donor advised charitable fund and then distribute the funds to the charities over the following two years.
  3. Take required minimum distributions (RMDs). Taxpayers who have reached age 70-½ should be sure to take their 2019 RMD from their IRAs or 401(k) plans (or other employer-sponsored retired plans). Failure to take a required withdrawal can result in a penalty of 50% of the amount of the RMD not withdrawn. Those who turned age 70-½ in 2019 can delay the first required distribution to 2020, however, this can result in taking a double distribution in 2020 (the required amount for 2019 and 2020).
  4. Use IRAs to make charitable gifts. Taxpayers who have reached age 70-½, own IRAs, and are thinking of making a charitable gift should consider arranging for the gift to be made by way of a qualified charitable contribution, or QCD—a direct transfer from the IRA trustee to the charitable organization. Such a transfer (not to exceed $100,000) will neither be included in gross income nor allowed as a deduction on the taxpayer’s return. A qualified charitable contribution before year end is a particularly good idea for retired taxpayers who don’t need all of their as-yet undistributed RMD for living expenses.
  5. Make year-end gifts. A person can give any other person up to $15,000 for 2019 without incurring any gift tax. The annual exclusion amount increases to $30,000 per donee if the donor’s spouse consents to gift-splitting. Anyone who expects eventually to have estate tax liability and who can afford to make gifts to family members should do so.
  6. Reinvest capital gains in Opportunity Zones. Capital gains reinvested within 180 days into an qualified opportunity fund allows for federal tax deferral and partial tax exemption and tax free appreciation if held for the required ten year period.

These are broad suggestions that will benefit some but not all taxpayers.  To discuss and create a personalized tax strategy, be sure to contact a WFY tax specialist at info@cpa-wfy.com or (949) 910-2727.

© Copyright 2019. All rights reserved.

ante up for autism

WFY Sponsors TACA’s 13th Annual Ante Up for Autism Benefit Gala

WFY was proud to be a Full House Sponsor of TACA’s 13th Annual “Ante Up for Autism” benefit gala.

The Autism Community in Action’s (TACA) Orange County chapter held its 13th annual “Ante Up for Autism” fundraising gala on Saturday October 26, 2019 at the Waterfront Beach Resort in Huntington Beach. Wright Ford Young & Co. was proud to continue its long standing support of TACA through a program sponsorship of the very successful event. TACA is a national nonprofit 501(c)(3) organization founded in 2000 by Glen and Lisa Ackerman with the mission to provide education, support and hope to families living with autism. TACA is headquartered in Irvine, CA with staff and volunteers working across the country.

To learn more about TACA, visit www.tacanow.org

business owner summit

WFY Partner Kahni Bizub as Panelist at 2019 Business Owner Summit

On November 8th, WFY Senior Tax Partner, Kahni Bizub, will be one of the panelists for WealthWise Financial Services’s 2019 Business Owner Summit.

The 2019 Business Owner Summit is a day-long event which includes discussing topics such as scaling your business, income tax strategies, retirement plans strategies, and more. The keynote speakers are Jacob M. Gerber, an equity & multi-asset investment director, and E. Luke Farrell, a fixed income investment director.

Kahni Bizub’s specialty is tax planning and compliance services for closely-held and family-owned businesses and their key executives in the service, manufacturing, and distribution industries. She has served some of the same clients for her entire career and believes in building strong CPA-client relationships. Such a rapport allows her to best understand her clients’ needs and tailor services specific to each client. Kahni is also involved in multiple business organizations including Vistage, AICPA, and CalCPA.

If you’d like to learn more about the 2019 Business Owner Summit, click here.

lawyers for warriors

WFY Title Sponsors Veterans Legal Institute’s Lawyers for Warriors Event

Wright Ford Young & Co. had the privilege of serving as the title sponsor to the Veterans Legal Institute’s annual Lawyers for Warriors event on Monday, September 23rd.  Senior audit partner Jeff Myers spoke on Wright Ford Young’s behalf to honor our ongoing partnership with the Veterans Legal Institute.

Lawyers for Warriors is an event that started four years ago where over 250 business leaders who represent legal, medical, financial, military, and other professional industries can network, enjoy wine and appetizers, and recognize those legal community leaders who have graciously offered their services to our veteran heroes.  All the proceeds of this event go to Veterans Legal Institute to continue their mission to ensure veterans can receive free legal services.

