Rarely is there such a convoy of cases involving a Texas billionaire, Anna Nicole Smith, a frat party and a pirate ship in Florida. They all came to this blog because of a modest Tax Court case concerning the setting aside of a charitable contribution.
In an increasingly connected world, estate planning, like many areas of law has expanded beyond local, and even national boundaries, implicating rules governing lawyers and their conduct, which remain in the hands of local authorities.
It’s no secret that President Obama has always fought to increase transfer taxes. In the past, he has proposed restoring transfer taxes to 2009 levels and curtailing various estate planning techniques.
Ninth Circuit rebukes Tax Court in valuation case stating that the Tax Court engaged in using ‘imaginary scenarios’ to predict the probability that the heirs of an estate would sell a partnership interest. Isn’t that what all courts do for valuing business partnership interests held by estates?
The Tax Court's opinion in
Smith v. Commissioner
, highlights the pitfalls that can attend attempting to deduct the value of used clothing, furniture, and household goods donated to organizations like the Salvation Army, Goodwill, and others. Here I take a look at the substantiation problems highlighted in the opinion and show some ways to make sure that donors are able to take advantage of the government's charitable subsidy.
The IRS recently released Rev. Proc. 2014-61
, confirming the projected 2015 inflation adjustments made in a special report by Bloomberg BNA. Check out the the amounts you need to know for 2015.
While everyone else is worried about employer-provided food getting taxed in Silicon Valley, let’s look at some of the tastier items of the IRS Priority Guidance Plan that we can chow down on, namely those affecting gifts, estates and trusts.
With the IRS's release of the
2014-2015 Priority Guidance Plan
(PGP), those in the exempt orgs area can be forgiven if they feel like Bill Murray's Phil Connors yet again waking up at 6 a.m. to "I Got You Babe" - things look a lot like they did last year. And while the PGP isn't as fetching as Andie MacDowell's Rita Hanson, tax geeks will surely want to check things out.
For the third year, Bloomberg BNA has released projected inflation-adjusted amounts for thresholds, limits, and deductions in 2015. The projections affect inflation-adjusted amounts relating to estates and gifts, as well as exempt organizations.
The Tax Court's recent opinion in
Estate of Adell v. Commissioner
T.C. Memo 2014-155
(Aug. 4, 2014) (
), was just the latest in a flurry of activity at the court for the late Frank Adell's estate. The estate has been on the losing end of two decisions in the last year, but this new opinion provides at least some good news for his heirs.
On Wednesday, July 30, 2014 between 12:30 - 2:00 ET, Alan Acker, one of the nation's leading estate and trust experts, will present a Webinar on the recently issued
§67(e) regulations and the
regulations. The Webinar is designed for estate and trust planners and administrators. The purpose of the Webinar is to allow these professionals to become conversant with options both in drafting of wills and trusts, and in administration of estates and trusts that can lead to lower taxes under
In response to public comments, the IRS amended the effective date for Regs. §1.67-4 to on or after January 1, 2015. Regs. §1.67-4 govern which nongrantor trust and estate expenses are subject to the 2% floor for income tax purposes.
On Wednesday, August 6, 2014 at 12:30 PM ET, Bloomberg BNA will host a one-hour live
webinar entitled, "Hybrid Social Enterprise Organizations," presented by Cassady ("Cass") V. Brewer, Elizabeth Carrott Minnigh, and Robert A. Wexler.
The final regulations for §67(e) are finally out, but where will they lead for unbundling fees? While the final regulations provide that a nongrantor trust or estate can use any reasonable method of allocating bundled fees, it should be kept in mind that the taxpayer will bear the burden of proof in substantiating any deduction.
How can a Tax Court judge reject the opinion of an expert, but then rely on a case in which that same expert proffered essentially the same expert opinion, where the previous opinion relied almost exclusively on that expert?
David Kirk and Jeanne Sullivan will host a webinar on the first year of the Net Investment Income Tax, looking at the application of §1411 and some of the compliance issues and glitches. The discussion will include completion of the Form 8960, and the role of the Form 8960 Instructions and the §1411 final and proposed regulations in resolving compliance issues.
Frank Aragona Trust v.Commissioner
, 142 T.C. No. 9 (3/27/14), the Tax Court held that a trust could materially participate in rental real estate activities so as to avoid the per se passive activity rule. And, the court went on to hold that the trustees of the Frank Aragona Trust did materially participate in this case. However, the court declined to rule on whether a trust or estate could consider the activities of non-trustee fiduciaries, employees, or agents in making that determination, as a Texas district court had held more than 10 years earlier in the
Mattie K. Carter Trust
case. Given the renewed importance of this decision in light of the impact it will have in the Net Investment Income Tax area, it's doubtful that the Tax Court's opinion will be the last word on this issue.
