This week we’re highlighting business owner James Basurto, President of Security & Cabling Solutions, better known as SCS. For more than a decade, James’s company has served the Silicon Valley by putting the customer first. It is that customer care that has enabled SCS to be nimble during this latest crisis.

When the stay at home order was issued in March, James sent home his employees and immediately looked at his business model. He realized that clients were going to need new products if they were going to get back to work.

SCS started offering new services, including infrared temperature reading cameras. The move immediately paid off. The company received new construction clients looking to have temperature taking machines installed on construction sites (they kept operating as essential services).

Building off of that, James is investigating FLIR cameras that can take the temperature of retail patrons or employees. The extra security would allow companies to send people home if their temperatures spike.

James believes that many companies may also install check-in kiosks asking people about COVID-19 symptoms before they enter a building. He’s looking into how he can service customers that way.

James has worked in the industry long enough to remember what it was like after the 9/11 attack. There was an influx of business then. He expects to see another surge in industry demand following the COVID-19 shutdown.

James is also preparing for when retail establishments are allowed to reopen. He’s scheduling projects now so that his employees can jump back into work safely when the time is right.

If you missed any of our other small business features, check out Sift+Pour Bakery, Wine & Liquor Mart, Killroy Pest Control, and Professional Coach Amber Setter.

When you’re dealing with a loved one’s estate, there can be a lot of foreign terms suddenly tossed at you. One of them may be alternate valuation date. This phrase may sound like gibberish and the explanation even more so. Figuring all of it out while dealing with your grief can be overwhelming.

What is the alternate valuation date?

All estates are subject to tax law, and some of them have to pay taxes. Usually, when a person dies, their estate’s value is determined by what the assets within the estate were worth on the date of his or her death. So, if an estate is worth $10 million on the date of death, that’s what the IRS will base its calculations on.

However, the estate can be re-valued six months after the date of death. This is what’s called the alternate valuation date. The IRS tax code allows this new value to be used on estate taxes with no penalty to the estate.

IRS 26 U.S. Code 2032

Getting technical for a moment, the section of the IRS tax code that refers to alternate valuation date is called: Title 26, Subtitle B, Chapter 11, Subchapter A, Part III, Section 2032. You can read it here if you want, but it’s a bit of a slog.

What you really need to know is below.

Why do I want an alternate valuation date?

If the value is big enough, the estate may owe taxes. However, how much it owes could vary depending on when the value of the estate is determined.

Let’s say the estate we talked about before was worth $10 million on the date the person died. Six months later, the market declines, and now the estate is worth $8.5 million. It’s much better to be taxed on the $8.5 million than it is on the $10 million.

What’s the downside?

Before you get too excited, there is a downside to the alternate valuation date.

You can only choose to take the value of the entire estate on the date of death or the value of the entire estate six months after the date of death. There is no in-between.

The IRS will not let you pick and choose which parts of the estate you want to value at the time of death and which ones you want to value six months after death. This is an all or nothing deal.

That means while some of the assets within the estate may be worth less six months later, others may be worth more. You have to do the work to estimate the value at that later date if you think this could be useful.

What’s the other downside?

There’s another wrinkle in choosing the alternative valuation date and that’s future income. Initially taking the lower estate value requires you to pay less in taxes, but remember that the lower value is what’s applied when the asset is distributed to the estate’s beneficiaries. If you choose to take the alternate (lower) value and that asset is later sold, then the alternate value is what’s used to determine how much profit is made (though possibly at a lower rate).

In other words, either way, the IRS is going to get it’s cut.

Are there any exceptions within the alternate valuation date tax code?

The only exception that the IRS allows for is if an asset within the estate is sold, exchanged, distributed, or disposed of in another way within the six months. If that’s the case, then the asset’s value will be determined based on the date that you disposed of the item from the estate.

Is there anything else I need to know about the alternate valuation date?

You have nine months from the date of death to tell the IRS that you want to use the alternate valuation date. You or your CPA will need to make an election when they file IRS Form 706 if you plan to use the alternate valuation date.

Once you make this choice and the form is submitted, there’s no going back. The election to use an alternate valuation date is irrevocable.

Another fun twist is that you have to exclude changes due solely to the passage of time. If you have a loan due to you, you can’t say it’s worth less only because payments have been made in the six months between the date of death and the alternate valuation date.

Is it better to take the alternate valuation date?

So, with everything you’ve learned about the alternate valuation date, is it better to take the value of an estate on the date of death or six months later?

Unfortunately, there’s no easy answer.

You and your CPA should examine several factors when weighing the alternate valuation date option including:

  • Determine if the estate taxable at all;
  • The tax bracket that the estate falls into;
  • Is it on the estate for a married person;
  • The relationship of the deceased to the estate’s beneficiaries;
  • The future tax implications;
  • The future tax benefits on depreciable assets;
  • And whether the estate’s assets will be sold or passed down through inheritance.

