EFTA02394757.pdf

From: Barry J. Cohen < > Sent: Wednesday, August 23, 2017 12:24 AM To: Jeff Epstein Subject: Fwd: Advisor fee deductions--PRIVILEGED AND CONFIDENTIAL Begin forwarded message: From: "Barry J. Cohen" all <mailto >> Date: August 22, 2017 at 7:17:22 PM EDT To: Joseph Vinciguerra < <mailto: >, Brad Wechsler <mailto: > Cc: Richard Joslin <mailto > >, John Castrucci <mailto: > Subject: Advisor fee deductions--PRIVILEGED AND CONFIDENTIAL<=r> On a call today, David Kirk at EY made a case for th= following approach to deducting advisor fees that involved setting up and=structuring (construed fairly broadly) a new disregarded entity, like AP N=rrows, and others. 1. Find entities which were set up a. within the last 2 years, and b. the advisor expense= were incurred prior to an entity's starting its operations. 2. If the entity is a DRE, stand it up (make it a K-1issuer) by ad=ing a partner (like a sub 5). 3. Whoever paid the adviso= should also be made a partner of the entity. 4. The ent=ty should reimburse the partner(s) who paid the advisor. a. If the entity lacks sufficient cash, a someone should infuse cash int= it. 5. The entity can then capitalize this as a formation expense.=/o:p> 6. The expense should not be amortized. 7. =f the entity liquidates and distributes its assets (e.g., art) in kind, th= capitalized expense will be incorporated in the basis of each piece of ar=. a. Allocation among the individual pieces of art can probably be any rea=onable method, like pro rata according to value or embedded gain. 8. It is possible that other assets could be distributed from the e=tity prior to liquidation, and that would concentrate the advisor expense =upon liquidation) in the remaining pieces. 9. When and i= the assets distributed in liquidation are sold, gain or loss would be red=ced by the amount of the capitalized amount in each asset. =li class="MsoListParagraph" style="margin-left:0in;mso-list:I0 levell =fol">The IRS may scrutinize this transaction given the size of the advisor=expense, and this is even more likely if the liquidation happens too soon =fter formation. (Maybe would have to be 2020 or later. . . .) EFTA_R1_01424468 EFTA02394757  I've left out the complex reasoning behind thi=, as well as the rejected scenarios that EY decided won't work for c=mplex reasons. Joe, John and Rich should feel free to supplement my =utline. Barry J. Cohen = I President and Speci=l Counsel I Elysium Management,=LLC 445 Park Avenue Suite 1401 New York, NY 10022&=bsp; I Tel. (646) 589-0322 I Cell =0:p> <mailto > &n=sp; 2 EFTA_R1_01424469 EFTA02394758