KROST Quarterly: The Financial Services Issue - Volume 4, Issue 1

VOLUME 4, ISSUE 1

KROST QUARTERLY M A G A Z I N E

THE FINANCIAL SERVICES ISSUE SECTION 1244:

CLAIMING ORDINARY LOSSES FOR SALES OF QUALIFIED SMALL BUSINESS STOCK LENDER MANAGEMENT, LLC TAX CASE STUDY

RESEARCH AND DEVELOPMENT IN THE FINANCIAL SERVICES INDUSTRY WATERFALL CALCULATION

IRC SECTION 1061:

PARTNERSHIP INTERESTS HELD IN CONNECTION WITH THE PERFORMANCE OF SERVICES

FINTECH TRENDS WWW.KROSTCPAS.COM KROST QUARTERLY VOL. 4 ISSUE 1 - THE FINANCIAL SERVICES ISSUE

1

KROSTCPAs.com

CONTENTS

Volume 4, Issue 1 / February 2021 Offices Pasadena (Headquarters) West LA Woodland Hills Phone: (626) 449-4225 Fax: (626) 449-4471 Principals Gregory A. Kniss, CPA Managing Principal Lou Guerrero, CPA, MBT Jason C. Melillo, CPA Jean Hagan So Sum Lee, CPA Douglas Venturelli, Esq. Richard Umanoff, CPA, MBA Christopher H. Gaynor, CPA, MS Stacey R. Korman, CPA, MST Production, Copy, and Design Bethany Wolfe, Editor-in-Chief Anna Chen, Editor Jackie Do, Graphic Designer Diana Vu, Assistant Editor Mayra Silva, Assistant Editor Inquiries may be sent to: admin@KROSTCPAs.com

4 6 8 12 14

All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law.

By Matthew Weber, CPA, MAcc

Lender Management, LLC Tax Case Study

By Adrian Ong, CPA; Frank Xu, CPA; and Adam Saad

Research and Development in the Financial Services Industry Guest Contributer: Kurt Pfisterer

Waterfall Calculation

By Rebecca Hickle

IRC Section 1061: Partnership Interests Held in Connection with the Performance of Services

By Matthew Weber, CPA, MAcc and Randall Poe

Stock Photography Adobe Stock - Used with permission Copyright © 2021 by KROSTCPAs.com

Section 1244: Claiming Ordinary Losses for Sales of Qualified Small Business Stock

17

FinTech Trends With Paren Knadjian

THE FINANCIAL SERVICES ISSUE KROST Quarterly is a digital publication released by KROST CPAs & Consultants headquartered in Pasadena, California. Established in 1939, this full-service Certified Public Accounting and Consulting firm serves clients across a variety of industries. With a focus on recognizing opportunities and creating value, KROST equips clients with tools to make better business and financial decisions for the future.

KROST QUARTERLY VOL. 4 ISSUE 1 - THE FINANCIAL SERVICES ISSUE

1

INTRODUCING KROST’S FINANCIAL SERVICES TEAM Our team, led by industry expert Matthew Weber, offers specialized niche services in a narrow band of industries including financial services. Our focus is on management companies and their investment vehicles. We have assisted the management companies of Hedge Funds, Money Managers, Private Equity Firms and their principals with a wide range of accounting and tax services for the last 15 years. We are prepared to address the implications of specific financial industry issues.

LEARN MORE 

Our team produces regular KROST Insights posted to our website. This issue will highlight some of the hot topics in the Financial Services industry including Section 1244 claims, the Lender Management, LLC

SUBSCRIBE

case study, waterfall calculations, and more.

2

Receive KROST news right to your inbox! To subscribe, click here.

KROST QUARTERLY VOL. 4 ISSUE 1 - THE FINANCIAL SERVICES ISSUE

Greg Kniss, CPA Managing Principal

FINANCIAL SERVICES

Team at KROST 360° Service Model •

Carried interest

•

Qualified Small Business Stock (QSBS)

•

Special allocations of incentive fees

•

Mark-to-market treatment and elections (Section 475)

•

Regulated futures contracts (Section 1256)

•

Wash sale rules

•

Specialized profit and loss allocations for syndicators and investors

•

Unrelated business income for tax-exempt investors

Matthew Weber, CPA, MAcc

•

Federal withholding issues for foreign investors

•

Self-employment tax issues for traders and management fee income

Senior Manager - Tax

•

Cryptocurrency transactions

Lou Guerrero, CPA, MBT Principal - Tax

Experience You Can Trust Our Sector Expertise

Stacey R. Korman, CPA, MST Principal - Accounting

Paren Knadjian Practice Leader M&A and Capital Markets

•

Hedge Funds

•

Money Managers

•

Private Equity Firms

•

Venture Capitalists

•

Family Offices

“The experienced, multi-disciplined teams at KROST can provide services for very specific needs relating to financial services, as well as a holistic approach to tackling multiple challenges as a true partner in the development of your business.”

