Bell and Company Wins 2010 Spotlight Award

We are so proud to announce we won form the Governor's Work-life Balance Award the Spotlight Award. The Spotlight Award recognizes unique programs that address the needs of employees and their families.

We were awarded the award for our motto with emphasizes coming to work with a "healthy mind, body and spirit" we have incorporated bicycle riding into our everyday routine. Providing bikes to employees that want to ride. We are so honored to have received this award from the Governor

HIRE Act

Trucking company executives should be aware of certain provisions of the HIRE Act, Congress passed recently.

For 2010, the purchase of trucks, trailers, and other equipment may be written off or expensed on your income statement on the first $250,000 of purchases , subject to a spending cap of $800,000 allowed for the year, amounts purchased over the $800,000 cap will begin to phase out the $250,000 amount on a dollar for dollar basis.

If you hire new employees, you may want to look at the HIRE provisions, which may allow you to skip the 6.2 % required employer‘s share of the payroll tax payment, for the remainder of 2010. You will need to consult with your CFO or outside CPA to discuss what a qualifying employee is. In reading the HIRE provisions, the most interesting section is the eligibility requirement which states that a new employee will not be eligible if the new employee replaces another employee who performed the same job, for the employer, unless the prior employee left the job voluntarily or for cause. The new employee must have been unemployed for the last 60 days, except for 40 hours of employment, which is allowed during the out of work period. The following is a "what if" scenario you may kick around, to determine if your company qualifies for the payroll tax holiday, and the special $1,000 tax credit.

Consider the following: If your trucking company hires a driver, after February 3, 2010, who has been unemployed for 60 days, is hired by your company to drive truck # 109, previously driven by a company driver who left your company on their own accord, to seek other employment, it would appear on the surface that the company could take the payroll tax credit of 6.2 %.
If the new driver earned wages of $45,000, for the 2010 year, then the payroll tax credit computed at 6.2% would be $2790. The credit would apply to the 2nd, 3rd, and 4th quarter, 2010 payroll reporting periods.

In addition, if the new driver, stays a year, on the 2011 corporate tax return filed by the employer, an additional credit of $1,000 would be allowable to offset income taxes incurred by the company, the credit is the lesser of $1,000 or 6.2% of wages, thus the wage limit would be $16,000 in wages paid to reach the cap of $1,000.

This sounds too good to be true, given the nature of turnover in the trucking industry. If you had 100 percent turnover, which is an industry average, you would not be paying much of the payroll tax matching tax of 6.2% on wages paid new drivers hired during the year. More research need s to be done to determine what is meant by job replacement for the former employee who left the job voluntarily or for cause.

If you have any questions please give Richard Bell a call 501.753.9700.

Deductiblity of Covenants Paid Not to Compete

In a recent ruling, Recovery Group, Inc., v. Commissioner, (TC Memo 2010-76), the tax court answers a common question about the sale of a partnership or corporation interest that involves a covenant not to compete. A common scenario for transferring an owner’s interest when the owner leaves a company is that the remaining owners purchase that interest. A purchase price allocation is made between the value of the partnership or stock interest, goodwill, and a covenant not to compete.

The values assigned to each component are more important than you might think. The value assigned to purchase the partnership interest is usually stepped up, and the assets within the partnership receive new values. In order to properly accomplish this, tax elections must be filed. This usually leads to tax deductible assets for the remaining partners in the form of inventory or fixed assets. If a stock interest is purchased, then the value is not currently deductible, similar to buying stock shares in Walmart, until the stock interest is later sold. If goodwill is purchased, the goodwill asset is amortized over 15 years.

This leaves the question about value assigned to the non-compete agreement, and when and how much is deductible. In the case examined by the tax court, $400,000 of the purchase price was assigned to the covenant not to compete and was deducted over the term of the agreement, the following twelve months. The purchase terms of the departing owner’s interest consisted of a down payment of $200,000 and a note for $600,000 over three years. The tax court disagreed with the twelve month deduction, and ruled that the non-compete was akin to goodwill, i.e. an intangible asset, and should be amortized over 15 years, the amortization life of that asset group.

In reviewing this case, it should be noted that the term of the non compete , one year, and the payment period of the non compete , three years, did not govern the deductibility term. In reviewing the tax side of a proposed purchase transaction, covenants not to compete will be treated like goodwill for deductibility purposes.
If you have questions or comments, please let Pancho or Kelly know. You can give them a call at 501.753.9700.

Presdient and First Lady Release 2009 Tax Return

On 4/15/10 the President released their 2009 tax return. I find it interesting the amounts on this return which reported and AGI of $5.5 million and tax of $1.8 million. President Obama earned $5.6 million in book royalties and made charitable contributions of $329,000 to 40 different charities. The President's return can be downloaded at www.whitehouse.gov/blog/2010/04/15/president-obama-and-vice-president-biden-s-tax-returns.

Receivership Instead of Bankruptcy, a new Concept!!!

Receiverships instead of bankruptcy, a new concept!!!

Google, Bell Receivers, LLC, and it will drive you to numerous news sites about a recent project, our firm, Bell Receivers, LLC worked on. The uniqueness of the project was an attempt by a lender and a company to use the concept of a receivership, to operate and manage a troubled company, take the company thru an attempted liquidation of its assets and liabilities, outside the context of a bankruptcy filing. Receiverships usually involve real estate property liquidations and operations, this receivership broke new ground in what receiverships may be able to do, in handling workouts, liquidations or restructurings, outside the context of a bankruptcy filing, in the future. For more information contact Richard or Jeff at Bell Receivers, 501-753-9700.