We believe in creating a strong working relationship with our clients to determine their specific accounting and compliance needs.

Ramping Up Depreciation Deductions with a Cost Segregation Study

Businesses that acquire, construct or substantially improve a building — or did so in previous years — should consider a cost segregation study. These studies combine accounting and engineering techniques to identify building costs that are properly allocable to tangible personal property rather than real property. This may allow you to accelerate depreciation deductions, thus reducing taxes and boosting cash flow.

The basics

IRS rules generally allow you to depreciate commercial buildings over 39 years (27½ years for residential properties). Most times, you’ll depreciate a building’s structural components — such as walls, windows, HVAC systems, elevators, plumbing and wiring — along with the building. Personal property — such as equipment, machinery, furniture and fixtures —is eligible for accelerated depreciation, usually over five or seven years. And land improvements — fences, outdoor lighting and parking lots, for example — are depreciable over 15 years.

Too often, businesses allocate all or most of a building’s acquisition or construction costs to real property, overlooking opportunities to allocate costs to shorter-lived personal property or land improvements. In some cases — computers or furniture, for instance — the distinction between real and personal property is obvious. But often the line between the two is less clear. Items that appear to be part of a building may in fact be personal property, like removable wall and floor coverings, removable partitions, awnings and canopies, window treatments, signs, and decorative lighting.

In addition, certain items that otherwise would be treated as real property may qualify as personal property if they serve more of a business function than a structural purpose. This includes reinforced flooring to support heavy manufacturing equipment, electrical or plumbing installations required to operate specialized equipment, or dedicated cooling systems for data processing rooms.

Although the relative costs and benefits of a cost segregation study depend on your particular facts and circumstances, it can be a valuable investment. For example, let’s say you acquire a nonresidential commercial building for $5 million on January 1. If the entire purchase price is allocated to 39-year real property, you’re entitled to claim $123,050 (2.461% of $5 million) in depreciation deductions the first year. A cost segregation study may reveal that you can allocate $1 million in costs to five-year property eligible for accelerated depreciation. Reallocating the purchase price increases your first-year depreciation deductions to $298,440 ($4 million × 2.461%, plus $1 million × 20%).

A cost segregation study can assist you in making partial asset disposition elections and deducting removal costs under the recently issued final tangible property regulations. Consult with your tax advisor about the possible interplay that may prove beneficial depending on your situation.

Look-back studies

If your business invested in depreciable buildings or improvements in previous years, it’s not too late to take advantage of a cost segregation study. A “look-back” cost segregation study allows you to claim missed deductions back to 1987.

To claim these tax benefits, file Form 3115,“Application for Change in Accounting Method,” with the IRS and claim a one-time “catch-up” deduction on your current year’s return. There’s no need to amend previous years’ returns.

Property and sales tax considerations

You can also use cost segregation studies to support the property tax or sales tax treatment of certain items. For example, you might use a study to document the cost of tax-exempt property. Many states exempt property used in manufacturing, for example.

A word of caution: Certain property may be treated differently for income tax and property tax purposes, and reporting mistakes can lead to double taxation. Suppose your state has a personal property tax and that you reclassify certain building components as personal property for income tax purposes based on a cost segregation study. If you report these items to the state as taxable personal property, but state law treats them as part of the real estate for real property tax purposes, they may be taxed twice: once as personal property and once as real property.

To avoid this result, be sure you have systems in place to track the costs of these items separately for income tax and property tax purposes.

Is it right for you?

Cost segregation studies may yield substantial benefits, but they’re not right for every business. To find out whether a study would be worthwhile, we would be happy to to do an initial evaluation to assess the potential tax savings. Contact H&M today.


Fake $100 Bills Being Circulated in Central Ohio

A warning was recently issued about counterfeit money making its way to central Ohio. According to the U.S. Secret Service and the Westerville Police, counterfeit old-style $100 bills have appeared in local cash circulation.

How is the fake money produced and how can you tell if an imposture makes its way you’re your wallet? Authorities warn that most of the fake bills have been made by bleaching $1 notes and digitally printing counterfeit $100 bills.  A genuine bill will have a security thread of micro-printing around the picture of Benjamin Franklin. The micro-printing will only be visible when held up to a light.  It is important to note that bills that were printed prior to 1990 do not have the security thread or the micro-printing around the portrait of Benjamin Franklin.

