20 THE QUEENS COURIER • DECEMBER 21, 2017 FOR BREAKING NEWS VISIT WWW.QNS.COM
Tax Reform Bills Full Of Errors and Conflicts
BY JOHN SAVIGNANO, CPA
The new tax reform bills that passed
the House and Senate were built on
the “need for speed.” Both versions
were rushed along in the hopes of a
final measure arriving on the president’s
desk before Christmas. But haste
makes waste and, in this case, could
result in glitches, misinterpretations
and loopholes opening when others
In fact, the Senate-approved bill –
which includes handwritten additions
that were barely legible – might create
unintended opportunities for wily
taxpayers and tax pros to “game the
system.” The legislation is almost 500
pages long and the lawmakers themselves
are still reading and trying to
understand the finer points.
Start with the basic premise that
the sweeping overhaul of the tax code
would generally take effect on New
Year’s Day without any transition period.
As a result, there will be a sudden
tax impact as individuals and businesses
are forced to cope with a new
ground rules right out of the gate.
Besides the controversial repeal of the
deduction for state and local income
taxes, a slew of other provisions are
cause for concern. For example:
• Under the Senate bill, pass-through
entities such as partnerships, S corporations
and limited liability companies
(LLCs) would be able to take a
23% deduction on earnings. Although
the provision is equipped with guardrails
restricting professional service
firms, other taxpayers may be tempted
to recharacterize their income to take
advantage of this tax break.
• At the last minute, the alternative
minimum tax (AMT) for individuals
and corporations was preserved,
hardly an example of the “tax simplification”
reputably sought by legislators.
Notably, the corporate AMT
would negate the tax benefit of the
research credit available to businesses
on the cutting edge.
• An entire new international
tax regime would be implemented
in addition to the highly-publicized
one-time repatriation tax for
returning profits from overseas. GOP
leaders have already conceded that
the new rules on international taxation
are confusing and require some
adjustments to avoid potential snafus.
It is expected that this item will be a
top priority in conference meetings.
• A provision taxing the investment
earnings of certain private university
endowments has been criticized as
being overly vague. Significantly, the
law doesn’t define an “endowment”
for this purpose, leading to considerable
head-scratching in tax circles.
• In a little-noticed but important
change, investors would have less
flexibility in establishing capital gains
and losses from certain securities
sales. Instead of being able to identify
the shares being sold when you own
multiple blocks of the same security,
you will have to treat the first shares
acquired as being the first ones sold.
This could result in larger taxable
gains or smaller losses due to the sale
of low-basis shares. A comparable
rule would apply to charitable donations
• Currently, the home sale exclusion
is available for the sale of a home used
as your principal residence two out of
the previous five years. The Senate bill
changes the requirement to five out of
the past eight years, a much tougher
hurdle to overcome.
• Because the new law effectively
doubles the standard deduction
to $12,000 and $24,000 for joint filers,
many taxpayers will no longer
itemize deductions. Thus, the itemized
deductions that have survived
the chopping block, such as those
for charitable and mortgage interest,
won’t provide any tax benefit to millions
These are just some of the issues that
will be raised once negotiations begin
in earnest. Of course, you can expect
for the tax reform legislation to take
plenty of twists and turns as it heads
down the home stretch.
John Savignano is a partner with
Savignano Accountants & Advisors
located at 47-46 Vernon Blvd., Second
Floor, in Long Island City. If you have
any questions or require additional
information, please call John at 718-
41-18 Crescent St, Long Island City, NY 11101
47-46 Vernon Blvd, 2nd Floor, Long Island City, NY 11101
Hernan Barona, E.A
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