For large estates, talk to a professional about whether or not an alternate valuation date is beneficial to you. Make sure you contact your CPA. You can also talk to us here at Towne Advisory Services about any estate valuation questions.

Related Posts:
Business and Valuation Terms You Should Know But Feel Dumb Asking About
How to Spot Dangerous Entrepreneurship Advice
Why You Want a CPA Not an Accountant

Real Life = Work Life + Mom Life

In this week’s small business success story, we highlight Executive Leadership Coach and sole proprietor Amber Setter. Amber is a Professional Certified Coach (PCC) who works with executives and other professionals to help them navigate life transitions.

When the stay at home order was issued Amber’s mom-life and work-life collided. Like many parents, she was suddenly juggling work and family 24/7. She found that many of her clients were experiencing the same problems and her services were needed more than ever.

Amber says while her clients vary, she’s hearing a common refrain. “Our illusion of control is broken. People are being more self-reflective for a moment,” said Amber. She says clients are starting to prioritize and look at what they can and cannot live without.

As for Amber, she’s come up with a game plan for how she handles the stay at home order. Because things are changing so quickly, Amber reevaluates her business needs every week. She knows that being open to flexibility and anchoring back to goals is key to managing in the new normal. She makes every effort to work smarter, not harder.

Amber makes it a point to take care of herself. She sleeps a little more and sets aside time to make decisions during moments of stillness, away from outside influences.

Most of all, Amber hasn’t changed the overall game plan of her business just yet. She keeps her eyes on the horizon, while still being cognizant of the present.

To find out more about Amber, check out this article she wrote for CalCPA aimed at early career professionals.

For a look at some of the other small business professionals we know that are thriving during these difficult times, check out our features on Killroy Pest Control, Wine and Liquor Mart, and Sift+Pour Bakery.

Lately, we’ve been focusing on small businesses that have figured out how to navigate these unprecedented times. We talked to Elizabeth at Sift+Pour Bakery who created a social distancing survival kit to help bring in a new stream of revenue and Frank and Peggy Tavarez, who completely pivoted the Wine and Liquor Mart to a virtual sales space to make sure they were following social distancing guidelines.

Killroy Pest Control Family Run Silicon Valley Business

Courtesy: Killroy Pest Control

This week, we look at essential business Killroy Pest Control, which has served Silicon Valley for more than six decades. Lynn Olavarri-Schmidt and Richard Schmidt have seen almost every economic twist and turn imaginable while running Killroy Pest Control in Campbell, CA. So they knew what to do when business in California stopped because of the stay at home order.

Even as an essential business that deals with pests such as roach, spider, and rodent control, Killroy found itself with no revenue coming in. Lynn and Richard sent everyone home and began formulating a game plan for the coming weeks. They contacted customers to make sure the demand was still there. They adjusted the office to adhere to social distancing guidelines.

Employees now take trucks home and go directly to customers instead of meeting in a centralized location. Administrative staff have laptops and home offices to do their work. They now email bills to customers instead of sending them via mail or delivering them in person.

Four weeks later and the essential business is running at about 75% to 80%. Lynn and Richard are already looking at new potential business avenues so Killroy can be #buildbackbetter when the order is lifted. They say the changes have worked, but they’re hoping to be back to the old ways soon. Social distancing has forced them to cut one of the most important aspects of their business, the camaraderie.

Great job Lynn, Richard, and the entire Killroy family!

During times like these, it’s always interesting to see what new and innovative ways small businesses are working to reach out to old and new customers alike. About a week ago, we highlighted the Sift+Pour Bakery in Dallas, Texas. This week, we want to take a look at a shop that’s a piece of the Towne Advisory extended family.

frank peggy tavarez wine liquor mart poughkeepsie new york small businessesThe Wine and Liquor Mart in Poughkeepsie, NY is a family business opened by Frank and Peggy Tavarez in 1999. When the novel coronavirus started closing down non-essential businesses, the couple had the opportunity to stay open as an essential business located between two hospitals. Competitors were remaining open and it might have made sense for Frank and Peggy to follow suit.

Instead, they chose the health of their employees and patrons. They shut their doors for the duration and pivoted their business. They invested in a new website, upgraded their inventory system, and added an online ordering system all in under 10 days. They used social media to highlight the business changes and it’s paid off, allowing The Wine and Liquor Mart to continue serving the community once again since the new site launched.

Frank and Peggy have proven that it’s possible to stay in business while still keeping employees and the community as healthy and safe as possible. Way to go Frank and Peggy!

