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Tax Notes Blog

Sales Factor: Other Than Tangible

Written by Gregory Fallon, EA, MST on Friday, 30 August 2013.

Sales Factor: Other Than Tangible

When it comes to apportionment the sales factor is usually the most influential factor.  Many states double weight the sales factor and some have adopted a single sales factor apportionment formula.  There is a growing philosophy that by using payroll and property factors for apportionment states are encouraging businesses to build plants and employ workers out of state. 

The complexity of the sales factor is mainly due to the lack of uniform sourcing rules.   In the past, for the most part, sales of services and other then tangible property (OTTP) were sourced based on income-producing activity. If the taxpayer conducted income-producing activities in multiple states the sales were either apportion based on cost of performance or required that 100% of the sales be apportioned to the state with the greater cost of performance.  Recently, a number of states have adopted market sourcing rules that source sales based on the place of benefit.

Possible Income Tax Benefits for Parents of Dyslexic and ADHD Children

Written by Gregory Fallon, EA, MST on Wednesday, 11 September 2013.

Possible Income Tax Benefits for Parents of Dyslexic and ADHD Children

Many parents with children who are learning disabled fail to take advantage of numerous tax deductions.  The cost of providing learning disabled children with the tools and support they need can be expensive, even with disabilities as common as dyslexia and attention deficit hyperactivity disorder.  Many of these costs, including less obvious expenses such as tuition, tutoring, and special schools, can be deducted as medical expenses, but most taxpayers neglect to do so.  Additionally, starting in 2013, the amount of these expenses combined with other medical expenses must exceed 10% of the taxpayer’s adjusted gross income (1040 line 38) before they can be deducted. Therefore, taxpayers with high incomes may receive no benefit from these medical deductions.

Multi-state S Corp.: Shareholder Abode

Written by Gregory Fallon, EA, MST on Thursday, 29 August 2013.

Multi-state S Corp.: Shareholder Abode

When I start work on a multi-state S Corp. return I first consider where all the shareholders have abode. This is important because if their state imposes income taxes they will be taxed on their worldwide income. For example, If all the shareholders of an S Corp. live in a high tax state such as CA scheming to apportion income out of CA will provide no income tax benefit since they will be taxed on worldwide income in CA (however, it would lower the franchise taxes paid at the entity level). Many states allow credits for taxes paid to other states to prevent double taxation. In effect, use of these credits will simply allocate the total tax bill not lower it. Therefore, filing in states can eliminate income tax contingencies without increasing over all taxes. Many owners believe filing in another state will caused double taxation and fail to consider credits and income apportionment formulas.

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