Jeff Lovelady's letter published in Transport Topics

These Letters to the Editor appear in the Sept. 19 print edition of Transport Topics. Click here to subscribe today.

EOBR Rule

This is in reference to the editorial “Fixing the EOBR Rule” (9-5, p. 4).

What we need to fix the electronic onboard recorder rule — and many other inane decisions by activist jurists — is a little real-world common sense.

Obviously, the plaintiffs went venue shopping and selected the 7th U.S. Circuit Court of Appeals for a reason. Why would you file there instead of Washington, where the Federal Motor Carrier Safety Administration and Congress reside and the rule originated?

Who defended this suit anyway? Of all the reasons to attack it they chose “harassment,” and the defense attorneys couldn’t refute it?

How is a device that accurately records a drivers’ hours more likely to be used to harass them than the current system, which we all know is manipulated daily by drivers themselves in order to maximize driving hours, miles and pay?

How is it that a lawyer couldn’t make that case to a panel of learned jurists? Harassment? That’s the best they could come up with? Harassment?

Surely the world has gone completely mad. Inept lawyers or idiot jurists — we are doomed. Common sense has left the building.

Kevin Mullen
Director, Safety
ADS Logistics Co. LLC
Area Transportation
Chesterton Ind.

Like/Kind Convoy

I was reading the Opinion column in the Sept. 5 issue of TT (“The 1031-LKE Cash-Flow Convoy,” p. 5) and noted that the cash savings on the taxes does not work in 2011 because you can take advantage of the 100% bonus depreciation and, in doing so, the net reduction in the taxable income for a Like/Kind Exchange Program transaction is the same as it would be if you did not elect to use the LKE method.

I thought it would be a good idea to point this out to your readers, especially if they are thinking that they are going to get some extra cash by taking advantage of a 1031 exchange. It would actually cost them money to do the LKE as the 1031 exchange agents charge a fee for this transaction.

Check us out on our website, so you know I am not some nut who does not know what he is talking about.

We have had this question asked and have done some tax projections, etc., to come to this conclusion. Also, our firm has a niche in working with trucking companies.

Assume that you buy 100 trucks as you would in an LKE, and assume they are still $100,000 each — so your basis is $10 million again. Your deduction without an LKE is $10 million, and you claim the $2.5 million as gain on sale of assets. With the LKE you have to reduce your basis in the new assets by the $2.5 million so you only take the 100% bonus on the $7.5 million.

As you can see, the net reduction in taxable income in either the LKE or straight sale is the same — $7.5 million — so there are no tax savings on the transaction.

This only works in 2011. Who knows what is going to happen for 2012?

I enjoy reading your magazine. Thank you for your commitment to the trucking industry.

Jeff Lovelady, CPA
Principal
Bell and Co.
North Little Rock, Ark.

Editor’s Note: We offered the authors of the Sept. 5 Opinion column a chance to respond to the letter above. Their response follows:

The previous commenter makes some important points regarding 100% bonus depreciation and its known applicability for the year 2011. However, as a Qualified Intermediary, we have been diligent in approaching the marketplace to offer solutions for this year and beyond.

LKE strategies are typically long term, reaching out many years into the future. Currently, at the federal level, 100% bonus has proven to offset recognized gains in a way that reduces/eliminates federal tax burdens, but a high number of states have effectively “decoupled” from federal bonus treatment, making the state tax impact a significant one. Additional considerations (for 2011), beyond decoupling, include:

• State net operating loss considerations.

• Federal Alternative Minimum Tax considerations for individual owners of S-corporations and partnerships.

• Ability to utilize used property as replacement property to maximize LKE and bonus benefit.

• Bonus depreciation sunset planning opportunities.

• Utilizing LKE service providers for fixed asset tax compliance and reporting.

• Time and resources needed to “de-institutionalize” a company’s LKE processes.

As you can see, there’s no easy answer and any current research efforts require a comprehensive analysis of all the relevant issues. And, planning around a nearly 100-year-old piece of tax law requires a constant eye on the future. So, for 2012 and beyond, serious tax planning should begin immediately, and LKEs should be part of that analysis. I believe the previous commentary put it best: “Who knows what is going to happen for 2012?”

Stephen Doherty
Director of National Accounts
Accruit LLC
Denver

Recent Article about Bell and Company

We were featured in the August 2011 - The TABloid by TAB Bank as a Vendor Spotlight wanted to share with everyone.

VENDOR SPOTLIGHT // August

Bell & Company
Certified Public Accountants and Business Advisors

Bell & Company is a diversified public accounting and business advisory firm located in North Little Rock, AR that serves a broad range of corporate clients including a sub-specialty in the transportation sector. Since the company began in 1982, they have worked diligently to build expertise in many segments of the accounting field. They provide a wide spectrum of accounting services for small and medium-sized businesses — from cash flow budgeting to counseling on the sale or purchase of a business.

Small and medium-sized business owners and financial officers often face a common challenge — limited access to expert oversight and advice from accounting and finance professionals who focus on and specialize in serving privately-held businesses. As a privately-held, family-owned business, Bell & Company is strongly committed to serving similar businesses.

Their experience in understanding and serving privately-held, family-owned businesses is deeply-rooted. Bell & Company takes great pride in possessing intricate knowledge of the specific issues these businesses face on a daily basis. They know that their success is determined by their client’s success. Therefore, they strive constantly to help their clients improve in operations, accounting and finance, revenue and profitability, decision-making, and efficiency.

Their current clients include businesses and organizations in a wide variety of industries (e.g., transportation, professional, manufacturing, wholesale, and not-for-profits) and ranging in size from $1 million to $250 million in revenue. Their clients know they can count on the team at Bell & Company to provide them with the most proactive, relevant advice that can increase the gross profits of their companies while helping them manage their tax liabilities.

To learn more about Bell & Company, visit www.bellandcompany.net, or call Jeff Lovelady, CPA or Brady Pipkin, CPA at 501-753-9700. //

1099s For Owner Operators

Save time and money this coming January by not preparing and filing unnecessary 1099’s for owner-operators. In general, payments exceeding $600 or more to any non-employee person in a taxable year for services performed must be reported to the IRS by submitting a Form 1099. Section 1.6041-3(d) of the Income Tax Regulations excludes freight payments from being reported on informational returns. What does this mean for you as a trucking company owner? If you have owner-operators, the payments to them are treated as “freight” payments and the issuance of 1099’s is not required. For more information on this topic please contact derick.fortenberry@bellandcompany.net or call Derick at 501.753.9700.

AFTA Truck Rodeo - 2011

We recently attended the AFTA Truck Rodeo held in Beebe Arkansas. We volunteered and help cook and serve hot dogs and drinks, to help raise money for the local fire departments. A good time was had by all that attended.

US/MEX Cross Border Trucking Agreement

Great link regarding US/MEX cross border trucking agreement that was just signed today. http://www.ttnews.com/articles/basetemplate.aspx?storyid=27071&utm_source=alert&utm_medium=newsletter&utm_campaign=newsletter