Bloomberg BNA has released a new Tax Management Portfolio,
Social Enterprise by Non-Profits and Hybrid Organizations
, No. 489-1st. This Portfolio analyzes the unique federal income tax and state law issues affecting the relationships between social entrepreneurship and tax-exempt organizations, whether carried on directly by the tax-exempt organization or encouraged by investments in or grants to socially- or charitably-minded for-profit businesses. The discussion includes an examination of the emergence of hybrid organizations designed to apply commercial strategies to maximize a social or charitable purpose.
While the General Utilities Doctrine died in 1986, the various circuits are still unsettled about how to apply the discount for built-in capital gains tax liability in closely-held businesses. From discounting 100 percent of the liability to ignoring the discount altogether, the courts offer a variety of options.
The IRS issued
Rev. Proc. 2014-18
, 2014-7 I.R.B. 513 (2/10/14) providing a simplified method for certain estates to obtain an extension of time, under Regs. 301.9100-3, to make a §2010(c)(5)(A) portability election. The election must be made on the estate of the first deceased spouse's estate tax return (Form 706). The relief provided in this guidance is only available for thoses estates that would not otherwise be required to file the estate tax return.
Trust interests created before 1977 can bring state law into the formula for determining whether a disclaimer will ward off gift tax on the transfer. While the rules under §2511 apply, state law requirements must still be met before a disclaimer is effective for federal gift tax purposes.
For tax years beginning in 2013, Form 8949, Sales and Other
Dispositions of Capital Assets, is to be used in conjunction with revised Form
1041, Schedule D, to report a trust’s or estate’s...
Notice 2014-2, on the ability of tax-exempt hospital organizations to rely on the 2012 proposed regulations REG-130266-11
and the 2013 proposed regulations REG-106499-12 under 501(r), 4959, 6033 hospital organizations must comply with statutory requirements for tax-exempt organizations operating as hospital facilities.
The Patient Protection and Affordable Care Act created a new set of requirements for charitable hospital organizations to meet in order to maintain tax exempt status. Notice 2014-3 proposes a procedure to allow the IRS to excuse charitable hospitals for minor and inadvertant omissions and errors.
The IRS released proposed regulations, REG-134417-13 , 78 Fed. Reg. 71535 (11/29/13), providing guidance to tax-exempt social welfare organizations (i.e., §501(c)(4) organizations) that would...
As many are familiar with by now,
is the net investment income (NII) tax of 3.8% imposed on individuals, trusts, and estates with a certain threshold of income for tax years beginning in 2013. Nearly a year following the proposed regulations (
), the IRS issued the much-anticipated final regulations (
), providing guidance on the general application and computation of the NII tax. While there are several other components to the regulations, this discussion focuses only on the effect for trusts and estates.
District Court holds that the income tax exemption under IRC §107(2) for rental allowances paid to ministers as part of compensation violates the First Amendment's establishment clause. The court enjoined enforcement of the section pending the expiration of the period for appeals.
In United States v. Windsor, the Supreme Court ruled that sec. 3 of the DOMA, which provided that for all federal purposes marriage was defined as being between one man and one woman, was unconstitutional as it discriminated against same-sex married couples. At the same time, the Supreme Court refused to rule on whether same-sex marriage bans were unconstitutional in Perry v. Hollingsworth. These cases left many unanswered questions, including but not limited to, how to handle same-sex married couples living in states that either ban or do not recognize their marriages. The IRS, the Department of Labor, and other federal agencies have issued pronouncement all granting these same-sex married couples living in states that do not recognize their marriage full federal rights and benefits. But, is that the end of the discussion?
On Tuesday, November 19, 2013, at 12:30 - 2:00 PM ET, Bloomberg BNA will present a live webinar entitled "
Chapter 14 Essentials: A Practitioner's Guide Through the Minefield
." Chapter 14 of the Code has existed for over 20 years, yet many estate and gift tax provisions are not well understood by trusts and estates professionals. Todd Angkatavanich of Withers LLP and Jonathan Blatmmachr of Eagle River Advisors will discuss the many estate and gift tax pitfalls that can occur when structuring transactions between family members.
The IRS recently released Rev. Proc. 2013-35, confirming the projected 2014 inflation adjustments made in a special report by Bloomberg BNA.
On Thursday October 31, 2013, BBNA hosted a webinar on Planning
for Disability in an Aging World. The speakers were Robert B.
Fleming, Esq. CELA and Rebecca Morgan, LL.M. (Elder Law), Boston
Asset Management Chair in Elder Law, Director, Stetson University
College of Law, two of the foremost leaders in disability
planning. The webinar provided practitioners with an in-depth analysis of the issues that they will face when advising older clients and their families dealing with incapacity and disabilities.
