Tax planning and compliance for investors
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January 3, 2013
By Kaye A. Thomas
In a last gasp effort Congress passed legislation to avert the fiscal cliff and prevent tax increases on 98% of Americans. Key features of the American Taxpayer Relief Act of 2012 (“ATRA”) include the following:
June 22, 2012
By Kaye A. Thomas
Pay attention, because missing this deadline could cost $1 million or more. And for some people, the deadline is today.
The Treasury has issued temporary and proposed regulations relating to portability of a deceased spousal unused exclusion amount. Under these rules it may be critically important to file an estate tax return for an individual who dies with a surviving spouse, even if the decedent has no valuable assets and an estate tax return is not otherwise required. Filing an estate tax return is the only way to transfer the decedent’s unused estate tax exclusion amount to the surviving spouse. People handling estates in this category may not realize there is any need to file an estate tax return, yet failing to do so could permanently deprive the surviving spouse of an increase in the estate tax exclusion amount that might otherwise produce savings of $1 million or more in estate and gift taxes. (more…)
June 21, 2012
The Tax Court dealt with an unusual twist in a case where the IRS is seeking some $95 million in estate tax and penalties. The biggest dispute is over the value of certain shares of stock, with the estate tax return reporting $1,000 per share and the IRS appraising them at nearly $200,000 per share. But the Tax Court left that minor discrepancy for another day while it determined whether the decedent owned 740 shares, as the IRS claimed, or only 600.
The decedent, Alexander Richard, died in 2004. His wife had died seven years earlier, in 1997. When the wife died, no will was found and no proceedings were held regarding her assets on the assumption that everything passed by intestacy to her surviving husband, the decedent in this dispute. In 2010, in connection with preparations for this dispute, it was discovered that the wife had executed a will leaving 140 of the shares to a credit shelter trust. The Tax Court found that title to the shares had never been transferred to the decedent and that the shares were more properly included in the wife’s estate, even though the will establishing this result was not discovered until years after her husband died as the apparent owner of these shares.
reference: Estate of Alfred J. Richard v. Commissioner (PDF)
June 6, 2012
The gift tax exclusion permits a donor to make annual gifts up to a limited amount ($13,000 per donee for 2012) without paying gift tax or tapping into the donor’s lifetime exclusion amount. To qualify, however, the gift must be a “present interest” — in other words, something that will provide a current benefit, not merely a delayed one, to the recipient. A gift of a partnership interest may or may not qualify, because in some cases ownership of the interest confers only a future benefit on the recipient. Practitioners who work with these rules may want to review a new Tax Court decision discussing the factors necessary to treat a transfer of a partnership interest as a present interest, and finding that the transfers in that case qualified for the annual gift tax exclusion.
court opinion: Wimmer v. Commissioner (PDF)
October 3, 2011
Estate tax returns are due nine months after the death of the decedent. That means today is the first deadline to fall under the estate tax rules that took effect as of 2011. Estates can obtain an automatic six-month extension by filing Form 4768 (PDF). The deadline is notable because the new rules for the first time permit an election to transfer the unused portion of the decedent’s exclusion amount ($5 million for 2012) to the decedent’s spouse. The IRS says the election can only be made by filing an estate tax return, even if the return is not otherwise required to be filed.
December 8, 2010
There’s a hint in press reports about the deal being struck on tax legislation that it may include portability for the estate tax exemption. The idea has been around at least since 2008. Here’s what we said about it then. (more…)
September 14, 2010
This year’s temporary expiration of the estate tax may be a boon for heirs of very wealthy decedents, but actually increases the amount of tax paid by many other heirs. In years when the estate tax applies, the basis of assets held by the decedent is adjusted to the fair market value of the assets on the date of death, so that heirs can sell assets at that value without reporting a capital gain. This year, because the estate tax doesn’t apply, this basis adjustment is subject to a dollar limitation (see Property Received from 2010 Decedents for details). It’s possible for heirs of 2010 decedents to be better off under the rules that were in effect in 2009, when the generous exemption amount and unlimited marital deduction may have protected them from paying estate tax while the unlimited basis adjustment would also have protected them from paying tax on capital gains that were built-in at the time of the decedent’s death. (more…)
August 5, 2010
No doubt you’re aware that the estate tax has been repealed, solely for people dying in 2010. It’s less well known that repeal of the estate tax was accompanied by a change in the rules for adjusting the basis of inherited assets. For a description of the rules that apply when you inherit from someone who dies this year, see our new page on basis of property inherited from 2010 decedents.
July 6, 2010
It appears that the grantor retained annuity trust, or GRAT, is about to lose much of its flexibility. Legislation to curtail the popular estate planning tool has been on the table for some time. Just days after the Senate removed GRAT provisions from the pending small business legislation, the House plugged it into a supplemental appropriations bill that provides funding for the troop surge in Afghanistan, among other measures. Assuming the bill is passed by the Senate, the measure would apply to transfers occurring after the date President Obama signs it into law. (more…)
July 4, 2010
If I ever had thoughts of writing a book on estate planning, I abandoned them when I saw this book. Estate Planning Smarts: A Practical, User-Friendly, Action-Oriented Guide by Deborah L. Jacobs covers the subject thoroughly and thoughtfully. It’s readable and well-organized. This is a category killer: a book so good there’s no need for anyone else to cover the same material. (more…)
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