The current economic crisis, particularly in the real estate sector, has left many businesses scrambling to find ways to reduce or eliminate debt obligations. While opportunities do exist, many must be carefully planned upfront in order to avoid unwanted, burdensome tax consequences. Many attempts by debtors to reduce, modify, or eliminate their obligations are met with federal income tax consequences not originally intended by any of the parties involved. Among those are triggering of Cancellation of Indebtedness (COD) income, realizing “phantom” gains on foreclosure of properties,
and producing inequitable results to investors in flow thru entities (i.e. partnerships, S Corporations, etc.) Whatever the situation, planning is crucial to achieving a desired result. Read more…
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Tax Consequences of Bankruptcy
Wednesday, October 28th, 2009Roth IRA Conversion Planning Strategies
Monday, July 27th, 2009The recent New York Times article “Converting an IRA Into a Roth? How’s Your Crystal Ball?” offers a great explanation of the critical issues that should be considered when deciding to make this conversion. So much of the current information available touts that an IRA conversion is great for everyone and has many people thinking ‘why not?’
Keiter Stephens identified one individual that would be a candidate for conversion. After performing our conversion analysis with varying considerations, we found that in certain circumstances the conversion would be favorable and in others it would not. This further indicates that this is not a quick decision that should be made. Those considering the conversion should have a complete analysis performed to include factors such as future spending needs, estate tax exposure, heirs’ tax and financial posture, and charitable interests before reaching a decision.