KROST QUARTERLY VOL. 4 ISSUE 1 - THE FINANCIAL SERVICES ISSUE

3

SECTION 1244:

CLAIMING ORDINARY LOSSES FOR SALES OF QUALIFIED SMALL BUSINESS STOCK

By Matthew Weber, CPA, MAcc | Senior Manager - Tax

A

s a way of encouraging investment in small businesses, Internal Revenue Code Section 1244 permits the recognition of an ordinary loss instead of a capital loss on the disposition of qualified small business stock. This is beneficial because ordinary losses offset ordinary income (taxed at higher rates). In comparison, capital losses offset capital gains (taxed at lower rates) and are capped at $3,000 per year with any excess amount carried forward to the following year. Further, a loss that qualifies as an ordinary loss under Section 1244 is treated as a trade or business loss in computing the shareholder’s net operating loss (NOL). As such, a loss is allowed for NOL purposes without being limited by non-business income.

MAXIMIZING ORDINARY LOSS TREATMENT There are however, limitations on the recognition of a Section 1244 loss. The annual maximum deductible loss is $50,000 for a single taxpayer or $100,000 for married taxpayers filing jointly (Sec. 1244(b)). Any loss in excess of the annual limitation is simply treated as a capital loss, subject to capital loss rules. A shareholder who expects to recognize a Section 1244 loss in excess of the applicable annual limitation should plan to split up the disposition of the qualified stock into multiple years in order to maximize the ordinary loss treatment.

No election is necessary for a Section 1244 loss, but multiple requirements must be met for corporate stock to qualify as qualified small business stock under Section 1244. First, the corporation must be a small business corporation. If the total amount of cash and property received by the corporation for issued stock (or as capital contributions /

4

KROST QUARTERLY VOL. 4 ISSUE 1 - THE FINANCIAL SERVICES ISSUE

additional paid-in capital) does not exceed $1 million (Secs. 1244(c)(1)(A) and (3)(A)), then a domestic corporation (a C-corporation or an S-corporation) is considered a small business corporation. This determination is made each time stock is issued and includes the amount received by the corporation when issuing that specific stock. In the year the $1 million threshold is exceeded, the corporation may designate the shares to be treated as Section 1244 stock. If the corporation does not make a designation, the remaining Section 1244 benefit is allocated among all shares issued that year (Regs. Sec. 1.1244(c)-2(b).

THE GROSS RECEIPTS TEST The Gross Receipts Test for the Corporation (Sec. 1244(c)(1)(C)) is another requirement for qualified small business stock in the year the shareholder realizes the loss. Under the Gross Receipts Test, during the five most recent tax years ending before the date the loss was realized by the shareholder (or the life of the corporation, if less than five years), the corporation must have derived more than 50% of its aggregate gross receipts from sources other than royalties, rents, dividends, interest, annuities, and sales or exchanges of stocks or securities. A corporation is exempt from the Gross Receipts Test if the corporation’s cumulative deductions (excluding the NOL carryover and carryback deduction and the special dividends-received deductions) exceed its cumulative gross income during the five-year testing period (Sec. 1244(c)(2)(C)). However, even if the gross receipts test is passed or the corporation is exempt from the test, the stock will be considered qualified small business stock under Section 1244 only if the corporation is an operating company, not a holding or investment company, for the five-year testing period (Regs. Sec. 1.1244(c)-1(e)(2)).

It is critical that founders, investors, and employees who have an opportunity to take advantage of Section 1244 engage the right professionals for advice. In addition, it is prudent for corporations to document their Section 1244 status at each stock issuance. 

