Section 132 allows employers to provide certain fringe benefits tax-free, but only if they follow specific rules. Jeremy breaks down no additional cost services, like airline employees flying on empty seats, and qualified employee discounts, explaining the 20% cap on services and the gross profit limitation on products. He covers the critical "line of business" requirement, who qualifies as an employee beyond current workers, and why highly compensated employees face stricter rules.

Connect with Jeremy
https://www.linkedin.com/in/jwellstax
https://www.steadfastbookkeeping.com

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This podcast is a production of Earmark Media

Jeremy explores the hobby loss rule through the landmark case of artist Susan Crile, who successfully defended her art business against IRS claims despite reporting losses in nearly all of 25 years. The episode breaks down the nine-factor test used to determine whether an activity has a genuine profit motive, examining how professional conduct, record-keeping, and business decisions matter more than consistent profitability. This case offers crucial lessons for practitioners working with creative professionals, startups, and any clients going through extended periods without turning a profit.

Connect with Jeremy
https://www.linkedin.com/in/jwellstax
https://www.steadfastbookkeeping.com

Subscribe on YouTube
https://www.youtube.com/@TaxinAction

Earn CPE for Listening to This Podcast
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This podcast is a production of Earmark Media

Jeremy wraps up his two-part series on S corporation terminations by diving into what happens after an election ends, whether intentional or inadvertent. He explains the IRS's relief procedures for common mistakes like violating the one-class-of-stock rule, the crucial five-year waiting period before re-electing, and why a terminated S corp doesn't just revert back to an LLC but becomes a C corporation instead. The discussion includes real tax court cases and the specific steps needed to clean up termination issues before the IRS discovers them.

• (00:00) - Introduction and Recap of Part One
• (01:40) - Three Ways to Terminate an S Election
• (03:30) - Administrative Dissolutions at the State Level
• (08:00) - What Happens After S Election Termination
• (13:10) - Inadvertent Terminations Explained
• (17:00) - The One Class of Stock Rule
• (21:30) - Maggard v. Commissioner Tax Court Case
• (26:20) - Profit Interests and Phantom Equity Problems
• (29:40) - IRS Relief for Inadvertent Terminations
• (34:30) - Revenue Procedure 2022-19
• (39:20) - Missing S Election Acceptance Letters
• (42:00) - Filing the Wrong Return Type
• (44:10) - Six Areas of Relief Without a PLR
• (47:10) - Short Year Returns and Pro Rata Allocation
• (51:30) - The Five-Year Rule Explained
• (54:20) - Reverting from C Corp Back to LLC Status
• (56:50) - Final Thoughts and Episode Wrap-Up

Subscribe on YouTube
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This podcast is a production of Earmark Media