If you know of a small business that’s found a new or innovative way to serve its customers, let me know.

I need a quick break from the madness, don’t you?

I wanted to highlight a small business in our circle that has taken this opportunity to think outside the box. They have brought smiles to faces while adding a helpful new stream of revenue during this time!

Elizabeth Ging, the owner of Sift+Pour Bakery in Dallas, makes custom cookies and treats. She started playing around with the idea of everyone buying up all of the toilet paper in stores. Elizabeth drew toilet paper on a cookie and said: “There is no shortage here!”

coronavirus business success story toilet paper masks cookies

As the news evolved of potential shutdowns and a decrease in foot traffic, Elizabeth realized it was her job to find ways to bring her product to her customers. She has created “The Social Distancing Survival Kit” and a Rice Krispy Treat Decorating Kit!

Check them out at siftandpour.com.

Kudos to Elizabeth and Sift+Pour for taking steps to be Disaster Proof!

If you have a story of a small business doing something fun, novel, or just extra caring that is helping make them Disaster Proof, I’d love to hear about it. #DisasterProof. #TASC

No one wants to see something like the recent outbreak of the novel coronavirus make headlines around the world, but it happens. It’s undeniable that the worldwide spread of the novel coronavirus has had an impact not just on our everyday lives, but in the way that we do business. World markets have felt the impact as well as supply chains and to a lesser extent, consumers. And with the full impact of the virus still unknown, the economic impact could get worse before it gets better.

Now businesses can react to this impact in a few ways. Some businesses will conduct business as usual, operating as if the novel coronavirus will have little to no impact on what they do and how they operate. Other businesses will plan for the worst and lose sight of what they’re doing in the present.

And some businesses will see the novel coronavirus as the unfortunate business roadblock that it is. It’s something that exists whether we like it or not and we can either run from it or find a moral and ethical way to make sure our business comes out on the other side of it stronger.

Never take advantage of the customer

Before I get into the ways a business can overcome novel coronavirus and come out the other side stronger, I want to make sure people understand what I’m talking about. In no way, shape or form am I suggesting that a business take advantage of the consumer. Price gouging, also called profiteering, is not only bad karma but it can be illegal.

If you own a company that makes hand sanitizer, by all means, advertise but don’t price gouge.

No matter what you do as a business, remember that human decency should always come first.

Do satisfy a new, temporary need

However, your business can still use a world issue like the novel coronavirus to its advantage. Ruth Fisher, economist and CEO of Quantaa says, “During pandemics and other such crises, people avoid crowds and public spaces. A company can commercialize on this by tailoring products or services to this situation: enable people to access or use the product or service at home or in a venue that’s physically separated from others.”

A great example of this is Netflix. As the New York Post reports, while the S&P 500 lost points in the final week of February, Netflix’s stock rose. Netflix is a company that’s specifically set up for people who want to seclude or quarantine themselves. “Social distancing” as a business model.

Think of this in terms of yourself. What would you do if you were stuck inside all day, whether it’s just for one day or a series of days? There’s a reason why companies like Amazon, Zoom Video, and Netflix as well as work applications like Slack are gaining so much attention during this outbreak.

Sometimes a temporary method becomes permanent

The spread of the novel coronavirus could be the opportunity a company needs to infiltrate a saturated market.

“When the pandemic subsides, a lot of people will have found that the stopgap (temporary) product/service fills their more general needs, and thus adopt that measure permanently,” says Fisher.

In particular, Fisher sees the novel coronavirus as having the potential to speed up current trends in home delivery of products and services, as well as employees working from home.

Company goodwill

Sometimes your company is not in a position to fill a commercial need during a pandemic or crisis. That does not mean that you should pretend that the crisis does not apply to you.

“A company can earn reputational benefits or goodwill by putting the needs of its employees or the community ahead of its own,” says Fisher. “This will increase loyalty of employees or community. For there to be real value (and not just empty virtue signaling), however, the act must be costly to the company.”

Johnson & Johnson, for example, is a leader in the health industry. To date, the company has donated 1 million surgical masks to impacted areas of China, 48,000 bottles of alcohol, as well as money and other supplies necessary for battling the outbreak in China.

Companies like Facebook and Google, who don’t have the healthcare inventory that Johnson & Johnson does, can use its buying power to build company goodwill. According to CNBC, Google will donate $1 million to Mountain View organizations to support small businesses after the company canceled its annual Google I/O conference. Facebook is donating $500,000 in San Jose after canceling two of its conferences in the city. Both companies are also donating millions of dollars in free advertising to help the World Health Organization (WHO) battle misinformation on the internet.

As these actions show, goodwill doesn’t have to be a concept thrown around by valuation professionals, it can be real positive karma that your company builds by the actions it takes in the world.