We want to congratulate the following people for their awards at this event: Stephens Friedland, LLP for Law Firm of the Year, Volunteers of America Los Angeles for Community Partner of the Year, Judge Lon F. Hurwitz for Veteran Advocate of the Year, and David Price, Esq. for Attorney of the Year.

If you’d like to learn more about Veterans Legal Institute or the Lawyers for Warriors event, please go to https://www.vetslegal.com/

 

meet the firms

WFY Attends Meet the Firms at CSUF and NAU

On Thursday, September 26th, a group of our Wright Ford Young & Co. employees attended California State University, Fullerton’s Meet the Firms event as well as Northern Arizona University’s Career & Graduate School Expo.

These type of meet and greet events are a way for students and professionals in the accounting community to network with a wide range of firms from boutique to the Big Four.  We attend these events to educate students about WFY and what we do, and encourage them to get a hands-on learning experience with our firm.

Wright Ford Young & Co. thanks California State University, Fullerton and Northern Arizona University for another great Meet the Firms recruiting event on Thursday, September 26th.  We are very fortunate to have a long standing relationship with the accounting schools and hardworking students in which many of our employees are alumni.

 

When Does a Resident Become a Nonresident?

According to a recent SFGate poll, 53% of Bay Area residents interviewed want to leave California.(1) We have been hearing similar comments from seminar attendees across the state, and we know many of you have clients who are attempting to “move out of California.”

Keep in mind, one of the FTB’s longest running, and most active, audit programs is the residency audit program. The FTB looks closely at a taxpayer who moves from California, and often they are high income taxpayers who have large amounts of income after they change their residency to another state. However, lower income taxpayers can also be caught in this trap.

Recently, we heard of two examples of clients who want to leave California — but not completely.

Case study #1: High-income taxpayer who is expecting a large capital gain from the sale of very appreciated stock will move out of state. However, he will keep the California home that has been in his family for generations.

Case study #2: Woman moves to a non-tax state, buys a home there, and keeps her California home to which she returns periodically to oversee care of her mother. She has income from both California and the other state.

Each of these taxpayers is in the danger zone. Let’s look at the rules for residence and domicile and apply them to these case studies, as this is the key to being a nonresident.

Residence and domicile

A “resident” is an individual who is:

  • In California for other than a temporary or transitory purpose; or
  • Domiciled in California, but who is outside California for a temporary or transitory
    purpose.

A domicile is the place where an individual has his or her true, fixed, permanent home and principal establishment, and to which place he or she has, whenever absent,the intention of returning. It is the place in which an individual has voluntarily fixed the habitation of self and family, not for a mere special or limited purpose, but with the present intention of making a permanent home, until some unexpected event shall occur to induce an adoption of some other permanent home.(2)

If a person has not changed their domicile, they continue to be California residents for income tax purposes, even if they are outside of California for most or all of the year.

Don’t keep the house

The key to these case studies is domicile. In order to be a nonresident of California for tax purposes, the taxpayer must show that their domicile is in another state. The FTB will assume any taxpayer that left the state but kept a home in California has retained their California domicile (because they “intend to return”). So, that is one big step against the taxpayer.

In case study #1, the taxpayer must dispose of the property or they will have trouble proving they ended the residency. This is going to be a particularly difficult situation because the taxpayer has significant income from the sale of his appreciated stock, and the FTB will argue that he is only trying to change his residence to avoid the California tax on that income. We would typically recommend that the taxpayer sell their California residence and purchase a residence in their new home state. However, the taxpayer does not want to sell his home because it has been in the family for generations.

Simply having the children rent the family home will make it hard to prevail, as the FTB may argue that the taxpayer can return to the home at any time. One suggestion might be to gift the home to the children or put the home in an irrevocable trust for the children.

In case study #2, the taxpayer has relatively low income, but the FTB is still likely to find that she continues to be a California resident. Keeping the home here indicates that she intends to return to California, especially if she is periodically using it and working occasionally in California. If the FTB audits her, she will surely lose. The best way for her to end her residency is to sell the home and not work in California when she comes to care for her mother. She can stay with friends or in a hotel, but not in her home.

Cases where taxpayers won and lost

A good way to understand factors that will help or hurt taxpayers in these situations is to review cases where taxpayers have lost on residency issues.