CONTACT MATTHEW 

CONTACT MATTHEW 

KROST QUARTERLY VOL. 3 ISSUE 3 - THE REAL ESTATE ISSUE

5

LENDER MANAGEMENT, LLC TAX CASE STUDY

By Adrian Ong, CPA | Senior - Tax; Frank Xu, CPA | Senior - Tax; and Adam Saad | Staff - Tax

T

he Tax Cuts and Jobs Act, TCJA or simply Tax Reform, was enacted in December 2017 and made several significant changes to individual income tax, including reforms to itemized deductions. On December 13, 2017, the Lender Management, LLC tax case concluded that a family office is treated as a business and is permitted to deduct its expenses pursuant to Internal Revenue Code Section 162. This change to the tax rule is particularly significant because it provides planning opportunities for taxpayers, especially family offices, with similar facts and circumstances to reorganize their assets and take full advantage of the deduction of family office expenses under this code.

BACKGROUND According to the Lender Management, LLC v. Commissioner of Internal Revenue, T.C. memo. 2017-246, Lender Management, LLC was initially owned by Marvin Lender Trust and Helaine G. Lender Revocable Trust. On December 23, 2010, Keith Lender Trust acquired a 99% interest by assignment in Lender Management, LLC. From December 23, 2010 through December 31, 2012, Marvin Lender Trust owned the remaining 1% interest. After December 23, 2010, Keith Lender, through Keith Lender Trust, acted as Lender Management’s managing member. On July 9, 2015, the Commissioner of Internal Revenue Service (IRS) issued notices of final partnership administrative adjustment to Lender Management, LLC disallowing deductions claimed pursuant to Section 162. Instead, they allowed the deductions under Section 212 because the family office was not engaged in trade or business rather than investment activities. Expenses under Section 162 are treated as fully deductible business expenses, whereas expenses under Section 212 were previously deductible as miscellaneous itemized deductions with a 2% of the adjusted gross income floor until it was suspended with tax reform in 2017.

COURT RULING The court focused primarily on two items to reach its conclusion: the activities of Lender Management, LLC and the family relationship and connections that existed between the managing members of the Lender Management, LLC and the owners of the investment LLCs. The IRS argued that Lender Management, LLC, an investor, managing their own assets is not considered

6

KROST QUARTERLY VOL. 4 ISSUE 1 - THE FINANCIAL SERVICES ISSUE

engaged in trade or business. However, there is no clear definition of trade or business in the tax code.

A factor that distinguishes the conduct of a trade or business from a mere investment is the business’ primary objective to generate income or profit. They have the obligation to meet the investors’ needs to earn the highest return on their investments. Keith Lender, the Chief Investment Officer, worked approximately 50 hours per week for Lender Management, LLC, and he spent most of his time looking for new investment opportunities. The company did pay him a sizeable salary for the work he performed to generate income. In addition, the company also paid other operating expenses, such as rents, repairs, and maintenance to operate as a business. Because of that, the court defined that Lender Management, LLC’s activities went far beyond those of an investor and determined Lender Management, LLC was carrying on a trade or business for the purpose of Section 162.

Since Lender Management, LLC maintained a business relationship and provided valuable services to its clients for compensation, the court concluded that Lender Management, LLC was carrying on a trade or business and was entitled to deduct its expenses under Section 162.

IMPACT OF LENDER MANAGEMENT, LLC TAX CASE FOR TAX PLANNING The Lender Management, LLC case provides a roadmap for other businesses that operate with the purpose to generate income to take advantage of the deduction for family office expenses and improve their bottom line. Taxpayers should reexamine their specific situation to determine if there is an opportunity under Section 162. 

LEARN MORE 

KROST QUARTERLY VOL. 4 ISSUE 1 - THE FINANCIAL SERVICES ISSUE

7

RESEARCH AND DEVELOPMENT IN THE FINANCIAL SERVICES INDUSTRY Guest Contributer: Kurt Pfisterer KBKG Tax Credits, Incentives, & Cost Recovery

T

he Section 41 credit for increasing research activities was originally enacted in 1981. At the time, it was a temporary code section and stayed as such until it was permanently extended as part of the Path Act of 2015. The Section 41 credit is a federal statute. However, most states offer some form of research credit that borrows from the federal statute. Although there are billions of dollars worth of research credit claims every year in the United States, there are still billions of dollars of credits that go unclaimed. Primarily, this is due to taxpayers being unaware of the credit. This article will attempt to clarify some of the nuances of the Research & Development (R&D) Tax Credit for financial services companies.