If you believe you have come across a counterfeit $100 bill, please contact the Westerville Division of Police or the U.S. Secret Service Office.

The Importance of Reviewing your Company’s Buy-Sell Agreement

If you own a business and follow professional advice, you’ve likely established a buy-sell agreement in case you or a co-owner voluntarily or involuntarily leaves the company. Assuming this is true, remember that it’s not enough to draft an agreement and put it in a safe place. You need to review and perhaps revise the document periodically.

Problems solved

The primary purpose of every buy-sell agreement is to legally confer on the owners of a business or the business itself the right or obligation to buy a departing owner’s interest. But a well-crafted agreement can also help ensure that control of your business is restricted to specified individuals, such as current owners, select family members or upper-level managers.

Another purpose of a buy-sell agreement is to establish a price for the ownership interests. You should engage a qualified appraiser to estimate the value of those interests when first making a buy-sell agreement, and periodically thereafter to ensure the price keeps up with the growing (or shrinking) value of your company.

Estate planning is also a priority for many buy-sell agreements. If your agreement was drafted more than a few years ago, you may need to update it based on recent gift and estate tax changes. For 2017, the top rate for the gift, estate and generation-skipping transfer (GST) taxes is 40% and the exemption limit is $5.49 million. However, also keep in mind that the President and Republicans in Congress have indicated a desire to repeal the estate tax, which might happen later this year.

Standard and unusual triggers

Most buy-sell agreements lie dormant for years. What can quickly bring one to life is a “triggering event,” such as the injury or death of an owner, or, when one retires or voluntarily leaves the company. These are the major events that can bring a buy-sell agreement into play, but other occurrences such as changes to marital status can as well. Also, many agreements cover events such as conviction of a crime, losing a professional license or  certification, or becoming involved in some other situation that is deemed inappropriate or illegal.

Options for Structuring an Agreement

Buy-sell agreements typically are structured as one of the following agreements:

Redemption, which permits or requires the business as a whole to repurchase an owner’s interest,

Cross-purchase, which permits or requires the remaining owners of the company to buy the interest, typically on a pro rata basis,

Hybrid, combines the two preceding structures. A hybrid agreement, for example, might require a departing owner to first make a sale offer to the company and, if it declines, sell to the remaining individual owners.

In choosing your buy-sell agreement’s initial structure, consider the tax implications. They will differ based on whether your company is a flow-through entity or a C corporation.

Sources of Funds

Buy sell agreements require a funding source so that remaining owners can buy their former co-owner’s shares. Life insurance is probably the most common, but there are alternatives. If you company is cash-rich and confident in its ability to remain so, you could rely on your reserves. However, this could leave many businesses vulnerable to an unplanned cash shortfall. Another option is to create a “sinking fund” by setting aside money for paying out the agreement over time. Again, if your cash flow begins to suffer, you may not have enough funds when they become needed.

Keeping your buy-sell agreement updated requires some effort. That effort will pay off in saved time and prevented conflicts should a triggering event take place. Whether you have a current buy-sell agreement that could use some reviewing and updating or you need to begin to draft an agreement all together, contact H&M. We will be happy to assist you.



Happy Ohio Agriculture Week!

This week we are celebrating Ohio Agriculture Week. Enacted by the legislature in 2011, Ohio Ag Week is recognized during the second full week of March to celebrate the vitally important role that agriculture plays both in this state and across the nation.

This special week is being celebrated in various ways across the buckeye state. Members of the Ohio Department of Agriculture team are out on foot making visits to various farms and businesses. You can go along with them by following them on twitter (@OhioDeptofAg). Other organizations and businesses are taking the time to reflect on how the agriculture industry has impacted their operations. We are doing so right along with them.

It’s hard not to take a moment to stop and appreciate the longevity and importance of agriculture. According to the United States Department of Agriculture, there are 74,500 farms in Ohio- being operated on 14,000,000 acres of land. From cattle and corn, to soybeans and various fruits, Ohio is a massive producer of agricultural products. We encourage you to take a look at the specifics at this link from the USDA. These statistics are impressive and deserve to be celebrated:  goo.gl/LwMhov

We have been working with agriculture professionals since our firm began in 1919. Many of these businesses are run by families and because we specialize in family-owned and closely-held businesses, we are uniquely suited to serve them. We take great pride in helping their operations grow and thrive. When asked what they enjoy most about working with agriculture professionals, our team members had this to say:

