The Cummings & Cummings Law Journal

Understand What Triggers Broker-Dealer Status Many well-intentioned companies assume a casual “introduction fee” or a one-page finder agreement is benign. In reality, the United States securities laws define broker activity broadly, and seemingly simple referral arrangements can trigger broker-dealer registration requirements under Section 15(a) of the Securities Exchange Act of 1934. You are at higher

Understanding Declaratory Judgment Jurisdiction in Tax Court A petition for declaratory judgment in the United States Tax Court is a specialized proceeding that seeks a judicial declaration regarding a specific tax status or qualification, rather than a determination of a tax deficiency. Unlike a typical deficiency case, which involves a Notice of Deficiency and a

Understanding What Legally Constitutes a Franchise Across Borders Before offering opportunities abroad, it is essential to determine whether your model is legally considered a franchise in the target jurisdiction. Many founders assume they are licensing a brand or providing distribution rights, only to discover that local law treats the arrangement as a franchise because it

Defining a “Signing Bonus” That Vests Over Time: Why Terminology Dictates Legal Outcomes Employers often label inducement payments as a “signing bonus” while staggering payment over time or conditioning payment on continued employment. That label is rarely dispositive. In many jurisdictions, a “bonus” paid for work performed or as consideration for accepting an offer can

Understanding the Section 1042 Roll-Over in ESOP Transactions A Section 1042 roll-over allows certain business owners to sell stock to an Employee Stock Ownership Plan (ESOP) and defer recognition of capital gain by reinvesting the proceeds in qualified replacement property. In plain terms, Congress created a pathway for owners of closely held companies to achieve

What the IRC Section 965 Transition Tax Actually Is IRC Section 965 imposed a one-time tax on certain deferred foreign earnings of specified foreign corporations, generally measured as of the last taxable year of the foreign corporation that began before January 1, 2018. The law effectively required many U.S. shareholders to include accumulated post-1986 earnings

Understanding the Foreign Earned Income Exclusion and Who Qualifies The Foreign Earned Income Exclusion (often referenced as the FEIE) allows a qualifying U.S. citizen or resident alien living abroad to exclude a specified amount of foreign earned income from U.S. taxation each year. The exclusion threshold is adjusted annually for inflation and applies only to

Understanding a “Complete Liquidation” of an S Corporation A complete liquidation of an S corporation is not simply closing the doors and distributing cash. It is a legally significant sequence of steps under the Internal Revenue Code, state corporate law, and often loan covenants and contractual arrangements. For federal tax purposes, a complete liquidation occurs

Understanding the Meaning of “Covered” Versus “Non-Covered” in Healthcare The distinction between “covered” and “non-covered” activities is not a single, universal classification. It is a layered concept that depends on the specific legal regime at issue. For some providers, “covered” refers to services reimbursable by Medicare, Medicaid, or commercial payors, subject to payer contracts and

Competitor Coordination Risks Hidden in “Joint Marketing” Labels When competitors contemplate a joint marketing agreement, they often assume that promotional activity is “safe” because the collaboration focuses on brand awareness rather than prices or output. That assumption is dangerously incomplete. Under Section 1 of the Sherman Act and Section 5 of the FTC Act, even

Understand the Purpose and Scope of a Nexus Study A proper nexus study is a disciplined, methodical evaluation of where a business has created sufficient connection to a state or locality to trigger tax registration, collection, remittance, and filing obligations. It is not a single checklist. It is a cross-functional assessment that combines legal analysis,

  Understanding What Real Estate Flipping Means for Tax Purposes Real estate flipping is often described casually as buying, improving, and quickly reselling property for profit. From a tax perspective, however, flipping is not a casual concept. The Internal Revenue Code treats repeated purchase-and-resale activity as a trade or business, and the seemingly simple act

What an Excess Cash Flow Sweep Really Does in a Credit Agreement In commercial credit agreements, an excess cash flow sweep is a contractual mechanism requiring the borrower to prepay term debt with a specified portion of cash generated by the business that exceeds agreed thresholds. It is often described casually as a “share of

Understanding Hybrid Entities And Their Role In International Tax Planning Hybrid entities are legal vehicles that are treated differently for tax purposes across jurisdictions. For example, a company may be regarded as a corporation in one country but as a flow-through or disregarded entity in another. This mismatch in characterization, while seemingly straightforward, produces complex

Regulatory Framework That Governs the “Blank Check Company” Label Blank check company is not merely a colloquial label; it is a term of art under federal securities law with concrete regulatory consequences. The principal anchor is Securities Act Rule 419, which defines and regulates offerings by companies that have no specific business plan or purpose

Understanding the “80/20 Company” Rules: What They Are and Why They Matter The term “80/20 company” describes a set of tax classification rules that exist in both federal and state contexts, each with materially different implications. At a high level, certain regimes use an 80 percent threshold to separate U.S.-centric businesses from groups that predominantly

Understanding What Counts as a Golden Parachute Payment In merger and acquisition transactions, a “golden parachute payment” refers to compensation that is contingent on a change in control and paid to a disqualified individual. While this sounds straightforward, the legal definition under Section 280G is broader and more intricate than most executives and companies realize.

Understanding the “Kiss Kiss Bank Bank” Peer-to-Peer Lending Model Peer-to-peer lending that resembles the “Kiss Kiss Bank Bank” model connects individual lenders directly with individual borrowers through a marketplace or informally through social or professional networks. The legal and tax consequences of such arrangements are often underestimated. Borrowers and lenders may assume that a simple

Understanding Unearned Revenue: What It Is and Why It Matters for Taxes Unearned revenue, also called deferred revenue, is cash collected before goods or services are delivered. It arises in common arrangements such as annual software subscriptions, prepaid service contracts, gift cards, maintenance agreements, retainers, and event deposits. On the balance sheet, it is recorded