APPLICATION One of the common misconceptions surrounding the R&D Tax Credit is that participants must wear lab coats and use test tubes in order to qualify for the credit. This could not be further from the truth. In reality, the definition of R&D for tax credit purposes is relatively broad. Companies are able to qualify activities beginning with the development of concepts and extend to the point where a product, process, formula, or other business component is ready to be commercially released.

In order to qualify for the R&D Tax Credit, a company must meet the 4-Part Test.

1 2 3 4 8

1. Technological in Nature (§41) The activity performed must fundamentally rely on principles of: • Physical Science; • Engineering; or • Biological Science; • Computer Science 2. Permitted Purpose (§41) The activity must relate to a new/improved business component’s: • •

Function; Performance;

• •

Reliability; or Quality

3. Elimination of Uncertainty (§174) The activity must be intended to discover information to eliminate uncertainty concerning the capability, method or design for developing or improving a product or process.

4. Process of Experimentation (§41) The taxpayer must engage in an evaluative process designed to identify and evaluate more than one alternative to achieve a result For example: modeling, simulation or a systematic trial and error methodology.

KROST QUARTERLY VOL. 4 ISSUE 1 - THE FINANCIAL SERVICES ISSUE

To the extent a project meets all four parts of this test, companies are able to capture the expenses associated with the project towards the research credit. Generally, there are three types of expenses that qualify for the research credit.

They are wages, supplies, and contract research.

Qualified wages are generally defined as the qualified portion of an employee’s W-2, Box 1 amount.

Qualified supplies are items that are used and consumed in the research process. For example, materials used in prototypes.

Supplies cannot be capital in nature. Therefore, taxpayers cannot qualify land and equipment. Additionally, general and administrative expenses such as travel, meals and entertainment, and telephone expenses cannot be captured as qualified supplies.

Qualified contract research is 65% of the payments made to third-parties for purposes of qualifying research.

FINANCIAL SERVICES BENEFITS Private equity groups who have majority ownership of entities in the following industries should consider the benefits of the R&D Tax Credit: • • • • • • • •

Aerospace Architectural & Engineering Automotive Chemical Computer Software Cosmetics Electronics Engineering

• • • • • • • •

Equipment Food & Beverage Hardware Development Manufacturing Medical Pharmaceuticals Telecommunications Tooling, jigs, molds

MAJORITY CONTROL AND CONTROLLED GROUPS CONTACT JON  Pursuant to IRC §41(f)(1), members of a controlled group of corporations and trades or businesses under common control are treated as a single taxpayer for purposes of computing the research credit. Generally, a controlled group of corporations KROST QUARTERLY VOL. 4 ISSUE 1 - THE FINANCIAL SERVICES ISSUE

9

consists of any group of corporations that are connected by stock ownership of greater than fifty percent (>50%). Similar rules apply when determining if trades or businesses are under common control.

Private equity firms will first need to determine which companies they have majority control of. Next, they will need to determine which of these companies performs activities that would qualify for the research and development tax credit.

If they have multiple entities performing research and development, they will need to compute the credits for each of the entities and then allocate the credits to each of those entities.

PAYROLL TAX OFFSET Private equity groups may be able to benefit from the Research & Development Tax Credit even if they do not produce any taxable income. Effective for tax years beginning after December 31, 2015, qualified small businesses can now use up to $250,000 of research credits to offset a portion of their payroll tax. A qualified small business is defined as a person or entity with less than $5 million dollars in gross receipts and no gross receipts before the five-year period ending with the current period. Additionally, taxpayers cannot make the election for more than five years.

CONCLUSION The Research and Development Tax Credit is a tax strategy that should be examined by any private equity groups that maintain ownership in industries that develop products, processes, formulas, or other business components that are ready to be commercially released. While millions of dollars are claimed each year, there are still countless dollars left unclaimed by qualifying businesses. An assessment can quickly and easily determine if there is an opportunity to take advantage of this federal and, often times, state benefit. 

LEARN MORE 

PPP SERVICES KROST's PPP Loan Experts are here to help with:

• PPP Loan Application • PPP Loan Management • PPP Loan Forgiveness

What is KROST’s Track Record with PPP Loans?

KROST’s subject matter experts have been consulting with Paycheck Protection Program (PPP) borrowers throughout the process, from assistance with loans to consulting on loan allocation, to ensure expenses are permissible and maximize forgiveness. To date, KROST has assisted more than 350 entities in obtaining and managing over $500 million in PPP and Economic Injury Disaster Loans (EIDL). To learn more, visit: KROSTCPAs.com/services/ppp-services.

