Masonry Magazine December 1988 Page. 14
2. Consider issuing a tax-free preferred stock dividend. See H-2 below for advantage.
3. Consider a stock option or bonus plan, either qualified or non-qualified.
4. If new stock financing is contemplated, make it Section 1244 stock.
5. Consider income and estate tax implications of a recapitalization, redemption, gifts or other transfer of ownership techniques.
H. Earnings and Profits
1. Pay tax-free dividends if there are no current or accumulated earnings.
2. Pay dividends. Although normally this is a no-no, it could help an accumulated earnings problem. Also, if preferred stock is held by low-bracket family members (except for your children under 14 years old), dividends may help more than hurt.
3. Time dividends for the best tax advantages of the stockholders usually declare in current year, pay in next year.
4. Document reasons for accumulating earnings in excess of $250,000 ($150,000 if a professional corporation) and recite in corporate minutes. Retain all backup documentation.
I. Look at every other asset and liability on the balance sheet to determine if anything can be done taxwise.
# If Business Has a Cash Shortage
1. If corporation overpaid estimated income tax, file a quickie refund claim using Form 4466 with 2½ months of year-end.
2. If the business has a qualified profit-sharing plan, get an automatic six-month extension; can still deduct payments for the current year, even though the actual payment is not made until 8½ months after the end of the fiscal year.
3. Charitable contribution-Fix liability by corporate minutes before year-end; get current deduction, but have 2½ months after year-end to make payment.
4. Make charitable contribution in property; can deduct up to twice the cost of inventory.
# Cash-Basis Taxpayer
1. Same as 2 above for a qualified plan.
2. Desire to reduce income
a. Pay bills before year-end.
b. Defer billing.
c. Prepay expenses, noninventory items.
WECK® Glass Blocks
Quality Glass Products since 1900
Design-Patent
Design-Patent
NUBIO clear or goldtone
AKTIS clear only
CLEAR VIEW clear only
FORTRESS = Security
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X-RIB clear only
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14 MASONRY-NOVEMBER/DECEMBER, 1988