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Easter Boosts Week 4 Sales
Week four of March was 2016’s Easter week, which explains the big 11.71 percent jolt independent grocers reported on their same store sales compared to the same period in 2015. Customer counts were up over seven percent.
Easter 2015 occurred the following week, so we can expect a big swing in the opposite direction in next week’s report.
The Bureau of Labor Statistics released its March unemployment report last week, which showed an increase in 215,000 jobs during the month. The unemployment rate ticked upward to 5.0 percent, but that was mainly due to an increase in the workforce by 396,000 people. The participation rate continued to nudge in the right direction, hitting 63 percent.
Another noteworthy indicator is the U-6, which combines total unemployed with those marginally attached to the workforce and those working part-time because they can’t find full-time work. This number dropped back below 10 percent at 9.9. Overall this was a solid jobs report.
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| Same Store Sales
% Change from last year
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| Same Store Sales – Previous Months
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| FMS Opens First Canadian Office
FMS is excited to announce that it has opened its first office in Canada to better serve its growing Canadian client base. With the move, FMS is now able to service its best in class independent grocer clients from Vancouver to Toronto. The newest North American office is located at 5511 Tomken Road, Suite 204, Mississauga, Ontario, L4W 4B8.
FMS began servicing Canadian grocers in 2013 and since then, more and more Canadian independent grocers are discovering how FMS can help their businesses succeed.
To learn more, visit http://fmssolutions.com/aboutus/press_canadaoffice.php
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| BGBC Partners Tax Update: The At-Risk Basis Rules
Although we don’t like to focus on a store’s potential operating loss, or worse an actual operating loss, as you know it is a possibility. The tax law has specific rules for partners and S corporation shareholders which address when and how much of a loss can be recognized.
For example, you may have heard of the general tax basis loss limitation rule, which in summary means that an owner of a partnership or S corporation can take losses only up to his or her tax basis in a given year. Tax basis for partnerships is different than for S corporations in areas such as debt, but the general concept is basis equals cost plus or minus income or losses and less distributions. For partnerships, the partner also receives a portion of the entity’s debt, which is allocated using specific rules. For S corporation, only a loan directly made by a shareholder can become basis for that shareholder.
You may have also heard of the passive loss rules which restrict the ability to offset nonpassive income with passive losses.
This segment of our Tax Update introduces you to another, albeit lesser known, loss limitation provision known as the “At-Risk” rules. The At-Risk rules were enacted as part of the Tax Reform Act of 1976, when tax shelters made news headlines with shady investors reaping huge tax losses related to investments largely funded by debt with which the investor wasn’t even liable. Unfortunately, Congress cast a net which became wider and wider through the years. Your store has nothing to do with tax shelters, but you may get caught up in this net.
If you are subject to these At-Risk rules, any loss from the activity for the tax year is allowed only to the extent the taxpayer is At-Risk. The At-Risk rules have no effect if the activity is profitable. The profit or loss is first calculated with all capital, risk and non-risk, taken into consideration. Only if a loss occurs does the At-Risk limitation apply. Any losses limited by the at-risk rules are carried over.
The At-Risk rules apply to partners and S corporation shareholders.
So if you are subject to these rules, how much are you “at-risk? You are at-risk to the extent of the sum of the following: 1) The amount of money you contribute to your store (if operated as a partnership or S corporation);
2) The adjusted cost basis of other property you contribute; and
3) Amounts borrowed to the extent you are personally liable or if your property was pledged as security. For example, assume you operate your store as a 50%/50% partnership. You contributed $10,000, contributed some equipment with an adjusted tax cost basis of $3,000 and the entity borrowed $6,000 of which you are personally on the hook for $1,000.
Your amount at risk is $10,000 + $3,000 + $1,000 = $14,000. This means that after passing the basis limitation rules noted above, you can only take up to $14,000 taxable loss since this is the amount you are at-risk for. Incidentally, the basis limitation rules are applied first, then the At-Risk rules, and finally the passive loss rules.
As you can see, your ability to take a loss can be hampered by several sets of limitations. In the unfortunate situation in which you have an operating loss, or you have only a tax loss as a result of depreciation and other items, consult a knowledgeable CPA to ensure that you get the most benefit from the loss.
BGBC Partners, LLP is a full service certified public accounting and business consulting practice.
For more information, contact Brad Bell, CPA or Steve Reed, CPA/ABV/CFF at BGBC Partners, LLP (317-633-4700).
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| For More Information,
Contact Mark Ehleben
877-435-9400 x1402
marke@fmssolutions.com
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