WATERFALL CALCULATION

By Rebecca Hickle | Senior - Assurance and Advisory

T

he purpose of a waterfall calculation is to ensure that each participant in an investment group or pool is given the correct amount of distributions from the proceeds of the investment. While the “waterfall” is an accurate visual for the way proceeds are distributed in one tier after another, it can also be a metaphor for how complicated and harmful a small miscalculation can be. By breaking down the calculation into five distinct areas of focus, we can navigate some of the common pitfalls of waterfall distributions.

1) UNDERSTANDING THE NON-FINANCIAL Although the waterfall distribution is fundamentally a series of calculations, several non-numerical items inform the computation and need to be considered before beginning the calculation. The best place to start is by reading the partnership agreement in full. Understanding the difference between the general and limited partners, whether a catch-up calculation is necessary, and what the expected return rate should be, is key to identifying how many sections of the waterfall there are and how they need to be calculated.

2) UNDERSTANDING THE TYPE OF WATERFALL STRUCTURE There are two types of waterfall structures, American and European, commonly used to describe waterfall calculations.

Identifying which structure a waterfall follows is key to both the understanding of who will get distributions first, as well as how the distributions will be calculated. American structures calculate distributions on a deal-by-deal basis, rather than aggregating distributions at the fund level like the European structure. As a result, the American model allows for the fund manager to receive payment before investors have received the entirety of their invested capital and expected return. In 12

KROST QUARTERLY VOL. 4 ISSUE 1 - THE FINANCIAL SERVICES ISSUE

The Waterfall Structure

Total Proceeds Available

First Distribution

Second Distribution

Third Distribution

contrast, the European model pushes all distributions to the investors before any profits can be allocated to the manager.

3) IDENTIFYING THE SECTIONS OF A WATERFALL There are many ways that a calculation can flow depending on the way that the agreement has been written, but there are four types of sections most commonly found in waterfall calculations: return of capital, preferred returns, catch-up returns, and carried interest payments. While they typically follow that order, it is important to understand the order of distributions as laid out in the partnership agreement, before beginning a waterfall calculation.

4) PROPERLY CALCULATING THE PROCEEDS NECESSARY TO ACHIEVE THE REQUIRED HURDLE RATE The hurdle rate in a distribution calculation represents the minimum rate of return required by the investor at the signing of the partnership agreement. While the rate will be explicitly stated as part of that agreement, understanding when the hurdle rate has been achieved and translating it from a percentage to dollars is more complicated. It requires that the anticipated return be calculated on a fractional basis, based on the expected proceeds through the date of distribution, while also accounting for the return of principal prior to any profit on the investment.

5) CALCULATING CATCH-UP AMOUNTS FOR GENERAL PARTNERS One area responsible for many of the errors found on waterfall calculations is the portion related to partner catch-up requirements. It requires an understanding of what portion of the limited partners’ returns should be the basis for the catch-up calculation and where the calculation falls in the order of distributions.

There are five key components to any waterfall calculation that can lead to success or failure, depending on how much care is taken with them.

By focusing on these areas, KROST helps clients ensure that their final calculations are correct and backed up by our expertise. If you need assistance with utilizing a waterfall calculation, please contact KROST. 

LEARN MORE 

KROST QUARTERLY VOL. 4 ISSUE 1 - THE FINANCIAL SERVICES ISSUE

13

IRC SECTION 1061:

PARTNERSHIP INTERESTS HELD IN CONNECTION WITH THE PERFORMANCE OF SERVICES

By Matthew Weber, CPA, MAcc | Senior Manager - Tax

By Randall Poe | Staff - Tax

BACKGROUND IRC Section 1061 was enacted in the Tax Cuts and Jobs Act of 2017. To best understand the code section, below are a few key terms and definitions as they pertain to IRC Section 1061.

1.

Applicable Partnership Interest (API): An applicable partnership interest is an interest in a partnership that is transferred to or held by a taxpayer, directly or indirectly, in connection with the performance of substantial services by the taxpayer, or any other related person, in any applicable trade or business.

2.

Applicable Trade or Business (ATB): ATB is defined as any activity conducted on a regular, continuous, and substantial basis which consists, in whole or in part of raising or returning capital and either: a. Investing in or disposing of specified assets (or identifying specified assets for such investing or disposition) or b. Developing specified assets

3.

