Tax Treatment of Different Business Activities

April 2017 | Article

Entrepreneurs and businesses are constantly on the lookout for new business ventures and opportunities. Sometimes, these new ventures are viewed as extensions or additions to existing business activities, while other ventures are viewed as new businesses. Whether the activities are viewed as extensions of existing businesses or the establishment of new businesses is often based on economic, marketing, or other business considerations.

Very few businesses make this determination based on tax considerations, even though it can have significant tax implications. Many taxpayers are unaware that the tax law outlines specific requirements for treating businesses as separate and distinct, and this can have a significant impact on the tax treatment of their new and existing business activities, including the tax accounting methods of the businesses.

Andrea Mouw, head of Eide Bailly's National Tax Office Accounting Methods practice, co-authored "Why Do the Separate Trade or Business Rules Matter?" The article, published in Bloomberg BNA Tax Management Real Estate Journal, addresses:

  • The interaction of separate trade or business rules and the rules governing tax accounting methods
  • The criteria identified by the Internal Revenue Service and courts as relevant in determining whether the taxpayer's trades or businesses are separate and distinct
  • Several scenarios in which the separate trade or business issue can arise and the tax implications of the determination in each scenario 

If you operate in the real estate industry, this article has specific and important items of current interest. Click here to read the article.

Questions? Contact your Eide Bailly professional or Andrea Mouw.

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