Business Tax Quarterly Winter 2020
February 01, 2020
In this issue, we address two matters of relevance to current and future business owners: Tax issues related to selling a business, and separately, the business threshold required to tip a hobby into business classification. Each subject requires varying degrees of action.
On the business-selling front, a business owner already mulling a company sale may wish to accelerate the timeline this year. With an upcoming presidential election that may reverse current tax reform, the window may be narrowing to sell a business while tax rates remain at historic lows. As part of the pre-sale process, businesses should review the impact of structure types on a sale as well as purchase price allocation strategies, and state tax implications, which are often overlooked but no less significant than federal tax considerations.
On the matter of turning a hobby into a business, while business losses can be deducted against income, expenses incurred from hobby-related activities remain a personal loss. If an activity already commands significant time and effort, transitioning to business classification may make sense. Before making the switch, though, it’s important to review the scope of current activities and whether they qualify for business classification. Learn the main criteria in this issue.