tax-law

name	tax-law
description	Tax law skill for tax compliance, planning, and disputes. Use when the user needs assistance with federal or state taxes, tax planning, IRS matters, tax structuring, corporate taxes, or international tax. Triggers on keywords like "tax", "IRS", "income tax", "corporate tax", "tax planning", "deduction", "tax credit", "1031 exchange", "transfer pricing", "SALT", "tax audit".

Tax Law

This skill provides expert guidance for tax compliance, planning, and controversy matters.

Core Capabilities

1. Tax Compliance

• Federal and state filing requirements
• Corporate, partnership, and individual returns
• Employment taxes
• Sales and use tax

2. Tax Planning

• Entity selection
• Transaction structuring
• Compensation planning
• Estate and gift planning

3. Tax Controversy

• Audit representation
• Appeals
• Tax court litigation
• Penalty abatement

4. International Tax

• Cross-border transactions
• Transfer pricing
• FATCA/CRS compliance
• Treaty planning

Entity Taxation Overview

Entity Selection Tax Comparison

Entity	Tax Treatment	SE Tax	Losses	Income Splitting
Sole Proprietorship	Pass-through	Yes	Deductible	No
Partnership/LLC	Pass-through	Yes (active)	K-1 to partners	Yes
S Corporation	Pass-through	No on distributions	K-1 to shareholders	Limited
C Corporation	Double taxation	No	Trapped in corp	N/A

C Corporation Tax Rates (2024)

• Flat 21% federal corporate rate
• State taxes vary (0% to ~12%)

Individual Tax Rates (2024)

Rate	Single	MFJ
10%	$0-$11,600	$0-$23,200
12%	$11,601-$47,150	$23,201-$94,300
22%	$47,151-$100,525	$94,301-$201,050
24%	$100,526-$191,950	$201,051-$383,900
32%	$191,951-$243,725	$383,901-$487,450
35%	$243,726-$609,350	$487,451-$731,200
37%	Over $609,350	Over $731,200

Pass-Through Deduction (§199A)

• 20% deduction for qualified business income
• Subject to W-2 wage/property limitations at higher incomes
• Specified service trades excluded at higher incomes
• Phase-out: $191,950 single / $383,900 MFJ (2024)

Corporate Tax Issues

M&A Tax Structuring

Structure	Tax to Seller	Tax to Buyer
Stock sale	Capital gains	Carryover basis
Asset sale	Ordinary + capital	Stepped-up basis
338(h)(10)	Treated as asset sale	Stepped-up basis
Type A Merger	Tax-free (if qualified)	Carryover basis
Type B Stock-for-Stock	Tax-free (if qualified)	Carryover basis
Type C Assets-for-Stock	Tax-free (if qualified)	Carryover basis

Tax-Free Reorganization Requirements

• Business purpose
• Continuity of business enterprise
• Continuity of shareholder interest (varies by type)
• Step transaction doctrine considerations

Net Operating Losses

• Post-2017 NOLs: 80% of taxable income limitation
• Indefinite carryforward (no carryback except farms/insurance)
• §382 limitations on change of ownership

Employment Tax

Payroll Tax Rates (2024)

Tax	Employee	Employer	Wage Base
Social Security	6.2%	6.2%	$168,600
Medicare	1.45%	1.45%	Unlimited
Additional Medicare	0.9%	-	$200,000/$250,000
FUTA	-	0.6%	$7,000

Worker Classification

Employee vs. Independent Contractor (IRS factors):

1. Behavioral control
2. Financial control
3. Relationship type

Consequences of Misclassification:

• Back employment taxes
• Penalties and interest
• Benefit plan issues
• State unemployment taxes
• Workers' compensation

Sales and Use Tax

Nexus After Wayfair (2018)

• Physical presence not required
• Economic nexus thresholds (typically $100K sales or 200 transactions)
• Marketplace facilitator laws

Common Exemptions

• Resale
• Manufacturing equipment
• Certain services
• Food (varies by state)
• Nonprofits (varies)

International Tax

US International Tax Framework

Outbound (US companies investing abroad):

• Worldwide taxation with foreign tax credit
• GILTI (Global Intangible Low-Taxed Income)
• Subpart F income
• BEAT (Base Erosion and Anti-Abuse Tax)
• FDII (Foreign-Derived Intangible Income deduction)

Inbound (Foreign companies in US):

• ECI (Effectively Connected Income) taxed at regular rates
• FDAP (Fixed, Determinable, Annual, Periodical) income subject to withholding
• FIRPTA (Foreign Investment in Real Property Tax Act)
• Branch profits tax

Transfer Pricing

Methods:

1. Comparable Uncontrolled Price (CUP)
2. Resale Price Method
3. Cost Plus Method
4. Comparable Profits Method (CPM)
5. Profit Split Method

Documentation Requirements:

• §6662(e) penalty avoidance
• Country-by-country reporting (large MNEs)
• Master file and local file

Tax Treaties

Common Benefits:

• Reduced withholding rates
• Permanent establishment threshold
• Tie-breaker rules for residence
• Limitation on benefits

Tax Controversy

Audit Process

Correspondence Audit → Examination (Field/Office) →
30-Day Letter → Appeals Conference →
90-Day Letter → Tax Court Petition or Pay and Sue

Penalty Abatement

Reasonable Cause Factors:

• Ordinary business care and prudence
• Reliance on professional advice
• First-time abatement (clean compliance history)
• Undue hardship
• Ignorance of law (limited circumstances)

Common Penalties:

Penalty	Rate	Code Section
Failure to file	5%/month, max 25%	§6651(a)(1)
Failure to pay	0.5%/month, max 25%	§6651(a)(2)
Accuracy-related	20%	§6662
Fraud	75%	§6663
Substantial understatement	20%	§6662(d)

Statute of Limitations

Situation	Period
General	3 years from filing
>25% omission	6 years
Fraud	Unlimited
No return filed	Unlimited

Common Planning Strategies

Individual

• Retirement account contributions (401k, IRA)
• Health Savings Account (HSA)
• Charitable giving strategies
• Capital loss harvesting
• Timing of income/deductions
• Qualified Opportunity Zone investments

Business

• Entity selection optimization
• Timing of asset purchases (§179, bonus depreciation)
• R&D tax credits
• Work Opportunity Tax Credit
• State tax incentives
• Cost segregation studies

Real Estate

• 1031 like-kind exchanges
• Opportunity Zones
• Depreciation strategies
• Passive activity loss planning
• REIT structures

Key Tax Resources

Source	Content	URL
IRS.gov	Official guidance, forms	irs.gov
Tax Court	Opinions, rules	ustaxcourt.gov
Treasury	Regulations, treaties	treasury.gov
Tax Notes	News, analysis	taxnotes.com
BNA/Bloomberg Tax	Research platform	bloombergtax.com

Integration with Other Skills

• corporate-ma: Transaction tax structuring
• legal-research: Tax authority research
• compliance-tracking: Tax compliance monitoring
• international-arbitration: Tax treaty disputes
• bankruptcy: Tax claims in bankruptcy

Reference Files

For detailed guidance:

• references/entity-selection.md - Entity comparison analysis
• references/audit-defense.md - IRS audit procedures
• references/international-tax.md - Cross-border planning