Confession - this is the second newsletter I wrote this week. The first one was a wrap-up of the last few weeks talking about how business owners can turn their business finances around in three steps - accounting, tax, and cash forecasting. But it felt bland AF so I'm shelving it for now. If you want to read it, let me know. This week, what's really been on my mind is partnership allocations. ๐ฌ Mainly because we finally hit our stride and hit a record number of partnership returns filed for...
12 days agoย โขย 3 min read
Last week, we talked about why basic accounting is critical to small business owners - including the extreme real example of having the business valuation move by 7 figures in the wrong direction. If you missed it, check out the previous issues link at the bottom of this email. ๐ But accounting is the boring bit. Once we feel good about our reporting, nailing down the tax strategy is the next big project. ๐๏ธ That's because taxes are the average highest single cost over the taxpayers lifetime....
19 days agoย โขย 6 min read
โ ๏ธ First - welcome to the new layout of The Plug. I'm still bringing the core content but have added a section below for the latest tax and finance news & some ways I could use your help to grow the impact of this letter. As always, let me know what you think! โ ๏ธ Confidence is everything in business. As a business owner, your team is looking to you for leadership through good times and bad. ๐ And while you can't always predict external impacts, there are some very simple steps you can take...
26 days agoย โขย 6 min read
I've been asked by a few readers to do a deep dive on "basis" - and never one to shy away from nerd-level content ๐ค, what follows is as good as I've got. But what should be said first is that entire careers can be built on basis-specific and basis-adjacent niches. So this can't begin to touch on all the nuance and fringe cases. ๐ซจ But we can get to a really good grasp of what it is, isn't, and why it should matter. Let's dive in. We'll cover the below and hopefully come out better for having...
about 1 month agoย โขย 11 min read
It's officially K1 season. ๐
A time of year filled with anticipation, surprise, and regret - not unlike my wedding night (badum tss) ๐ฐ. But it's also the time of year that many novice investors ๐ถ in private companies and real estate deals start asking questions about their K1s - one of the main deliverables ๐ซด they receive from what may be a significant investment they made. So today, we're going in on the most common questions I get from LPs: Why does the Capital Account Reconciliation look...
about 1 month agoย โขย 7 min read
Interest expense is a part of life for nearly everyone. Unless you're a die hard Dave Ramsey (no hate here) ๐ด๐ป, you likely pay interest expense on your mortgage ๐ก, credit cards ๐ณ, and auto loans ๐. And it's no less prevalent in business. Prior to 1986, all interest expense paid was generally deductible by everyone - people and businesses. Which, if you've ever looked at an interest rate chart for the 1980s, you'd see why this became a serious revenue raising opportunity for the IRS ๐ Cue the...
about 2 months agoย โขย 4 min read
Today we will be taking a pretty deep dive into an ownership structure common in real estate - the Tenancy in Common, or TIC. ๐ข This may be overly deep if you don't care about real estate tax structuring - but it's exactly the thing I nerd out ๐ฅธ about and enjoy so it's what you get today! Below, we'll talk about: What a TIC is and how it's used ๐คทโ๏ธ What are the (lesser-known) rules to run a TIC for tax compliance ๐ What does tax filing look like for TIC and TIC owners ๐ ๐จ Before we dive too...
about 2 months agoย โขย 5 min read
Every Cash Flow Statement I've seen from an accounting software sucks (looking at you, QBO)๐ฟ. It's a shame because the Statement of Cash Flows (SCF) is one of the most practical financial statements to really understand the health of a business. ๐ฉบ If you read the breakdowns of the downfall of Enron, the SCF and related party disclosures were throwing red flags ๐ฉ years before it all came down. So what is the SCF and how can you use it? Let's dig in ๐ I created the meme above to demonstrate how...
2 months agoย โขย 4 min read
๐ง Before we jump in - be sure to listen to Today in Tax Court: Gregory v. Helvering. It's the newest episode and I cover this landmark case on entity structure and business purpose doctrine. ๐ง Episode 6 - Gregory v. Helve... Jan 9 ยท Today in Tax Court 24:28 If you've been following me for a while, you'll know I preach that a core input of entity selection is what the balance sheet will look like. In general, you do not put appreciating assets in a S-Corp without very good reason. ๐
โ๏ธ That...
2 months agoย โขย 4 min read