Gary Kirk was featured in a Thought Leader Forum on tax reform in the April 20 issue of Puget Sound Business Journal (PSBJ). H.R. 1 — referred to as the Tax Cuts and Jobs Act — enacts sweeping changes to tax laws that impact both individuals and businesses. Kirk discusses what individual families and closely-held businesses need to know about these changes.
Q. PSBJ: You mentioned inquiries that you’ve gotten so far. What has the flow been like?
A. Kirk: I largely work for individual families and closely-held businesses and we’ve been looking at the same things except they’re very client specific. One family may evaluate the benefits from converting from an S Corporation to a C Corporation to take advantage of the lower tax rates for C Corporations under the new tax legislation. Another family may consider moving the opposite direction. The unique characteristics of each closely-held business often lead to the business owners needing to make different decisions. One aspect of that analysis is whether the owners will continue to pay the business profits in the form of dividends to the shareholders, which will lead to double taxation for C corporations and the shareholders, or will they recapitalize the profits into the business at the new C Corporation income tax rates. We also review the new deduction for qualified business income. Will passive rental activity qualify as business income? What types of income-producing activity will qualify as business income? How will trusts take advantage of that? And then, we have a large transaction where the new interest rate restrictions came into play. So, it’s been a different question and a different analysis for every client.