Paul Jones | Utah Attorney

The term “inherited IRA” in the internal revenue code describes any IRA after the death of its owner. The beneficiary of the IRA is said to have inherited his or her ownership of the IRA. Inherited IRAs have special tax rules regarding Inerited IRAs. There different rules for surviving spouses from beneficiaries who are not the spouse of the decedent (children, grandchildren, etc.).  If you have inherited an IRA an would like to know what your options are in terms of tax planning, click here to contact Paul to discuss your options.

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Maintaining capital accounts for state law purposes and for tax purposes is a very complicated task. State law and federal tax law can conflict creating disputes about ownership and allocation of profits, losses, and especially in the liquidation of assets. On the tax side of capital account maintenance,  IRC Section 704(a) provides that the partnership agreement should generally control the allocation of each partner’s distributive share of partnership tax items. The Internal Revenue Code recognizes that allocating all partnership items on the same basis to each partner may alter the economic reality of business transactions in the partnership. Partnership taxation has a valuable non-tax feature that permits conducting business with flexibility in allocating and reallocating certain sources of income or expense in disproportionate, contingent, straight-forward, or even undetermined ratios. Thus, if a particular partner in a partnership bears or benefits from a disproportionate economic share of a particular transaction, the Internal Revenue Code recognizes that the partnership should be able to adjust the tax consequences in a corresponding manner. There is also, however, a requirement to maintain substantial economic effect in the allocations that are made. As you can see partnership agreements or operating agreement play an essential role in maintianing capital accounts. The state law aspects of capital accounts is where significant issues can arise in determining and maintaining capital accounts. Disproportionate distributions can, under the laws of many states, dilute a business owner’s ownership in the partnership or LLC. This will generally come as a surprise to most business owners. The point here is that capital account maintenance is an important piece of business entity structuring and operations. If you would like more information about whether your business entity needs to assistance in this area click here to contact Paul.