In a BBNA Webinar,
Making the Most of Year End Planning Opportunities with Checklists, Forms and Client Letters
, Alan S. Gassman, Esq., Kenneth J. Crotty, Esq., and Christopher J. Denicolo, Esq. provided details on 9 common mistakes related to spousal gift splitting. Further, Gassman, Crotty, and Denicolo presented a cornucopia of information related to myriad aspects of estate, gift, and income tax planning. Other topics included utilizing ILITs and Dynasty Wealth Protection Trusts, as well as planning to avoid the new 3.8% tax on net investment income (the Medicare Tax).
In holding that the IRS was not entitled to summary judgment on the issue of whether a donor may reduce the value of gifts to her children by the mortality-adjusted present value of the children's agreement to assume and pay any estate tax liability imposed under §2035(b), the Tax Court stated that "We will deny [the IRS's] motion for summary judgment, and we will no longer follow
McCord v. Commissione
r, 120 T.C. 358 (2003),
rev'd and remanded sub nom.
Succession of McCord v. Commissioner
, 461 F.3d 614 (5th Cir. 2006), to the extent it provides otherwise."
In so doing, the court seemed to reverse its previous position in
McCord v. Commissioner
. However, this fully reviewed opinion may not be the last say on the matter. Two Tax Court Judges who did not take part in the decision could tip the balance in favor of following the
On Wednesday, October 30, 2013, Bloomberg BNA presents a new practical webinar,
Making the Most of Year End Planning Opportunities with Checklists, Forms and Client Letters
. The webinar, conducted by Alan S. Gassman, Kenneth J. Crotty, and Christopher J. Denicolo concentrates on year-end planning techniques which practitioners need to consider for their clients. This includes techniques that are available to utilize the clients' lifetime gift exemption, to structure clients' planning to reduce or eliminate possible income tax exposure, and the potential pitfalls and traps that need to be considered.
On Thursday, October 31, 2013, Bloomberg BNA presents a new practical webinar,
Planning for Disability in an Aging World
. Many practitioners have had or will have clients who are incapacitated to some degree, whether mentally or physically. As life expectancies increase in the United States, 2 the number of individuals with some type of disability or incapacity may also increase. Although some clients with a disability or degree of incapacity will still be able to make decisions regarding their health care and property management, others may not be able to do so. Advance planning is critical to provide for the seamless transfer of control from the client to the designated agent when and if the client is no longer able to make decisions for herself or her family, or to ensure that another steps into the role of decision-maker to make decisions for the client or the client's family when the client lacks capacity to do so.
On Thursday, October 31, 2013, Bloomberg BNA will host a webinar on Planning for Disability in an Aging World. The webinar will cover a host of topics geared towards providing practitioners with the tools necessary to assist their clients and their families in planning for disability. In addition, the course will help the practitioner understand the government benefit programs available to these individuals. All registrant will receive a complimentary copy of the authors' Bloomberg BNA portfolio, Planning for Disability (a $400 value).
For a second year, Bloomberg BNA has released projected inflation-adjusted amounts for thresholds, limits and deductions in 2014. The projections affect inflation-adjusted amounts relating to estates, gifts and trusts, as well exempt organizations.
Over the past few years there have been a significant number of
audits and Tax Court cases related to conservation (facade)
easements, and particularly the valuation of these easements...
Generally, for income tax
purposes, the character of income that is distributed to the beneficiary of a
charitable remainder trust (CRT) as an annuity or unitrust payment is
Private placement life insurance and Private Placement Variable Annuities have become significant estate planning tools to high-net-worth individuals. In consulting with their high-net-worth clients, tax advisors need to look beyond their client's estate planning needs and look to the client's investment, income tax and asset security needs as well. Portfolio 870-1st explores the use of these financial instruments in the estate planning context.
In Rev. Rul. 2013-17, the IRS finally provides guidance on the choice-of-law issues left unresolved by the Supreme Court's decision in
United States v. Windsor
. In general, same-sex couples who are married in states which recognize same-sex marriage will be considered "married" for federal tax purpose, regardless of their state of domicile. While same-sex married couples residing in states that ban same-sex marriages have some certainty in the short term, it is doubtful that this will be the last word on this issue.
