Taxation & Estate Planning

CLAIM INFORMATION INCLUDED IN PETITION FOR ADMINISTRATION QUALIFIES AS A PROBATE CLAIM [FLORIDA]

Posted on January 10, 2008
Creditors of a deceased person generally must submit a written claim against the estate within 3 months of publication of a notice of administration, or 30 days of service of the notice if service is required, their claim will typically be barred. Such claims are usually submitted on a Florida Bar approved form after the commencement of the probate proceeding...

MORE YEAR-END TAX LAW CHANGES

Posted on January 08, 2008
As promissed, here are some additional summaries of year-end tax law changes:A $250,000 gain exclusion applies for sales of a principal residence - $500,000 can be excluded for married couples. Since the $500,000 exclusion requires a joint return, if one spouse died and the house was sold in a later tax year, the surviving spouse could only use his or her $250,000 exclusion...

YES, A SURVIVING SPOUSE MUST SURVIVE THE DECEDENT

Posted on January 06, 2008
Mrs. Lee passed away. Her husband then died about 45 days later. However, under the terms of Mr. Lee's estate planning documents, Mrs. Lee was deemed to have survived him and thus a distribution was made to her estate. Mr. Lee's estate sought an estate tax marital deduction for the transfer...

RETURN PREPARER PENALTIES - MORE

Posted on January 04, 2008
Earlier this week we discussed some dynamics regarding the new tax return preparer penalties. Subsequent to that posting, the IRS issued several Notices regarding the expanded penalties. Notice 2008-13 has the key provisions. One provision notes that persons who give advice on a return position can be penalized - not just traditional return preparers...

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NEW PREPARER PENALTIES CREATE INTERESTING DYNAMICS

Posted on January 01, 2008
Applying tax laws to existing facts is not always a black and white affair. Many times there is uncertainty as to how the law should apply in a given situation. This creates issues for taxpayers and tax return preparers as to how to report such items, and penalty risks if an incorrect position is adopted...

YEAR END TAX LAW CHANGES

Posted on December 28, 2007
A number of interesting year-end tax law changes were recently enacted. We will review a few of them in the coming postings. Let's start with two - AMT relief and mortgage discharge relief.A. Alternative minimum tax exemptions have been increased for 2007, instead of being decreased as required under prior law...

APPLICABLE FEDERAL RATES - JANUARY 2007

Posted on December 25, 2007
January 2008 Applicable Federal Rates Summary: -Short Term AFR - Semi-annual Compounding - 3.16% (3.84%/December -- 4.07%/November -- 4.15%/October) -Mid Term AFR - Semi-annual Compounding - 3.55% (4.09%/December -- (4.34%/November -- 4.3%/October) -Long Term AFR - Semi-annual Compounding - 4...

WASH SALE RULE LOOPHOLE CLOSED

Posted on December 22, 2007
Common year-end tax planning advice is to consider selling publicly traded securities that have lost value, so as to obtain a loss deduction to offset otherwise incurred gains. However, as a practical matter, a taxpayer may like a particular stock and want to keep it in his portfolio...

CAN A SLOTS PLAYER BE IN A TRADE OR BUSINESS?

Posted on December 18, 2007
Before we get to the main question, let's review why we care. Section 165(d) limits losses from wagering losses to the amount of wagering gains (regardless of trade or business status). However, if a gambler is in the trade or business of gambling, he or she can generally make the offset of losses against gains...

CAN RELIANCE ON AN ATTORNEY AVOID PENALTIES FOR LATE FILING OF ESTATE TAX RETURN?

Posted on December 14, 2007
Code Section 6651(a)(1) provides for an addition to tax in the event a taxpayer fails to file a timely return (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause and not due to willful neglect...

STRETCHING THE ENVELOPE TOO FAR

Posted on December 11, 2007
Insurance professionals have an incentive to find creative tax planning opportunities that involve insurance since their compensation is based on sales of policies. Such tax planning usually makes good sense, at least in appropriate circumstances, but sometimes that planning goes too far...

IRS CAN ACT INCONSISTENT WITH FIELD SERVICE ADVICE

Posted on December 08, 2007
Auditors can ask for legal advice from the IRS's Office of the Chief Counsel. Such written advise is referred to as Field Service Advice, or an FSA. In a recent tax case, the IRS had issued an FSA in regard to another taxpayer and acted consistently with it as to that other taxpayer...

TREASURY CONCERNS IN THE INTERNATIONAL AREA

Posted on December 04, 2007
The Treasury Department often publishes reports on areas of tax law, addressing issues that are of current concern. Such reports are useful as an indication as to what legislation may be coming. Of course, just because the Treasury Department has a concern in an area does not mean that legislation will always follow, or that Congress will enact that legislation...

CLAIM OF RIGHT DOCTRINE

Posted on December 02, 2007
A recent tax case reminds of us an often overlooked income tax Code Section that can provide significant benefits to taxpayers - Code Section 1341. This Code Section is tied into the claim of right doctrine. The claim of right doctrine typically applies where a taxpayer receives an income item in one year and reports it as income, even though there is a chance that the taxpayer will have to repay the amount in a future year...

