How To Properly Structure Your E-commerce Business

Welcome to another episode of the Tax Tuesday show. Host Toby Mathis, Esq., joins our regular guest Eliot Thomas, Esq., Manager of Tax Advisors at Anderson Business Advisors, to help answer your questions.

On today’s episode, Eliot and Toby answer listener inquiries, including a mother and son who want to set up an e-business together, a question about filing an extension for your taxes, which is almost always a good idea, and a question about writing off a pool that is required for a medical condition, (which is a surprisingly common question!)

If you have a tax-related question for us, submit it to taxtuesday@andersonadvisors.

Highlights/Topics:

• I had to put more money into my LP for stock options trading- what is the easiest way to handle this addition to my LP? - You can put cash in, or capital contribution - there are no tax implications putting money in, or taking money out.
• Is it a good practice to file an extension? Yes it is - if you rush, you may have to do an amendment…it gives you time to breathe. I don’t know any instance when it is a bad idea.
• If I plan to leave investment property to my children, is it better to purchase and leave it to them in trust, or put their names on title? - They may have stepped up basis issues later on. I don’t recommend gifting things when you are still alive. If the kid is on the title, the child could have liability issues, and you lose the step up in basis.
• No activity in LLC for 2022- Do I need to file tax forms? - if its a partnership and absolutely no transactions, file a ‘no activity’ return. S-corps and C-Corps must file.
• What is bonus depreciation on residential property? Is there a disadvantage for carrying forward a large loss? - Bonus depreciation is just the ‘speeding up’ of straight-line depreciation. No real issues with carrying the loss forward…but it depends on your income.
• What is the best tax structure to set up eBusiness, for a co-owner son and mom - S or C Corp have better tax options than a partnership? Is mom materially participating?
• Pool installation for minor son, is it possible to do a tax deduction? - if it is for medical reasons, it is a possibility. You must document that this is the only option.
• 1099 income, how much to contribute to solo IRA/401K? Employee and employer contributions? – There is a calculation, and a maximum of 66K in 2023, yes, you can- but I wouldn't. Talk to your tax professional
• Federal tax rate for capturing depreciation on property from a previous 1031? - if its 1250 real estate, or 1245, in order to figure this out you have to do a cost seg.
• My AGI is 300K, I gifted to charity 90K – and thought I could also gift 90K in non-cash. Tax preparer said non-cash giving. - There is a 60% limit for cash donations. Non-cash has different limitations, depending on the non-profit.
• My only source of income is from 4X trading, 5K trades a year, 10 hours a day, what are the benefits in creating an entity to pay less taxes? I’m borrowing 15-30K, usually paying interest of 2K a month. - You want to have a note, and records of the interest. A C-corp would allow for some deductions and reimbursements, and be able to write off expenses. 

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