Farmers are innovative. Their industry has been around since before our country started and they are always finding ways to thrive through innovation. I love being a part of that. – Justin Linscott, Principal

No pun intended but they are “down to earth folks”;  wonderful privilege to work with families making their living off of the land and working with business owners who also work hand in hand with farmer producers.  We are fortunate and blessed to live in the bread basket of the world here in the Midwestern United States.  Brad Ridge, Managing Principal

Being someone that grew up on a farm and participated in 4-H, I enjoy being able to continue working with AG professionals, even if it is now in a different capacity.  I feel my upbringing gives me an edge in understanding the operations of our AG clients above and beyond what a CPA without that background could provide. - William Bauder, Manager

Farmers never die, they just go to seed! They seem to be realistic, in that, they plan for the worst and are pleasantly surprised when things turn out better than expected. Farmers also have the best weather related sayings…. And my dad who still farms at 74 years young still points these out today-

Ring around the moon?, rain real soon.

Taller weeds in the summer, the deeper the snow in the winter;


My favorites are related to wooly worms:-

If you see furry, all-black wooly worm, the winter will be cold.

The wider the brown band on a wooly worm, the milder the winter

 - Brian Ravencraft, Principal

To learn more about the services we offer in the agribusiness space, please visit this page:



Navigating SOX Compliance

 By: Dave Gruber, CPA

In familiarizing yourself with SOX and what your company needs to do to be compliant with SOX, there are two main documents that help drive this understanding – The Sarbanes-Oxley Act of 2002 and 2013 Internal Control – Integrated Framework.

The Sarbanes-Oxley Act of 2002 (SOX) was passed mainly to protect shareholders and the general public from accounting errors and fraudulent practices of a public company. Section 404 of SOX requires public companies to annually make an assessment of internal control over financial reporting. Section 404 also requires the company’s auditor to attest to the effectiveness of the company’s internal control over financial reporting.

The Committee of Sponsoring Organizations (COSO) published the 2013 Internal Control – Integrated Framework (The COSO Framework) which is an update of the original 1992 version.  The COSO Framework is recognized as the leading framework for designing, implementing, and conducting internal control and assessing the effectiveness of internal control – basically providing a road map to compliance with SOX. An executive summary (which is a great overview of internal control and the necessary elements to achieve an effective internal control system) of The COSO Framework can be obtained for free on COSO’s website.

In the latest framework, COSO defines internal control as a process, affected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting, and compliance.  Operations Objectives pertain to the effectiveness and efficiency of the entity’s operations, including operational and financial performance goals, and safeguarding assets against loss.  Reporting Objectives pertain to internal and external financial and non-financial reporting and may encompass reliability, timeliness, transparency, or other terms as set forth by regulators, recognized standard setters, or the entity’s policies.  Compliance Objectives pertain to adherence to laws and regulations to which the entity is subject.

The COSO Framework contains five components (Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring Activities) of internal control necessary to meet internal control objectives. This framework also breaks down the five components into 17 principles representing the fundamental concepts associated with the components:

Control Environment:

1.) Demonstrates a commitment to integrity and ethical values

2.) Exercises oversight responsibility

3.) Establishes structure, authority and responsibility

4.) Demonstrates commitment to competence

5.) Enforces accountability

Risk Assessment:

6.) Specifies suitable objectives

7.) Identifies and analyzes risk

8.) Assesses fraud risk

9.) Identifies and analyzes significant change

Control Activities:

10.) Selects and develops control activities

11.) Selects and develops general control activities over technology

12.) Deploys control activities through policies and procedures

Information and Communication:

13.) Uses relevant information

14.) Communicates internally

15.) Communicates externally

Monitoring Activities:

16.) Conducts ongoing and/or separate evaluations

17.) Evaluates and communicates deficiencies

The COSO Framework mandates that all of the above 5 components and the related 17 principles must be present and functioning in order for management to conclude that internal control over financial reporting is effective.

To set up an effective set of internal controls, an entity should properly design and document internal controls, mapping these controls to the COSO components and principles outlined above. Once documented, the entity should perform detailed tests of the controls, evaluate test results (remediate testing exceptions where applicable), and make a final assessment of the effectiveness of the controls.  In short, utilizing The COSO Framework as a guide provides the right path to SOX compliance.

Contact Holbrook & Manter today for more information regarding SOX Compliance. We would be happy to assist you.




