What is Section 174?

Section 174 of the Internal Revenue Code now defines the treatment of Specified Research or Experimental (SRE) expenditures. Section 174 was amended by the Tax Cuts and Jobs Act of 2017 to require amortization of SRE expenditures paid or incurred for tax years beginning after December 31st, 2021. Section 174 now requires taxpayers to amortize SRE expenditures over five years for domestic research or over fifteen years for foreign research. Both direct and indirect SRE expenditures must be amortized under Section 174.

What is Amortization?

Under Section 174, amortization refers to spreading SRE expenditures over specific periods instead of deducting the entire amount of the expenditures in the year they were incurred. Amortizing the expenditures over several years will cause an immediate increase in a company’s short-term income tax liability. This short-term tax liability increase is something that companies are looking to mitigate.

Is There a Difference Between Section 174 and Section 41 (R&D Tax Credit)?

YES! Section 174 and 41 are NOT the same thing.

Section 174 includes a company’s direct SRE expenditures, which can include payroll, supplies, and patent costs. Section 174 also encompasses a company’s indirect SRE expenditures, such rent, utilities, overhead, and other items in a cause-and-effect relationship with the direct SRE expenditures.

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Multi-State Tax Consulting

In this day and age, nearly every company conducts business across state lines. Are you aware of all the additional taxes and fees you may be liable for?

We assist companies with state sales tax and income tax matters. As companies expand their operations and send salespeople across the country, or sell to consumers in other states via the internet, they create into nexus (or taxable presence) and have to think about filing in other states. That’s where Miles Consulting Group comes in.

We help companies answer questions on multi-state tax compliance:

• Where do you have nexus creating activities?
• What are the rules? What are next steps?
• When was nexus created? When should you begin filing?
• How much retroactive exposure has been created? Can we help you reduce it?

As state tax rules change, we help our clients address these questions by bridging the gap between your business and complex state tax laws.

We are often asked these three questions:

1.  Why Is A Nexus Review Important?
2.  Which Activities Cause State Tax Issues?
3. Multi-State Tax Consulting

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Cost Segregation is a highly beneficial and widely accepted tax strategy utilized by owners of commercial and residential rental property to accelerate depreciation deductions, defer taxes, and improve cash flow. A quality study provides the appropriate documentation needed to support the correct classification of depreciable assets related to a building and exterior improvements. It is important to note that a Cost Segregation study does not create new deductions, it simply increases deductions in the early years of ownership. This front-loading of depreciation allows the taxpayer to take advantage of the time value of money.

From a tax perspective, Cost Segregation should be considered routine for all property owners who own or manage real estate. Not only will a study support accelerated depreciation by reclassifying eligible assets into shorter lives it but can provide valuable data to support important tax-centric initiatives during the holding period of the property.

Life Cycle Of Real Estate

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The Supreme Court issued its long-awaited opinion in Connelly v. United States (No. 23-146) on whether a corporation’s obligation to apply the amount of proceeds from corporate-owned life insurance to fund a mandatory redemption of stock on the death of a shareholder reduces the value of the corporate assets (i.e., offsets the insurance proceeds received by the corporation) when valuing the stock in the estate of the deceased shareholder. In a resounding taxpayer defeat by unanimous opinion, the Supreme Court said “no” and resolved a split between the Eighth Circuit in Connelly v. United States, 70 F.4d 412 (2023), and the Eleventh Circuit in Estate of Blount v. Commissioner, 87 TCM 1303 (2004), aff’d in part and rev’d in part, 428 F.3d 1338 (2005).

This fall’s Tax Planning Forum programs will discuss Connelly and a workaround that easily can be implemented in many closely held business situations by using a partnership to own the insurance, rather than the corporation, and thereby not increase the value of a decedent’s stock for estate tax valuation purposes by the corporation’s receipt of insurance proceeds. We will discuss how the partnership should be structured to meet the goals of the shareholders, which mirrors what would have occurred from an economic perspective had the policy been owned by the corporation. We also will delve into how to transfer insurance policies out of a corporation and avoid the impact of the §101(a)(2) transfer-for-value rules that can cause taxation of the life insurance proceeds, if those rules are not carefully navigated. (more…)

Enterprise 720 Quarterly Excise Tax E-File Now Available

Don’t wait until the IRS mandates e-file for forms 720 and 8849. Act now to stay ahead of the game.

Visit and Contact us Today at https://akorefederal.com

Still, filing your Excise Tax Returns through paper? It’s time to switch to digital e-filing and eliminate paper returns. The IRS offers an e-filing option for excise tax forms 720 and 8849, and only Akore Federal Excise Tax E-File Software has the enterprise-level solution.

TaxConnections is excited to introduce AKORE Federal Tax Software by Richard Carrier (CEO):

• IRS Authorized: Akore is the only e-file Provider with enterprise-level security for excise tax e-filing.
• Top-rated Security: Backed by an AKORE Trust Document, ensuring critical security checks and reliability.
• e-File 2024 Q3 and Q4: Get e-File ready now with introductory pricing through 12/31/24.

Flexible E-filing Solutions: Akore Federal provides an e-filing service tailored for everyone—individual tax experts, CPA firms handling hundreds of returns, and large corporate filers. No matter the volume, Akore has you covered.

