Masonry Magazine December 1988 Page. 20
A. Deferring Income
1. Instead of selling property, give up possession in current year but give buyer:
a. Option to buy in next year, or
b. Lease with option to buy.
2. Use escrow that closes next year.
3. Where services (as opposed to inventory) are source of income, change billing procedure to defer billing into next month or quarter (this will have to be a permanent change).
4. Structure advance payments received to be conditional, or in the form of a loan financing arrangement, rather than as a prepayment.
B. Increasing Income
1. Occasionally the worm turns, and it is advisable to accelerate income for reasons such as:
a. You expect to be in a higher income tax bracket next year.
b. A net operating loss is about to expire-don't lose it!
c. Other carryover benefits will be lost if not currently used.
2. The following techniques should be considered:
a. In general, the reverse of A above.
b. Encourage customer purchases in current year by: deferring payments, giving cash discount (next year), giving an advertising allowance, which you will pay and deduct next year, using your imagination to promote current sales.
c. Sell installment receivables.
d. Sell (and lease back) appreciated Section 1231 property. Section 1245 property (personal) or Section 1250 property (real estate). Take back notes, but do not elect the installment method.
NOTE
The tax law sweeps depreciation recapture into income in year of sale even if the installment method is elected.
Other Year-End Musts and Considerations
A. Minute Book
Review and update the corporate minutes at least annually... smart protection in the event of an IRS audit. Ideally, update at the beginning of each year and start by determining executive salaries for the year to come. Also, document bank loans, retirement plans, compensation plans and other unusual plans. An attorney should guide you. The IRS may say that the corporate minutes are "self-serving," but let's face it, they are the only minutes that exist.
B. Business Information Returns (Form 1099)
Make sure you file every information return required by the law-correctly and on time (most are due by July 31). Heavy penalties (up to $100,000) can be assessed for nonfiling.
C. Alternative Minimum Tax (AMT)
Review possible liability for AMT every quarter. Once liability or possible liability rears its ugly head, monitor monthly and take all possible steps to minimize or eliminate the liability.
D. Liquidation of Certain Corporations
Liquidation of small (under $5 million in value) closely held corporations avoids double tax until January 1, 1989.
E. Leasing
Put building and equipment acquired in separate partnership when purchased and lease them to the corporation. Year-end tax planning is always a win-win situation. Although this article will get you started, it does not attempt to cover every situation, exception or trap. Simply put, it is not a do-it-yourself kit. Get professional help.
Crown American's Headquarters
Crown American's corporate headquarters building, currently under construction in Johnstown, Pennsylvania, boasts many firsts. It is the first building designed by renowned architect Michael Graves to be constructed in Pennsylvania. It is the first major building where Graves has been responsible for both interior and exterior design. It is the first time Kasota sandstone, agate granite and bluestone have been used in combination. And it is also the first time resinous concrete has been pre-cast to form columns, colonades and cornices, and used in conjunction with stone.
Construction is continuing on both the exterior and interior of the building. The three-story rotunda is nearing completion along Vine Street, while masonry work is beginning on the porta cochere section facing Franklin Street. The steel has been set and the underlying concrete block wall is being layed. The final layer of granite and Kasota sandstone will be applied next.
Founded in 1950 as a small masonry contractor, Crown American has grown to become the 12th largest developer in the nation. Assets are valued in excess of $1 billion and include 28 regional shopping malls, 8 community shopping centers, 15 hotels, 2 office buildings and 73 Hess's department stores. Properties span the states of Pennsylvania, New York, New Jersey, Maryland, West Virginia, Virginia, Georgia, Tennessee, Kentucky, Indiana, and North Carolina.
Crown American made retail history in 1979 by becoming the first shopping mall developer to acquire a department store. At that time there were 16 Hess's stores in Pennsylvania. Today, the chain has grown to 73 units spanning a ten state area. Hess's is operated as a wholly-owned subsidiary based in Allentown, PA.
Masonry & Concrete Consultants, Inc.
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20 MASONRY-NOVEMBER/DECEMBER, 1988