Case Studies
1. S Corporation Election Saves Self-Employment Tax
Client: Consultant earning $180,000 as a sole proprietor.
Challenge: Paying self-employment tax on all net income.
Strategy:
Analyze whether an S Corporation election is appropriate.
Pay a reasonable salary.
Distribute remaining profits as shareholder distributions.
Potential Result:
Thousands in payroll tax savings annually while remaining compliant with IRS reasonable compensation rules.
IRS Support:
Publication 334 (2025), Tax Guide for Small Business | Internal Revenue Service
2. Maximizing Retirement Contributions
Client: Self-employed physician earning $350,000.
Challenge: High taxable income.
Strategy
Establish Solo 401(k) or Cash Balance Plan.
Maximize deductible retirement contributions.
Potential Result
Significant reduction in current-year taxable income while increasing retirement savings.
IRS Authority:
Publication 560 (2025), Retirement Plans for Small Business | Internal Revenue Service
3. Rental Property Cost Segregation
Client: Purchased a commercial building for $1.5 million.
Challenge: Slow depreciation deductions.
Strategy
Perform a cost segregation study.
Accelerate depreciation where appropriate.
Potential Result
Larger deductions in early years, improving cash flow.
Authority
IRS depreciation rules; cost segregation is a recognized tax planning strategy when properly documented.
Top Tax Strategy for Real Estate Investors: Cost Segregation Studies - Business Insider
4. Real Estate Professional Status
Client: Married couple with W-2 income and multiple rental properties.
Challenge
Large suspended passive losses.
Strategy
Determine eligibility for Real Estate Professional Status.
Meet material participation requirements.
Potential Result
Ability to deduct qualifying rental losses against other income when IRS requirements are met.
IRS Authority:
Publication 925 (2025), Passive Activity and At-Risk Rules | Internal Revenue Service