Join the expanding number of companies utilizing Akore’s Federal e-Filing service to not only expedite your refunds and streamline your tax processes, but also to experience the peace of mind that comes with choosing certified, secure excise tax software. Akore’s existing clients are primarily large enterprises that demand professional support and trusted security certification.

Visit and Contact us Today at https://akorefederal.com

The Supreme Court issued its long-awaited opinion in Connelly v. United States (No. 23-146) on whether a corporation’s obligation to apply the amount of proceeds from corporate-owned life insurance to fund a mandatory redemption of stock on the death of a shareholder reduces the value of the corporate assets (i.e., offsets the insurance proceeds received by the corporation) when valuing the stock in the estate of the deceased shareholder. In a resounding taxpayer defeat by unanimous opinion, the Supreme Court said “no” and resolved a split between the Eighth Circuit in Connelly v. United States, 70 F.4d 412 (2023), and the Eleventh Circuit in Estate of Blount v. Commissioner, 87 TCM 1303 (2004), aff’d in part and rev’d in part, 428 F.3d 1338 (2005).

This fall’s Tax Planning Forum programs will discuss Connelly and a workaround that easily can be implemented in many closely held business situations by using a partnership to own the insurance, rather than the corporation, and thereby not increase the value of a decedent’s stock for estate tax valuation purposes by the corporation’s receipt of insurance proceeds. We will discuss how the partnership should be structured to meet the goals of the shareholders, which mirrors what would have occurred from an economic perspective had the policy been owned by the corporation. We also will delve into how to transfer insurance policies out of a corporation and avoid the impact of the §101(a)(2) transfer-for-value rules that can cause taxation of the life insurance proceeds, if those rules are not carefully navigated. (more…)

Living abroad as a self-employed U.S. expat comes with unique financial benefits, one of which is the Foreign Housing Deduction. This deduction can significantly lower your taxable income by allowing you to deduct certain housing costs from your earnings. This guide will provide a clear and concise understanding of how the Foreign Housing Deduction works, who qualifies, and how to maximize your tax savings.

WHAT IS THE FOREIGN HOUSING DEDUCTION?
The Foreign Housing Deduction allows self-employed expats to deduct foreign housing expenses from their gross income. Unlike the Foreign Housing Exclusion, which applies to employer-provided amounts, the deduction is specifically for those with self-employment income. This can help reduce your tax liability and make living abroad more affordable.

WHO QUALIFIES?
To qualify for the Foreign Housing Deduction, you must:

Have self-employment income.
Have a tax home in a foreign country.
Pass either the bona fide residence test or the physical presence test for an uninterrupted period that includes an entire tax year.
Bona Fide Residence Test: You must be a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year. This means you must establish a residence in the foreign country and intend to live there for a substantial period.
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Living abroad as a self-employed U.S. expat comes with unique financial benefits, one of which is the Foreign Housing Deduction. This deduction can significantly lower your taxable income by allowing you to deduct certain housing costs from your earnings. This guide will provide a clear and concise understanding of how the Foreign Housing Deduction works, who qualifies, and how to maximize your tax savings.

WHAT IS THE FOREIGN HOUSING DEDUCTION?
The Foreign Housing Deduction allows self-employed expats to deduct foreign housing expenses from their gross income. Unlike the Foreign Housing Exclusion, which applies to employer-provided amounts, the deduction is specifically for those with self-employment income. This can help reduce your tax liability and make living abroad more affordable.

WHO QUALIFIES?
To qualify for the Foreign Housing Deduction, you must:

Have self-employment income.
Have a tax home in a foreign country.
Pass either the bona fide residence test or the physical presence test for an uninterrupted period that includes an entire tax year.
Bona Fide Residence Test: You must be a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year. This means you must establish a residence in the foreign country and intend to live there for a substantial period.
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The R&D tax credit is a governmental incentive designed to encourage research and development activities in the US. This credit offers a dollar-for-dollar reduction on federal taxes for qualified expenses related to developing new or improved products, processes, software, technique, formula, or invention.

Although claiming this credit can offer considerable benefits for companies engaged in Research and Development efforts, the process is not without its challenges. Three Common Challenges You May Face while Claiming R&D Tax Credits:

Documentation of Qualified Activities and Expenses

Insufficient documentation is a common challenge with the R&D tax credit. Accurately identifying what constitutes a qualifying R&D activity and having the proper support can be challenging for taxpayers. It is important that the taxpayer implements a system for maintaining records and documentation. While R&D activities must meet specific criteria related to developing new or improved products, processes, or software, having a robust record keeping process is important.
Companies must keep track of their activities and expenses and make sure they are tied to the qualifying activities while adhering to IRS regulations.

Updates To R&D Tax Credit Law

The R&D Tax Code is complex, and lack of awareness and understanding is a common challenge for the taxpayer. Staying informed of any updates in tax legislation is crucial. Being up to date ensures an understanding of how changes to the code might affect your company’s qualifying R&D activities

To overcome the challenge of ever-changing tax laws, taxpayers should engage experts who specialize in R&D tax credits
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