INTEREST RATES FOR TAX OVERPAYMENTS AND UNDERPAYMENTS (JANUARY 2008 QUARTER)

Posted on November 29, 2007
The IRS has announced the interest rates for tax overpayments and underpayments for the calendar quarter beginning January 1, 2008. For noncorporate taxpayers, the rate for both underpayments and overpayments will be 7%. This is a 1% reduction from the prior quarter...

PROPER FUNDING OF RETIREMENT BENEFITS INTO A QTIP TRUST

Posted on November 27, 2007
Assets of a decedent that is a participant in a retirement plan can be left to a surviving spouse to obtain the benefits of the estate tax marital deduction, and thus avoid current estate taxes at the death of the decedent. While there are reasons for leaving such plan assets outside of trust, decedents at times want to tie up the assets in trust, and thus a transfer to a QTIP trust may be advisable...

APPLICABLE FEDERAL RATES - DECEMBER 2007

Posted on November 24, 2007
December 2007 Applicable Federal Rates Summary: -Short Term AFR - Semi-annual Compounding - 3.84% (4.07%/November -- 4.15%/October -- 4.76%/September) -Mid Term AFR - Semi-annual Compounding - 4.09% (4.34%/November -- 4.3%/October -- 4.73%/September) -Long Term AFR - Semi-annual Compounding - 4...

NO DISCOUNT REQUIRED FOR BUILT-IN GAINS VALUATION REDUCTION

Posted on November 20, 2007
The built-in gains value reduction for transfer tax purposes provides that the value of stock of a 'C' corporation is reduced by any untaxed gains inside the corporation. The theory is that a willing buyer would reduce the purchase price for such shares by the latent income tax liability inside the entity...

CHARITIES AS POLICEMEN

Posted on November 18, 2007
Unbeknownst to many charities, they have been recruited as policemen in the war on terror. Anti-terrorist measures impose penalties on grant-making nonprofit organizations that make grants to individuals or organizations that engage in or support terrorism - nonprofits who fail to police their grantmaking and properly investigate their grant recipients could find themselves in trouble...

WHAT LIFE AND BUSINESS EVENTS MERIT AN ESTATE PLANNING REVIEW?

Posted on November 13, 2007
Estate planning is not a "set it and forget it" process, or at least it shouldn't be. Even with the best of planning, circumstances change and a review of an individual's situation and estate planning is advisable. The following is a (non-exclusive) list of life and business events that should trigger a review of an estate plan and applicable estate planning documents, or at least a consultation with one's estate planner: Birth of a child or grandchild; Marriage of self or heir; Divorce; Death of a spouse or child; Major change in the tax laws; Major change in financial circumstances, such as a substantial inheritance; Change of domicile to a new state or country; Acquisition of out-of-state or out-of-country property; Major illness; Acquisition or sale of a business or real estate, including major liquidity events; Major charitable gifting; Acquisition of life insurance or significant annuity policies; Significant gifting to friends or family members; Or in the absence of any of the above, the passage of 4-5 years since the last review...

SUMMARY TABLE - RESTRICTIONS ON TRANSFER OF FLORIDA HOMESTEAD PROPERTY

Posted on November 11, 2007
Most Florida attorneys will tell you that the homestead laws of Florida are a challenge to understand and apply. One important aspect of homestead law are the limits on who homestead property can be transferred to, both during lifetime and at death - when spouses and lineal descendants exist, these limits can apply...

LAST CHANCE FOR $100,000 DIRECT TO CHARITY IRA DISTRIBUTIONS?

Posted on November 09, 2007
Currently, individuals over age 70 1/2 can make direct distributions to most public charities from their IRA of up to $100,000 per year. Such a direct distribution avoids the need to include such distributions in income and then seek an offsetting charitable deduction, which complete offset may often not be available...

FURTHER LIBERALIZATION IN REORGANIZATION RULES

Posted on November 06, 2007
The IRS, in finalizing proposed Regulations in the tax-free reorganization area, has continued the process of liberalizing "continuity" requirements. In the latest Regulations, the IRS has given its blessing to certain post-reorganization transfers that can be made without jeopardizing required continuity of interest rules...

IRS INTEREST CONTINUES IN SUCCESSIVE MEMBER INTEREST CONTRIBUTIONS

Posted on November 04, 2007
In August 2007, the IRS issued a Notice [Notice 2007-72] that it was designating a form of charitable contribution as an item "of interest." As such, persons entering into those types of transactions, and their advisors making tax statements with respect to them, are subject to disclosure and list maintenance requirements...

IRS AGREES TO CASE-BY-CASE LIEN/BOND EVALUATION UNDER SECTION 6166

Posted on October 30, 2007
An estate may elect under Internal Revenue Code Section 6166 to pay the portion of federal estate tax attributable to a closely held business interest in up to ten equal annual installments starting no later than five years after the regular due date for payment if certain requirements are met, including the requirement that the value of the business interest is more than 35% of the decedent's adjusted gross estate...

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