compromise impossible: from jay katz' tools & techniques of financial & tax planning

Tool & Techniques World of Financial & Tax PlanningBy Jay Katz

Stay Tuned for Offer in Compromise Impossible.

The Tools & Techniques of Income Tax Planning www.NationalUnderwriter.com


Does a Beleaguered Owner Relaunched by Kitchen Nightmares or Bar Rescue Eventually End Up in Tax Deficiency Purgatory?

When Gordon Ramsey or Jon Taffer leaves, does the IRS come a calling?



Any owner on the verge of closing would gladly allow Ramsay or Taffer to transform the failing restaurant or bar from a dump to something fancy smancy.

However, can the saved owner afford to pay the tax piper for the value received?



Here’s the drill. A beleaguered restaurant or bar owner who swears to the high quality of the freezer burned food rotting in a bacteria and rat poop infested freezer heated in a non-functioning microwave from the ‘70s in a roach infested kitchen reaches out to Gordon Ramsay or Jon Taffer for help because he or she cannot imagine why the business is failing.

In spite of the owner’s insistence that the food is awesome, the patrons have stopped coming. Mountains of unpaid bills including delinquent taxes (most likely payroll) piled high on the owner’s desk in a makeshift cluttered office are indicative of the financial despair of the owner.



In most cases, the economy or a disrespectful staff, or both, (never the food or the owner) are the blame, or so says the owner. Go figure.



After hearing the barrage of excuses and finger pointing, Ramsay scratches his head and says “Right.” Then, Ramsay samples each “dish” on a menu the size of a telephone book comparing the food unfavorably to inedible scraps he would not even feed to a dog; and, of course, on camera, spitting it out in disgust.

In spite of Ramsay’s profanity laced bleeped out assertions that the owner is delusional for not acknowledging indisputable evidence that the food is crap, he or she stubbornly insists that it is the best food in town loved by the loyal diners (of which there are none).



Predictably, after 50 minutes of being reamed out, degraded and exposed as a selfish and disrespectful owner who has “given up” or “doesn’t care” on national television, there is an epiphany and the poor soul suddenly “gets it.”

Perhaps by divine intervention, the owner realizes that the Ramsay/Taffer tongue lashing rants were intended to be constructive criticism rather than the personal character assaults they had initially seemed to be.



Finally, there is the ultimate happy ending. Miraculously and literally overnight, Ramsay’s crew of carpenters, designers and electricians the size of a small (or not so small) regiment transforms the roach infested dump that should have been condemned into a five star fine dining establishment.

The transformation often includes replacing the nonfunctioning microwave with high tech state of the art kitchen equipment, a professional cleaning, creating and installing a new glitzy eye catching sign, a complete inside and outside renovation (i.e., new floors, art work, high definition televisions, lighting and other expensive décor) and maybe an executive chef to run the kitchen for a period of time.



So who pays for the transformation? Certainly not the hopelessly in debt owner. Obviously, the network pays.

Although I am not privy to the contract between the owner and the network, the bargained for consideration is most likely the owner’s unconditional blessing to allow the network to air his or her humiliation to a national audience.



Finally, the tax question. After an exhaustive review of the Internal Revenue Code, there is no provision that proclaims the economic value, i.e., the cost of such a transformation to be tax-free. In other words, swapping humiliation for improvements is not considered a tax-free like kind exchange.

So, if it is all taxable, an owner unable to pay delinquent payroll tax (among other bills) probably cannot pay the tax on the transformation? So, in the end, did the owner go from restaurant or bar hell to tax liability purgatory? Stay tuned for Offer in Compromise Impossible.



If this type of tax discussion strikes your fancy, join Jay Katz’ Linkedin Group:

The Tools & Techniques World of Financial and Tax Planning.


https://www.linkedin.com/groups/Tools-Techniques-World-Financial-Tax-8146260




Jay Katz is also the author of The Tools & Techniques of Income Tax Planning, 4th Edition--a single-volume reference that takes the reader through all the income tax topics your clients may encounter—no matter where they originate—providing easy-to-understand, practical guidance for situations that are often confusing. The Tools & Techniques of Income Tax Planning, 4th Edition, provides everything you need to put the optimal strategic plan in place, while taking into consideration the tax-related elements of:• The American Recovery and Reinvestment Act• The Affordable Care Act• The American Taxpayer Relief Act

Learn more today.


http://www.nationalunderwriter.com/the-tools-techniques-of-income-tax-planning-4th-edition.html

The Tools & Techniques of Income Tax Planning | www.NationalUnderwriter.com

compromise impossible: from jay katz' tools & techniques of financial & tax planning

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