Crossing State Lines? Know about Nexus

For many years, business owners had to ask themselves one question when it came to facing taxation in another state: Do we have “nexus”? This term indicates a business presence in a given state that’s substantial enough to trigger the state’s tax rules and obligations.

The question is still a valid one. If you’re considering operating your business in multiple states, or are already doing so, it’s worth reviewing the concept of nexus and its tax impact on your company. H&M can help you do that, but here is some basic information:

Common criteria

Precisely what activates nexus in a given state depends on that state’s chosen criteria. Triggers can vary but common criteria include:

  • Employing workers in the state,
  • Owning (or, in some cases, even leasing) property there,
  • Marketing your products or services in the state,
  • Maintaining a substantial amount of inventory there, and
  • Using a local telephone number.

Strategic moves

As with many tax issues, the totality of facts and circumstances will determine whether you have nexus in a state. So it’s important to make assumptions either way. The tax impact could be significant, and its specifics will vary widely depending on just how the state in question approaches taxation.

For starters, strongly consider conducting a nexus study. This is a systematic approach to identifying the out-of-state taxes to which your business activities may expose you. The results of a nexus study may not necessarily be negative. You may find that your company’s overall tax liability is lower in a neighboring state. In such cases, it may be advantageous to create nexus in that state by, say, setting up a small office there. If all goes well, you may be able to allocate some income to that state and lower your tax bill.

Taxation and profitability

The grass is always greener on the other side of the fence… so the saying goes. If profitability crosses state lines, please contact H&M for help projecting how setting up shop there might affect your tax liability.


$1 Billion in Tax Refunds Remain Unclaimed

According to the IRS, they are on the hunt for taxpayers who are entitled to their share of unclaimed tax refund dollars.  $1 billion is reportedly sitting in wait for those who have not filed an income tax return for 2013.  Those who have not filed for 2013 can be found across the country, but the IRS estimates that as many as 36,000 people in Ohio have unclaimed dollars waiting for them. Just how much money has gone unclaimed by Ohioans? The IRS shares this total amount: $34,547,000.

Taxpayers have three years to claim refunds for returns they have failed to file. If you still have not filed for 2013 and believe you are entitled to a refund, you must file a return for that year by this year’s deadline, April 18, 2017. Should you not have your 2013 return postmarked by that date, those unclaimed funds become property of the U.S. Treasury Department. Something else to keep in mind- your 2013 unclaimed tax funds could still be held up if you have not filed returns for 2014 & 2015. The IRS warns that your refund dollars could be used to pay off funds owed to them or a state tax authority. Unpaid child support and federal debts could also change the amount you receive.

Contact us today with any questions you may have. We would be happy to help.



Holbrook & Manter Acquires Lewis Center, Ohio Accounting Firm


Holbrook & Manter, CPAs Professional Services Firm with offices in Columbus, Dublin, Marion and Marysville recently acquired The TLC Group, Ltd.

For over 20 years, The TLC Group, Ltd. built strong relationships with the businesses and individuals that relied on their expertise to perform various accounting services. As a part of this acquisition, Holbrook & Manter, CPAs is thrilled to welcome The TLC Group, Ltd. clients and team members to the H&M family.

Keith Copeland, owner of The TLC Group, Ltd. shares his thoughts about the acquisition, “My priority was to find a firm who shared our values of client service and a “family” feel while maintaining the ability to give our clients the high-touch, down-to-earth service that we are known for.  After discussions with a multitude of accounting professionals in the Columbus area, I felt confident that Holbrook & Manter, CPAs would be an outstanding fit.”

 H&M’s Managing Partner, Bradley Ridge shares, “We realized immediately that with Keith’s foundational beliefs in life and his passion for helping people that we could be very successful together.  The owners of family businesses that have been attracted to Keith and his family over the last two decades are precisely the type of clients that H&M has served and helped achieve their dreams through our almost 100 years of existence.  And also from our Firm’s growth initiatives, this acquisition adds to and compliments, our significant Columbus Metro presence.  We wish a warm welcome to the TLC clients and team members! ”

Holbrook & Manter, CPAs is a professional services firm specializing in family and closely held businesses. Since its origination in 1919, H&M has been dedicated to providing superior accounting, tax and management consulting advice to both businesses and individuals. H&M provides cost effective, high quality technical service combined with sound personal attention. They are able to serve clients in virtually all areas of business, including those that require specialized expertise.