Losers

In the Appeal of Murray, the taxpayers were domiciled in California prior to the husband signing with the Cleveland Cavaliers.(3) The Board ruled in favor of the FTB, and found that the taxpayer maintained a domicile in California because the taxpayer and his family resided in Ohio only during the seven-month basketball season. They maintained two homes in California — one occupied by his mother-in-law and the other presumably vacant — and continued to use financial advisors, doctors, and had business registrations in California.

In Appeal of Cummings, the taxpayers had moved to Nevada — or so they thought.(4) However, they retained two homes in California and one in Reno, Nevada. Credit card transactions and amounts and locations of expenses for each spouse demonstrated an overwhelming presence in California. Following all trips, the Cummings always returned to their California location. The Board found that the taxpayers were still California residents.

In Appeal of Norton, the taxpayers, contemplating retirement, began construction of a residence in California and listed their Connecticut homes for sale.(5) In February 1990, they rented a small apartment in California and lived in it until their new home was finished. The Board determined that residency began on April 10, 1990, when the taxpayers moved much of their furniture, including a piano that had been kept in storage, and brought one of their vehicles to California.

Winners

In Appeal of Lau,(6) which was dismissed by the FTB before the BOE made a decision, the Board was posed to rule in favor of taxpayers who had retired from running their California business and had moved to Nevada. Due to the poor housing market, they had retained their California home along with its custom made furnishings, kept their Kaiser health plan, their golf membership (which they were unable to sell), and cars in California to use while they were visiting family and checking in on their business interests. The Board indicated that they felt that the taxpayers had demonstrated their intent to establish a Nevada domicile.

In Appeal of Bills,(7) taxpayers allowed their adult daughter to stay in their California home and purchased another home in Washington to move into when the husband retired from his investment company. The BOE ruled that the taxpayers had established a Washington domicile in only one week, even though they made frequent and extended stays in California immediately thereafter. The Board emphasized the subjective intent test rather than a quantitative objective test in establishing domicile.

1. www.sfgate.com/expensive-san-francisco/article/move-out-of-bay-area-california-where-to-go-cost-13614119.php
2 18 Cal. Code Regs. §17014(c)
3 May 22, 2013, Cal. St. Bd. of Equal., Case No. 469418
4 Appeal of Nicholas and Dorothy Cummings (October 7, 1999) Cal. St. Bd. of Equal., Case No. 98A-1239
5 Thomas H. Paine and Teresa A. Norton (October 7, 1999) Cal. St. Bd. of Equal., Case No. 98A-0741
6 Appeal of Lau, Cal. St. Bd. of Equal., No. 739838, heard March 25, 2015, dismissed May 7, 2015
7 Appeal of Bills (April 28, 2016) Cal. St. Bd. of Equal., Case Nos. 610028, 782397

This article is reprinted with permission of Spidell Publishing, Inc.® ©2019

New Partnership Audit Rules for 2018 Tax Filing Year

For the 2018 tax filing year, there are new Internal Revenue Service (IRS) partnership audit rules [also adopted by the California Franchise Tax Board (FTB)] in which the partnership, not its members, will now be responsible for tax adjustments under audit.

There is a very narrowly defined opt-out provision that many partnerships do not qualify for.  Please consider amending the partnership operating agreement to designate a “partnership representative” to represent the company in disputes with the IRS or the FTB.  Also, you should consider including language regarding the responsibility of tax audit adjustments pursuant to the three allowable methods: “amend”, “pull in”, and “push out.”

Below is a chart which discusses the advantages and disadvantages of each method.

MethodProsCons
Election OutPartnership out of CPARLimited to small partnerships with limited kinds of partners
Must elect on annual basis
AmendSimple to implementPartnership can’t compel partners to amend

Partnership can’t monitor who amends and who doesn’t

Pull InSimple to implement

Partnership can act as clearing house for convenience of partners (allows partnership to monitor which partners have pulled in)

Partnership can’t compel partners to pull in
Push OutPartnership can compel reviewed-year partners to pay tax on their share of imputed underpaymentShort time frame to elect and comply

Large administrative burdern on partnership

Partners pay additional 2% penalty

To discuss your situation under the new partnership audit rules, please contact a WFY tax expert at (949) 910-2727 or info@cpa-wfy.com

© Copyright 2019. All rights reserved.