In conjunction with the release of the State Trust Nexus Evaluator, Bloomberg BNA releases Portfolio 869-1st:
State Income Taxation of Trusts
by Richard W. Nenno. This Portfolio goes beyond the generic state rules on the taxation of trusts by discussing unique planning opportunities and the due diligence required of all trustees. According to the author, it is important for the trustee to be involved with the planning process, implementing the trust, and performing due diligence once the trust has been established. During each phase, the trustee should ensure that the attorney is considering where the trust might be subject to tax and whether it is possible to legally avoid tax in certain jurisdictions, Nenno said. According to Mr. Nenno, "With planning, you can save a lot of money,"
Bloomberg BNA, launched a major expansion of its state tax product offerings. Included in these offerings are an Estates, Gifts, and Trusts Navigator as well as a State Trust Nexus Evaluator Tool which will allow subscribers the ability to create charts comparing and contrasting different states' laws on the income taxation of estates and trusts. These tools are compliments to our Portfolios, including new Port. 869,
State Income Taxation of Trusts
by Richard W. Nenno. At a time when state taxes continue to grow in complexity and importance, Bloomberg BNA has added must-haves for all estate and trust advisers.
The IRS released final, temporary, and proposed regulations under §4959 for excise tax on charitable hospitals that fail to meet the community health needs assessment (CHNA) requirements under
§501(r)(3). These organizations must file Form 4720 by the 15th day of the fifth month after the end of the organization's taxable year in which the liability was incurred.
On August 7, 2013, the IRS issued 2013 draft Form 8960,
Net Investment Income Tax - Individuals, Estates, and Trusts
, which is based solely on its proposed regulations under §1411 (which taxpayers may rely on for the 2013 tax year). Once the IRS finalizes the form, individuals, estates, and trusts will use it to compute their net investment income tax.
BBNA App allows subscribers to access BBNA content anywhere and everywhere.
Practitioner's should be careful when advising clients with respect to filing and payment deadlines for estate taxes. Because of the ability to extend payment deadlines in the estate tax arena, practitioners should be careful to distinguish between advise they would give to income tax clients and advise that they would give to estate tax clients.
Valuing a facade easement is not easy, to say the least. It often boils down to a battle of the experts. However, both sides should make sure to not lose sight of the forest through the trees. Sometimes a common sense approach might be the way to go without needing to resort to a complicated state law analysis. Also, both sides should be careful not to get too greedy. When a court loses confidence in one aspect of an expert's analysis, the court could dismiss everything else the expert has to say. So, both sides should take care to pick an expert wisely.
Bloomberg BNA Tax Policy and Practice Summit
Bloomberg BNA Tax Policy and Practice Summit
on Nov. 13-14, at the Ritz-Carlton Hotel in Washington, DC will bring the "what now" into sharper focus.
Tax Court denies charitable contribution deduction for donations of home to
local fire departments for training and demolition purposes.
On June 15th, the IRS issued long-awaited temporary and proposed regulations that provide guidance on the estate and gift tax applicable exclusion amount, including the requirements for electing...
As you probably know, Congress passed the Defense of Marriage Act (DOMA)
in 1996. In recent years, the two main provisions of DOMA have been
challenged in the courts as being unconstitutional.
On April 19th and 20th, Georgetown Law hosted its annual conference,
“Representing & Managing Tax-Exempt Organizations.” The conference
is regularly attended by leading attorneys, accountants and managers of
nonprofits. The speakers at this year’s conference included
representatives from the IRS and Capitol Hill, as well as leading law
firms and nonprofit organizations.
Lois Lerner, Director of the IRS Exempt Organizations Division, opened
the Georgetown Law “Representing and Managing Tax-Exempt Organizations”
conference on April 19th with a thorough overview of things to come.
The March 26, 2012 Tax Court decision in
Wandry v. Comr.,
T.C. Memo 2012-88, was yet another win for taxpayers in a long-simmering dispute between taxpayers and the IRS on the issue of defined value gifts. In 2004, the Wandrys entered into a tax attorney-advised gifting plan by which they were to give interest, based on specific dollar amounts rather than percentages, in an LLC to their children and grandchildren.
The March 6, 2012 Tax Court decision in Dickerson v. Comr., T.C. Memo 2012-60, examined whether a waitress who received a lottery ticket and transferred it to a new family corporation made a taxable gift to the other shareholders and, if so, whether the value of the gift should be discounted because of her former co-workers’ claims for a share of the winnings. The court answered yes to both questions.
On February 17, the IRS issued Notice 2012-21, which extends by six months the deadline to make a portability election for a qualified estate whose executor did not timely file either Form 4768,
Application for Extension of Time To File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes
, or Form 706,
United State Estate (and Generation-Skipping Transfer) Tax Return
, within nine months of the date of death.
2011-09-29 Recently, the IRS issued long-anticipated guidance of interest to those administering estates of persons who died in 2010. Executors who wish to elect application of the §1022 carryover basis regime, rather than the estate tax, received an extension of time and a safe harbor in making that election.
Turner Est. v. Comr.
, T.C. Memo 2011-209 (8/30/11), Judge Marvell of the Tax Court held that the estate of Clyde W. Turner, Sr., included all the property that he contributed to a family limited partnership upon its formation, even though he gave away a considerable portion of his limited partnership interest before his death in February 2004.