Specified Assets: Specified Assets refer to certain securities commodities, real estate held for rental or investment, cash or cash equivalents, options, or an interest in a partnership to the extent of the partnership's proportionate interest in any of the aforementioned items (Section 1231 gains, Section 1256 gain, and qualified dividends are not subject to recharacterization as STCG under IRC Section 1061).

Section 1061 is an IRS regulation aimed at recharacterizing certain net long-term capital gains of a partner that holds one or more applicable partnership interest(s) as short-term capital gains. Essentially, Section 1061 increases the holding period required to benefit from long-term capital gains treatment from one year to three years for specified assets.

IRC Section 1061 only applies to taxpayers that hold applicable partnership interests. Once a partnership interest is an API, it remains an API unless one of the exceptions to the definition of an API applies. Generally, API is owned by fund managers who do not contribute capital into the partnership but perform services for the partnership (manage fund) and compensate themselves through future capital gains the fund generates (also known as carried interest).

14

KROST QUARTERLY VOL. 4 ISSUE 1 - THE FINANCIAL SERVICES ISSUE

EXCEPTIONS FROM API TREATMENT If any of the following exceptions are met, the partnership interest is not subject to Section 1061:

Capital Interest Partnership interest is exempt from API classification if the partnership interest gives the taxpayer a right to share profits and losses based on the taxpayer’s respective partnership capital balance, subject to certain exceptions for preferred returns. Under certain circumstances, an API is excepted from §1061. To be excepted from Section 1061, gains allocated to an API must be made in proportion to the holder’s capital account.

Corporation Exception API does not include any interest in a partnership directly or indirectly held by a corporation. However, further guidance issued by the IRS deems S-corporations to be excluded from the corporation exception. Therefore, any C-corporation’s interest in a partnership is not considered an API.

Bona Fide Third-Party Purchaser The taxpayer’s interest is not subject to Section 1061 if the taxpayer • • •

purchases an API in a fair market value taxable transaction, has not or will not provide any services relevant to the ATB, and is not related to anyone who provides service relevant to the ATB.

This allows interest purchased from a fund manager to be exempt from Section 1061.

KROST QUARTERLY VOL. 4 ISSUE 1 - THE FINANCIAL SERVICES ISSUE

15

TRANSFER OF API TO A RELATED PARTY If a taxpayer transfers interest in an API to a related person, the taxpayer may be required to recognize a gain upon the transfer. A gain must be recognized if the amount of gain attributable to partnership assets with a holding period of less than three years exceeds the gain attributable to partnership assets with a holding period of less than one year. The gain would be the difference between the two. If no excess is computed, then no gain is recognized.

POTENTIAL TAX PLANNING OPPORTUNITY Since short-term capital gains are subject to ordinary income rates, fund managers are looking for ways to exempt themselves from Section 1061. One avenue is through a carried interest waiver. Carried interest waivers allow carried interest holders to waive their right to receive capital gains from assets that have been held for less than three years. In return, the carried interest holder reserves the right to capital gains from assets held longer than three years. This position is considered aggressive because the IRS has yet to address carried interest waivers, and many believe the IRS will challenge this position.

REPORTING REQUIREMENTS Passthrough entities must report IRC Section 1061 information as a footnote on each partner’s Schedule K-1. The Schedule K-1 footnote should include the partner’s share of capital gain from assets held for one to three years. The IRC Section 1061 retains the same character as it is allocated from tier to tier (tiered partnerships). The taxpayer who is subject to income tax would then use Schedule K-1 footnote to recharacterize a portion of the long-term capital gain to short-term capital gain on their individual tax return. 

https://weaver.com/blog/proposed-changes-carried-interest-rule-irc-ss1061-redefine-some-long-term-capital-gains-short https://www.irs.gov/pub/irs-drop/reg-107213-18.pdf https://www.gtlaw.com/en/insights/2020/8/3-year-holding-period-rule-for-carried-interests-addressed-in-irs-proposed-regulations https://www.natlawreview.com/article/irs-issues-proposed-regulations-taxation-carried-interest-under-section-1061

CONTACT MATTHEW 

16

KROST QUARTERLY VOL. 4 ISSUE 1 - THE FINANCIAL SERVICES ISSUE

KROST VIDEO:

F

inancial technology, or FinTech, companies are companies that are addressing various financial services markets and consumer finance, by making the services more effiicient, accessible, and user-friendly. FinTech companies also incorporate aritifical intelligence and machine learning to assist in and improve these services. The market sectors that FinTech addresses include alternative business; consumer lending; consumer finance such as digital banking, point of sale lending, and money transfer; digital assets; wealth management; and capital markets.

