Has anyone dealt with Section 754 elections when a partnership interest changes hands? We did a family buyout last year and our accountant mentioned it but I'm still confused how it works.

Great discussion everyone! Just wanted to add one more consideration that might be relevant - timing of the sale within the tax year can matter quite a bit. If your friend sells early in the partnership's tax year, he'll have a shorter period of K-1 income to deal with, but the family members will have their increased ownership percentages for most of the year. Also, make sure they consider whether the partnership needs to file an amended partnership agreement or operating agreement to reflect the new ownership structure. While this isn't directly a tax form, having the legal documentation updated will make future tax filings much cleaner and help avoid any questions from the IRS about ownership percentages on future K-1s. The partnership should also notify their tax preparer about the ownership change as soon as it happens so they can properly allocate income and expenses for the partial year periods on everyone's K-1s.

This is exactly the kind of situation where keeping detailed records pays off! I've been a professional gambler for 5 years and dealt with similar multi-state issues. One thing I'd add to the excellent advice already given - make sure you're tracking which specific tournaments or sessions generated each W2G. Some states (like Pennsylvania) want to see the actual location and date of the gambling activity, not just the total amount. This becomes crucial if you're audited. Also, regarding your $78,000 total income vs $65,000 in W2Gs - that $13,000 difference needs to be carefully documented. Keep all your session logs organized by state and date. I use a simple spreadsheet that tracks: Date, Location, Buy-in, Cash-out, Net Result, and any expenses for that session. This makes the state allocation much easier. For Illinois specifically, since that's your home state, you'll report ALL your gambling income there (not just Illinois income), then claim credits for taxes paid to other states. The other states only get the income earned within their borders. One last tip: consider consulting with a tax pro who specializes in gambling taxes if your income continues to grow. The multi-state issues get complex quickly, and the penalties for getting it wrong can be substantial.

As someone who's been through the multi-state professional gambling tax maze, I want to emphasize one crucial point that hasn't been mentioned yet: make sure you understand each state's definition of "professional gambler" status. While you claim professional status on your federal Schedule C, not all states automatically recognize this. Some states treat ALL gambling winnings as "other income" regardless of your professional status, which can affect how you deduct expenses and losses. For example, I discovered that one state I filed in didn't allow me to deduct my full business expenses against gambling winnings the way federal law does. They had a cap on gambling loss deductions even for professional gamblers. This completely changed my tax liability calculation for that state. I'd strongly recommend researching each state's specific rules before filing. Some states have published guidance on professional gambling, while others require you to dig through their tax code or call their departments directly. The differences can be significant - I've seen cases where the same income and expenses result in vastly different tax liabilities depending on how the state treats professional gambling status. Also, keep in mind that your professional gambler status might need to be "proven" to each state independently if you're ever audited. Having consistent documentation across all states showing the business nature of your activities is essential.

This is a great discussion! I want to add some practical perspective as someone who's been through multiple startup equity situations. One thing that's been really helpful for me is creating a spreadsheet to model different scenarios before making decisions. I track: - Current 409A valuation vs my strike price - Projected company valuation growth - My tax bracket and AMT threshold - Cash requirements for different strategies The key insight I've learned is that there's no universal "best" approach - it really depends on your individual situation. For my first startup, ISOs worked great because I could exercise gradually and manage AMT. But at my current company, I went with early exercise + 83(b) because the strike price equaled FMV at grant time, eliminating immediate tax consequences. Also worth noting: if your company offers both restricted stock and ISOs, you might be able to negotiate a mix. I know folks who've gotten 75% ISOs and 25% restricted stock, which gives flexibility for different tax strategies. Don't forget to factor in state taxes too - some states don't have capital gains taxes, which can significantly impact your decision if you're planning to relocate.

Great question about timing the move to Texas! I actually did exactly this - exercised my ISOs while still a California resident but waited to sell the shares until after establishing Texas residency. Saved me a significant amount in state capital gains taxes (California's 13.3% top rate vs Texas's 0%). The key is making sure you meet the residency requirements for your new state before the sale. Most states have specific rules about how long you need to be a resident and what constitutes "domicile." I worked with a tax attorney to make sure I did this correctly since the stakes were pretty high. Regarding the mixed equity approach - I negotiated this upfront during the offer stage. I presented it as wanting flexibility to optimize for different tax scenarios, and the company was surprisingly open to it. They said other employees had made similar requests. The HR team actually appreciated that I was thinking strategically about it rather than just asking for "more equity." One more tip: if you do go the mixed route, consider the vesting schedules carefully. I structured mine so the restricted stock vested faster than the ISOs, which gave me some liquidity earlier while preserving the long-term upside of the options.

Another option is using a mileage tracking app like MileIQ or Everlance throughout the year. They automatically track your trips using GPS and let you swipe left/right to categorize as business or personal. At tax time, you can just export a summary report for your records and enter the total in TurboTax as one line item. Much easier than spreadsheets!

Has anyone had experience getting audited specifically for mileage deductions? I'm always paranoid about claiming too much even though I drive a ton for my job.

I had my company's tax advisor on the phone yesterday and specifically asked about this! She said the decision about making the 280C election is getting more complex now that 174 expenses must be amortized. Her explanation was that it depends on several factors: 1. Your effective tax rate 2. Whether you're in an NOL position 3. Your projected tax positions over the next 5 years 4. State tax considerations 5. International tax implications if you have foreign R&E She also mentioned that some of the Big 4 disagree about the "optimal approach" because they're using different economic models to project the long-term impact. So it's less about the technical requirements and more about strategic tax planning under uncertainty.

This is a really timely discussion - I'm dealing with the exact same issue right now! Our company has been going back and forth on the 280C election for months. What I've learned from our research is that the "optimal" approach really depends on your specific tax profile. For companies with significant R&E expenses that are now subject to the 174 amortization requirements, the cash flow timing differences between the two approaches can be substantial. One thing that hasn't been mentioned yet is the impact on state taxes. Some states don't conform to federal treatment of R&E credits or the 280C election, which can create additional complexity. We discovered that in our case, not making the 280C election actually resulted in better state tax treatment even though the federal impact was roughly neutral. I'd also add that given the ongoing uncertainty around potential legislative changes to Section 174 (there's been talk of repealing the amortization requirement), some firms may be taking a more conservative "wait and see" approach by not making the irrevocable election. Have you considered running both scenarios through a detailed projection model? That's what finally helped us understand why our new advisor was recommending against the election - the 5-year NPV analysis showed a meaningful difference we hadn't initially recognized.