Other Tax Questions
Questions and comments on other topics covered in Fairmark.com, such as UTMA accounts, and any tax questions that don't fit our other categories.
Proposed Tax Reform
Posted by: Sven, November 3, 2017 02:34PM
A couple of observations. I only speak MFJ. If you speak single or something else, you'll get the general idea.

Without reform, as of 2018 a MFJ couple, both age 65, get a standard deduction of $15,600, $13,000 regular plus $2600 for age. Their personal exemptions are $8,300. That's $23,900. With reform their standard deduction will be $24,000. It was not all that clear in discussions that the existing Age/Blind
standard deduction "add-on"was going away. I am sure this is going to spawn all sorts of comments by the AARP gang and advocates for the disabled. I am going to take a wild guess all the 65+ couple I see every day shopping at Walmart, Lowe's and the grocery story are going to be surprised at what's not in it for them.

It was also not clear in discussions what the deal was going to be with "zero bracket" treatment of long term capital gains and qualified dividends was going to be. The status quo survived. Details are in the proposed revisions to Section 1(h) of the Code. The benefit, if any, would still end at $77,400 MFJ, and not extend up to the $90,000 upper limit of the proposed 12% tax bracket. At least it was not done in. See discussion of that under Capital Gains for details and Code speak.

Re: Proposed Tax Reform
Posted by: 47Percent, November 3, 2017 02:52PM

Please see my Q under Retirement..

It looks like recharacterization got the axe.

Looking at the language, I am not even sure if the Roth conversion itself survived.

Assuming it did, now Roth conversion looks like driving over the metal grates at rental car return. DO NOT BACK UP.. Severe tire damage will result.

I am not sure what the intent is. If it was intended as a way to stop tax revenue loss, it will have exactly the opposite effect. People would be wary of conversion in the first place -- resulting in loss of tax revenue. I can't see how it qualifies as a simplification either.

Re: Proposed Tax Reform
Posted by: Sven, November 3, 2017 02:56PM
I certainly will. I am going to try my best to include current Code section references and where in the proposal to go to see changes.

Re: Proposed Tax Reform
Posted by: Drewremedy, November 3, 2017 04:00PM
Some have observed that alimony may not be deductible to payor nor income to payee .

Re: Proposed Tax Reform
Posted by: Sven, November 3, 2017 07:43PM
I am looking as I type for a Ouija Board on the internet, or maybe a Tax Magic 8 Ball.
" Signs point to Yes" was a frequent 8 Ball answer.
So was"I see bankruptcy in your future."

Re: Proposed Tax Reform
Posted by: 47Percent, November 3, 2017 07:59PM

Honest to God.. the following is verbatim from the Education Savings section of the tax reform.

The unborn child could be in Utero for just a couple of hours and you can start a 529 -- even before the obligatory 4 hours that you are asked to wait before you may have to call a doctor!

But just be sure it is not an ectopic pregnancy and more importantly it is of the Homo Sapiens variety. If you cannot be sure of either, it may be better to wait!


(e) UNBORN CHILDREN ALLOWED AS ACCOUNT BENEFICIARIES.—Section 529(e) is amended by adding at the end the following new paragraph:


(A) IN GENERAL.—Nothing shall prevent an unborn child from being treated as a designated beneficiary or an individual under this section.

(B) UNBORN CHILD.—For purposes of this paragraph
(i) IN GENERAL.—The term ‘unborn child’ means a child in utero.
(ii) CHILD IN UTERO.—The term ‘child in utero’ means a member of the species homo sapiens, at any stage of development, who is carried in the womb.

(f) EFFECTIVE DATES.—(1) IN GENERAL.—Except as otherwise pro-

Re: Proposed Tax Reform
Posted by: Sven, November 3, 2017 08:19PM
So the unborn have tax rights but not others.

Re: Proposed Tax Reform
Posted by: triad, November 4, 2017 04:02PM
As someone noted in an article, prospective parents could already accomplish this. Open the account in parent's name, then transfer to the new beneficiary when born.

Purpose appears to be another anti-abortion plan to get life defined as starting at conception.

Other big change allow use with secondary education.

Re: Proposed Tax Reform
Posted by: 47Percent, November 4, 2017 07:03PM

Triad.. not quite...

The following is from FA Magazine on 529..

"If the new beneficiary is a member of the family of the old beneficiary but is in a later generation-for example, if the beneficiary is changed from a child to a grandchild-then the change is treated as a gift. The IRS is unclear at this point whether the gift is from the old beneficiary or from the account owner to the new beneficiary. Whoever is deemed to be making the gift could apply his or her gift-tax annual exclusions and even make the five-year election to mitigate the tax consequences of the gift."

So, while it is doable, one needs to worry about gift taxe consequences etc. Gift taxes are all related to the estate tax... sorry Death Tax! But, the estate taxes are on the way out any way.

Re: Proposed Tax Reform
Posted by: triad, November 16, 2017 02:34AM
Update, see IRS pub 970 for rollover rules. No problem for immediate family, even if younger.

Re: Proposed Tax Reform
Posted by: Spirit Rider, November 21, 2017 01:08AM
triad: You should know that IRS publications are not "substantial authority".

All that is mentioned in Publication 970 is the definition of "Members of the beneficiary's family". The failure to mention the generation requirements there does not negate that requirement.

This is especially true when there is precedence of the actual code and other guidance.

26 U.S. Code § 529 - Qualified tuition programs, (c) Tax treatment of designated beneficiaries and contributors, (5) Other gift tax rules For purposes of chapters 12 and 13—, (B) Treatment of designation of new beneficiary.
The taxes imposed by chapters 12 and 13 shall apply to a transfer by reason of a change in the designated beneficiary under the program (or a rollover to the account of a new beneficiary) unless the new beneficiary is—
(i) assigned to the same generation as (or a higher generation than) the old beneficiary (determined in accordance with section 2651), AND
(ii) a member of the family of the old beneficiary.

Not to mention that both the 1998 proposed regulations and the 2008 advanced notice of proposed rulemaking both reinforced the code. The only difference being who was subject to the gift tax liability. Which the code was silent on.

The 1998 proposed regulations named the beneficiary as the liable party. However, there was a problem with that, because the beneficiary had no ability to control what was done with the account.

The 2008 notice of advanced rulemaking, switched that tax liability to the person who actually performed the rollover/change of beneficiary. The account owner.

Every tax professional I know uses the latter definition of tax liabilty. Not that there should ever be a tax liability, just a reporting issue.

I know of no one who assumes that the clear language of the code doesn't apply because publication 970 doesn't mention the generation issue.

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