In this video, Paren Knadjian, KROST's M&A and Capital Markets Practice leader, goes over the FinTech industry trends in 2020 and what to expect in 2021 and beyond. Paren also reviews some of 2020's major highlights, including Intuit's $7.1 billion acquisition of Credit Karma and the rise in popularity of Robinhood, a stock trading app.

Watch Paren's latest video to learn more about what happened in FinTech last year and what is on the horizon for 2021. 

WATCH THE FULL VIDEO 

KROST QUARTERLY VOL. 4 ISSUE 1 - THE FINANCIAL SERVICES ISSUE

17

CLICK BELOW TO READ OUR OTHER ISSUES

VOLUME 3, ISSUE 3

ENJOYED THIS ISSUE?

Flip through our collection of this interactive publication for detailed information, charts, and tools covering the latest news in technology, manufacturing, real estate, hospitality, financial services, and sports and entertainment.

KROST QUARTERLY M A G A Z I N E

THE REAL ESTATE ISSUE CHALLENGES FACING THE REAL ESTATE INDUSTRY IN THE WAKE OF COVID & THE ELECTION A DEEPER DIVE INTO THE UNINTENDED CONSEQUENCES OF THE PROPOSED SECTION 1031 REGULATIONS

OPPORTUNITY ZONES & COST SEGREGATION NOT SURE WHERE TO FIND REAL ESTATE DIVERSIFICATION?

GOING GREEN FOR THE GREEN:

FEDERAL TAX INCENTIVES FOR ENERGY EFFICIENT BUILDING

WWW.KROSTCPAS.COM KROST QUARTERLY VOL. 3 ISSUE 3 - THE REAL ESTATE ISSUE

KROST QUARTERLY M A G A Z I N E

TAX MATTERS FOR ATHLETES

TIPS FOR CHOOSING THE RIGHT BUSINESS MANAGER

CALIFORNIA’S WAGE ORDER 7:

M&A Trends

WHAT YOU NEED TO KNOW

in the Media, Entertainment, and Gaming Industries

Loan-Out Corporations:

M A G A Z I N E

Risky Business: Safeguarding Your Most Valuable Assets

GAME-CHANGING

QUALIFIED BUSINESS INCOME DEDUCTION

KROST QUARTERLY THE HOSPITALITY ISSUE

THE SPORTS & ENTERTAINMENT ISSUE

5

TECHNOLOGY Read Now »

VOLUME 2, ISSUE 2

MANUFACTURING Read Now »

REAL ESTATE Read Now »

VOLUME 2, ISSUE 4

1

Restaurant Technology:

Stacey R. Korman, CPA, MST, Brad Pauley, CPA, and Douglas A. Venturelli, Esq.

Trends and Funding

lead the Sports & Entertainment Industry group at KROST

SALES TAX COMPLIANCE FOR CALIFORNIA RESTAURANTS

To Be or Not To Be? WWW.KROSTCPAS.COM

SPORTS & ENTERTAINMENT Read Now »

Robert A. Benson, former chef and restauranteur, leads the Hospitality Industry group at KROST, serving up operations solutions for area businesses.

WWW.KROSTCPAS.COM

FINANCIAL SERVICES Read Now »

LET US KNOW YOUR FEEDBACK! IS THERE ANYTHING YOU WOULD LIKE TO SEE IN AN UPCOMING EDITION?

HOSPITALITY Read Now »

KROST QUARTERLY VOL. 4 ISSUE 1 - THE FINANCIAL SERVICES ISSUE

19

K R O S T C PA S . C O M

KROST QUARTERLY MAGAZINE

For over 80 years, KROST has assisted businesses and individuals to reach their financial goals through their in-depth knowledge of Tax, Accounting, Assurance and Advisory, M&A, and Wealth Management Services. KROST also provides specialty tax services such as Cost Segregation Studies, R&D Tax Credits, Transfer Pricing, Green Building Tax Incentives, Repair vs. Capitalization, Fixed Asset, IC-DISC, and more.

Pasadena • Woodland Hills West Los Angeles Phone: (626) 449-4225 Fax: (626) 449-4471 KROSTCPAs.com