 H&M is a member of Allinial Global, an association of legally independent accounting and consulting firms who share education, marketing resources and technical knowledge in a wide range of industries. Please visit the following sites to learn more about our service offerings and areas of expertise:




For press inquiries, please contact:

Molly Pensyl, Business Development Manager

614.516.0040 or MPensyl@HolbrookManter.com







Beware of the “Kiddie Tax”

Making gifts to children and grandchildren is a strategy sometimes used to reduce taxes. Doing so may shift some of your income into a lower tax bracket and remove assets from your taxable estate. But if you employ this strategy, beware of a hidden tax sometimes called the “kiddie tax.”

The kiddie tax isn’t a separate tax. Rather, it’s an income threshold above which a minor’s unearned income (interest, dividends and capital gains) is taxed at his or her parent’s marginal tax rate instead of the child’s rate.

Who’s a “kiddie”?

For kiddie tax purposes, a child is anyone under age 19 or any full-time college student under age 24. Previously, the kiddie tax applied only to children under age 14. But Congress increased the age limit to make it harder for parents and grandparents to reduce taxes by shifting income.

The first $1,050 of a child’s unearned income is tax-free and the next $1,050 is taxed at the child’s marginal rate. All unearned income above $2,100 is then taxed at the parent’s marginal rate, which could be as high as 39.6%.

Let’s assume you own stock that has appreciated by $10,000 and want to give this to your 16-year-old son. Assuming your son doesn’t have any other unearned income, only $2,100 of the taxable gain would be taxed at his marginal rate. The remaining $7,900 would be taxed at your marginal rate.

Are there strategies to avoid the tax?

There’s a possible way to skirt the kiddie tax, particularly if your child or grandchild is in college. If he or she earns income via a wage or salary that provides more than half of his or her support, he or she might not be treated as a dependent. Further, there may be some additional income tax benefits related to tuition, because your child may be able to claim a deduction or credit that you could not.

Another strategy (if you want to help pay your child’s or grandchild’s college tuition) is to make tuition payments directly to the school instead of gifting assets to him or her. This payment wouldn’t be subject to gift tax — another benefit of this approach.

If your child has only unearned income totaling less than $10,500 (2016), you may be able to include this on your tax return and not file a separate return for him or her.

Complex details

The details involved in planning gifting strategies to avoid the kiddie tax can be complex. Contact us to discuss your particular situation. H&M is always standing by to help.

Knowing the Tax Challenges of Self-Employment

Today’s technology makes self-employment easier than ever. But if you work for yourself, you’ll face some distinctive challenges when it comes to your taxes. Here are some important steps to take:

Learn your liability. Self-employed individuals are liable for self-employment tax, which means they must pay both the employee and employer portions of FICA taxes. The good news is that you may deduct the employer portion of these taxes. Plus, you might be able to make significantly larger retirement contributions than you would as an employee.

However, you’ll likely be required to make quarterly estimated tax payments, because income taxes aren’t withheld from your self-employment income as they are from wages. If you fail to fully make these payments, you could face an unexpectedly high tax bill and underpayment penalties.

Distinguish what’s deductible. Under IRS rules, deductible business expenses for the self-employed must be “ordinary” and “necessary.” Basically, these are costs that are commonly incurred by businesses similar to yours and readily justifiable as needed to run your operations.

The tax agency stipulates, “An expense does not have to be indispensable to be considered necessary.” But pushing this grey area too far can trigger an audit. Common examples of deductible business expenses for the self-employed include licenses, accounting fees, equipment, supplies, legal expenses and business-related software.

Don’t forget your home office: You may deduct many direct expenses (such as business-only phone and data lines, as well as office supplies) and indirect expenses (such as real estate taxes and maintenance) associated with your home office. The tax break for indirect expenses is based on just how much of your home is used for business purposes, which you can generally determine by either measuring the square footage of your workspace as a percentage of the home’s total area or using a fraction based on the number of rooms.

The IRS typically looks at two questions to determine whether a taxpayer qualifies for the home office deduction:

1.      Is the specific area of the home that’s used for business purposes used only for business purposes, not personal ones?

2.      Is the space used regularly and continuously for business?

If you can answer in the affirmative to these questions, you’ll likely qualify. But please contact our H&M for specific assistance with the home office deduction or any other aspect of filing your taxes as a self-employed individual.