Small Business Profit Maximizer!

Be Careful When Selling Depreciable Assets to Related Parties

The tax courts have ruled in a case involving two related corporations where one of the related corporations that transferred the assets reported a capital gain on the transaction.

The IRS re-characterized the gain because the same person owned more than 50% of the stock of each corporation.  The Tax Court agreed with the IRS that the firms were related and that the capital gain treatment was incorrect (Fish, TC Memo, 2013-270).  Thus the gain from the sale of assets that are depreciated will be taxed at ordinary income tax rates rather than the lower capital gain rates.

So before selling assets to a related party, be sure to check with a tax professional.

Recommended Software or App: Audible

Audible is an Amazon company that provides audiobooks for just about any portable phone or tablet.

I preach that successful business owners are lifetime learners who read at least one business book every month.  I used to read much more than this, but as my children and my business grew it became harder and harder to find time to read.

Enter Audible!  Now I can listen to a book while I walk the dog in the morning, wait in line to pick up a prescription, or do chores at home.  I usually listen to business books, but lately I have been listening to Terry Francona’s book about his years managing the Boston Red Sox (my favorite sports team).

The membership costs $14.95 per month and includes one audiobook.  It might seem costly but I usually get one good business-building idea from each book that more than offsets the cost.  I even got an idea on how to manage difficult employees while listening to Terry Francona’s ordeals trying to manage Manny Ramirez!