DGC Enewsletter 5-10

DGC Launches Pro Bono Program for Nonprofits
Many nonprofit organizations need assistance with basic accounting, budgeting, and best practices—essential building blocks for healthy financial performance. To help, DGC plans to launch its second annual Summer of Service pro bono program on May 15. It is the firm’s way of volunteering not just time, but expertise. This is a unique opportunity for nonprofit organizations to take advantage of our team members’ skills, training and industry knowledge.

Do you know a nonprofit organization that could benefit from participating in the program? Encourage them to visit the web site and fill out an application at www.dgccpa.com/summerofservice. DGC’s Summer of Service program will run May 15 thru August 31 on a “rolling admission” basis. Applications will be reviewed and accepted based on the scope of the work and staff availability.

For questions about the program and/or how to get involved, contact Todd Ellis at 781-937-5325 or tellis@dgccpa.com.

DGC to Host A&E Northeast Management Summit
On Thursday, June 3, DGC is hosting the A&E Northeast Management Summit at Boston Architectural College. A&E professionals throughout the northeast are invited to attend and participate in meaningful discussion about the challenges of managing an architectural or engineering firm in today’s business environment.

Keynote speaker Ian Rusk, President and CEO of ZweigWhite, will set the stage with a state-of-the-industry update. A panel of respected industry experts will then comment in more detail offering insight and advice. Panelists include Michael Williams, Director of Programming with the Commonwealth of Massachusetts’ Division of Capital Asset Management; Tom Alperin, President of National Development; George Christodoulo, Attorney with Lawson & Weitzen; Brett Gough, Senior Vice President and Partner at Ames & Gough; and Dave Sullivan, Partner in charge of the A&E group at DGC.

Panel discussion will touch on a variety of topics including transition planning, exposure to risk and how to protect your firm, M&A activity and how smaller firms can compete, strategic alliances, pricing strategies and profitability, technology and more. Afterwards, the floor will be open for questions from the audience. To learn more about the event or register, visit www.dgccpa.com/aesummit.

When a Landlord Opts to Terminate a Lease
By Celina Carter, CPA

In today’s volatile market, it is not uncommon for a landlord to experience a lease termination induced by the tenant. This usually entails the landlord receiving an early termination fee. But what are the consequences if the landlord opts to terminate a lease? There are many factors to consider and lease terminations by the landlord can have major tax consequences not only in the year of the lease termination but for future years to come.

Why would a landlord opt to terminate a lease especially in today’s market? Many times a landlord may be trying to rent vacant space to a potential major tenant. This tenant may need additional space that is currently being occupied by another smaller tenant. The landlord may work with the smaller tenant in order to relocate them. This may include paying a financial incentive to the smaller tenant. All costs the landlord incurs related to terminating the lease (legal fees, incentive payment, etc) are capitalized and amortized over the life of the new lease. However, the treatment changes if the lease termination was entered into in order to recapture the property for the landlord’s general use.

A landlord may also opt to terminate a lease in order to facilitate construction of a building. In this case, any costs incurred related to the lease termination are capitalized to the basis of the building. These costs are then depreciated over the life of the building (39 or 27.5 years). However, if the building is going to be demolished, all costs are added to the basis of the land. These costs include the cost of the demolition and the remaining basis of the demolished building, including any unamortized leasing costs. This changes depreciable property to non-depreciable property and there is no tax deduction until the year of sale.

The treatment of the costs incurred related to a lease termination vary based on the facts and circumstances surrounding the deal. These termination costs could be substantial and are normally not deductible in the year incurred. Before you or your Company enter into any lease termination transactions, contact a member of your DGC team.

Abandonment of a Partnership Interest
by Erica Nadeau, CPA

No one likes to admit they made a poor investment decision. The wise investor recognizes a poor investment decision and takes corrective action. Due to the current economy, you may be holding onto a partnership interest that has declined in value with little potential to rebound. If there is no market for the sale of a partnership interest, you may be tempted to walk away. This can turn out to be a better tax planning strategy than you may have thought.

In general, the sale of a partnership interest held for investment will result in a capital gain or loss. However, by abandoning a partnership interest, a taxpayer may be able to claim an ordinary loss. Ordinary losses are available to offset ordinary income such as wages, interest and dividends. To claim an ordinary loss the partnership interest must be related to a business or transaction entered into for profit, you must surrender your entire interest in the partnership, and you cannot retain any right to reacquire the property. If done properly, the abandonment of the partnership interest will satisfy these requirements.

In order for an ordinary loss to be taken no consideration can be received for the partnership interest. If the partner shares in liabilities, including nonrecourse liabilities, the release of liabilities upon the abandonment will be treated as a distribution (consideration). Therefore, if a partner in a partnership abandons the interest, and in doing so also abandons his share of partnership liabilities, the liabilities will be considered compensation for the partnership interest and will result in the loss being classified as a capital loss instead of an ordinary loss.

If you have questions regarding abandoning a partnership interest or would like to discuss your specific situation, please contact a DGC team member.

May 17 - Boston Estate Planning Council (BEPC) – Golf Outing
May 19 - BDC Capital – Annual Reception
May 21 - Boston Business Journal – Green Business Summit
May 25 - Greater Boston Chamber – Women’s Networking Breakfast
May 25 - Association for Corporate Growth (ACG) – Women’s Executive Forum
May 27 - Boston Estate Planning Council (BEPC) – Estate Planner of the Year Dinner
June 3 - DiCicco, Gulman & Company – A&E Northeast Management Summit