Los Angeles Business and Tax Lawyer Blog

Security Interests In Partnership or LLC Interests

Mon, 02 Nov 2009 10:33:53 -0800

If you have a security interest in a partnership or LLC interest, you probably perfected that security interest by filing a UCC financing statement against the debtor. And if you were the first to file against most partnership or LLC interests, you had first priority upon filing. However, you would probably be shocked to find out that a party who subsequently obtains a security interest can jump your priority.

IRS Pre-Submission Conferences

Mon, 02 Nov 2009 10:15:05 -0800

If you are considering requesting a private letter ruling from the IRS, there is a process which can save you significant time and expense. Prior to submitting an extensive private ruling request, you can first file a request for a pre-submission conference. This procedure allows the IRS to evaluate a brief overview of the issue, after which the IRS will recommend that you (a) schedule a conference with IRS attorneys to discuss the matter further, (b) submit a full-fledged private ruling request, or (c) not move forward with a private ruling request. You will then be able to assess the strength of your request without incurring the legal and administrative fees associated with a full-fledged letter ruling request.

Involuntary Bankruptcies

Mon, 27 Jul 2009 10:37:18 -0800

Los Angeles has recently seen a spate of involuntary bankruptcies. What is an involuntary bankruptcy? An involuntary bankruptcy is a bankruptcy filed not by the debtor, but by the debtor’s creditors. Thus the “involuntary” bankruptcy.

The Bankruptcy Automatic Stay

Fri, 24 Jul 2009 10:33:38 -0800

When a bankruptcy is filed, whether it is Chapter 11 or Chapter 7, a number of different things occur. Probably the most important is that an “automatic stay” is implemented. What is the automatic stay?

Income Tax Treaties

Thu, 23 Jul 2009 10:36:43 -0800

Income tax treaties are good. As tax analyst Lee Sheppard noted, "a tax treaty announces to the world that a country is open to business investment." Tax lawyers are quite fond of tax treaties. Because they supersede local law, if a tax treaty applies, it is possible to give a client meaningful advice on the tax treatment of an investment in a particular country without becoming an expert on that country's internal tax rules or engaging local counsel.

Tax Reporting on Foreign Entities or Activities

Thu, 28 May 2009 14:02:21 -0800

The Internal Revenue Code contains numerous requirements for U.S. taxpayers to report their interests in foreign corporations, partnerships, trusts and estates, and certain transactions involving foreign entities.

Heavy penalties can apply for failure to file these returns in a timely manner. In most cases, the forms must be filed as part of your regular federal income tax return.

California's New Film Production Credit

Tue, 26 May 2009 13:58:03 -0800

In an effort to retain film and television production in California, the state has enacted a film production tax credit, to be claimed against California personal income and corporate franchise taxes. The credit applies to costs of production starting July 1, 2009 although the credit may not be claimed on tax returns for years prior to 2011. The amount of the credit is 20% of production costs for feature films with a production budget between $2 million and $75 million, for certain mini-series or made-for-television movies and for television series licensed for basic cable, and 25% of the production costs for a television series that filmed all of its prior episodes outside California, or for an independent film (a film with a budget between $1 million and $190 million not produced by a publicly-traded company or a company in which publicly-traded companies own more than a 25% interest).

California Jobs Tax Credit

Wed, 22 Apr 2009 14:33:46 -0800

California businesses with 20 or fewer employees should be aware that the state provides a $3,000 tax credit for each additional full-time employee hired during 2009. The credit applies to hourly wage employees averaging at least 35 hours per week and full-time (at least 40 hours per week) salaried employees. An employer will not qualify for the credit unless it has a net increase in full-time employees compared to its number of full-time employees for 2008.

What is a Bankruptcy Preference?

Wed, 08 Apr 2009 10:48:24 -0800

Given that it seems like almost every company is a possible bankruptcy debtor these days, it is important to recognize that money paid by a company that ends up in bankruptcy might be subject to disgorgement. In other words, if you are the recipient of such a payment, you might have to give the money (or part of the money) back.

Unconstitutionality of the LLC fees in California

Thu, 02 Apr 2009 10:22:31 -0800

In 2007, California enacted legislation to address the unconstitutionality of the CA LLC fee based on gross receipts assessed on LLCs doing business in California. The legislation amends CA Rev. & Tax. Code §17942, effective for tax years beginning on or after January 1, 2007, to limit the amount of gross receipts subject to the fee to only those gross receipts generated from CA sources. The legislation also limits the amount of refunds that may be claimed for fees assessed in prior years. Refunds are limited to the amount by which the fee paid, plus any interest assessed, exceeds the amount of the fee that would have been assessed if the fee had been determined under Section 17942, as amended in 2007 (limits refunds to only the excess paid on account of unfair apportionment).

Chapter 7 -- A Last Resort

Fri, 27 Mar 2009 09:27:06 -0800

Chapter 7 of the Bankruptcy Code is often a last resort for individuals or companies with financial problems that they cannot solve. Under Chapter 7, a Trustee is appointed to administer the assets of the debtor. The Trustee sells the assets in order to pay creditors. For individuals, some assets are exempt, and those are retained by the debtor.

Use Tax on Vehicles Brought into California.

Wed, 25 Mar 2009 09:18:52 -0800

Many people have taken advantage of a long-existing rule that a vehicle purchased outside of California and kept outside the state for more than 90 days after purchase is not subject to California use tax when brought into California. That rule has now been changed.

What happens when a bankrupt tenant leaves personal property behind?

Wed, 18 Mar 2009 09:22:24 -0800

Often times when a tenant files for bankruptcy, the trustee not only rejects the lease but also abandons any personal property left over by the tenant pursuant to 11 U.S.C. 554(a). The California landlord who expects to use the value of the abandoned property to offset amounts owed by the bankrupt tenant will be sorely mistaken.

Home Mortgage Debt Forgiveness.

Mon, 16 Mar 2009 09:10:54 -0800

Generally, if you renegotiate a loan and reduce the amount owed, the reduction is subject to income tax as “cancellation of indebtedness income.” However, both California and federal income tax laws have special, temporary provisions under which reduction of mortgage debt on a taxpayer’s principal residence is not subject to tax. Unfortunately, these two provisions are confusingly different.

Why Chapter 11?

Mon, 02 Mar 2009 11:39:33 -0800

Chapter 11 allows companies to reorganize their financial affairs and emerge from bankruptcy with an improved balance sheet. Most large bankruptcies that make the news are Chapter 11 filings. For example, EZ Lube, which filed bankruptcy in December, is in Chapter 11, as is Circuit City, which filed in November. Most Chapter 11s are filed by companies, but individuals can also file Chapter 11. However, individual Chapter 11s are rare because there are other bankruptcy Chapters which are usually more appropriate for individuals.