Taxation & Estate Planning
Rubin on Tax 
Current tax and legal issues relating to federal and Florida tax, estate planning, probate, & business matters
Post Frequency: 10.8/day Last Entry: November 19, 2009 at 19:39:00 Recent Entries: 216
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ORDINARY INCOME ON SURRENDER OF LIFE INSURANCE POLICY
Posted on November 11, 2009Borrowing from a life insurance policy is a tax-advantaged method of obtaining funds. Generally, a policy owner can borrow against the cash surrender value of non-term life insurance policies. The receipt of the loan proceeds is not a taxable event to the owner, even though part of the cash surrender value was created by untaxed earnings that accumulated in the life insurance policy...
SUMMARYOF NEW TAX ACT PROVISIONS
Posted on November 07, 2009Congress passed last week the Worker, Homeownership, and Business Assistance Act of 2009. President Obama is expected to sign the new Act. Below is a summary of key provisions: A. Expansion of 5 Year NOL Carrybacks. The ability to carry back NOL?s for 5 years (instead of the normal 2 years) has been expanded to include 2009 losses (previously the 5 year rule only applied to 2008)...
TAX INCREASES IN HEALTH BILL NOT INDEXED FOR INFLATION, AND WILL ALSO REACH CAPITAL GAINS AND DIVIDENDS
Posted on November 06, 2009In 1960, only 3% of tax filers paid a 30% or higher marginal tax rate. By 1980, after the inflation of the 1970s, the share was closer to 33%. In 1981, Congress realized the inequity in these "stealth" tax increases by requiring tax brackets be indexed for inflation...
WILLFUL FAILURE TO PAY OVER WITHHOLDING TAXES APPLIES, EVEN THOUGH EMPLOYER DID NOT HAVE THE MONEY TO PAY IT OVER
Posted on November 03, 2009A nursing home operator collected payroll taxes from his employees. Instead of paying the collected taxes over to the IRS, the operator spent them on other expenses. The IRS obtained criminal tax convictions under Code Section 7202. The nursing home operator appealed the conviction, claiming he could not have ?willfully? failed to pay over the taxes since he did not have the money to pay them even if he wanted to...
STATE AND LOCAL TAX ISSUES RELATING TO PASS-THROUGH ENTITIES
Posted on October 29, 2009The U.S. allows pass-through treatment for partnerships and limited liability companies for federal income tax purposes. The issue remains how such entities and their owners will be taxed in those states and localities that impose income taxes. Most states and localities will respect the pass-through treatment of pass-through entities when applying their local income taxes...
NEXT IN THE IRS' SIGHTS - HIGH NET WORTH INDIVIDUALS
Posted on October 27, 2009Basking in the glow of the recently completed offshore voluntary compliance program, IRS Commissioner Shulman in a recent speech revealed a new direction for IRS enforcement - high net worth individuals. The Commissioner noted the recent formation of a Global High Wealth Industry group housed in its Large and Mid-Size Business operating division...
SECTION 2053 REGULATIONS ADOPT "WAIT AND SEE" APPROACH
Posted on October 25, 2009The IRS has issued final Regulations regarding the influence of post-death events on deductions under Code Section 2053 for claims and expenses. The Regulations intentionally adopt an interpretation under Section 2053 that events occurring after a decedent's death are to be considered when determining the amount deductible under all provisions of section 2053 and that deductions under section 2053 generally are limited to amounts actually paid by the estate in satisfaction of deductible expenses and claims...
INHERITED IRA DOES NOT RECEIVE CREDITOR PROTECTION [FLORIDA]
Posted on October 21, 2009In an interesting creditor protection case, Florida's Second District Court of Appeals held that an "inherited IRA" is not subject to creditor protection under Florida law, unlike regular IRAs that are held for the original owner/participant. In the case, an individual inherited his father's IRA...
IRS ISSUES GUIDANCE ON EXPATRIATION
Posted on October 17, 2009It has taken awhile, but the IRS issued extensive guidance this week on the operation of the revised expatriation rules under Code Section 877A.Some highlights and items covered: -The Code requires expatriates to recognize gain or loss as if they sold all their assets for fair market value on the day before expatriation...
LLC INTEREST IS NOT THE SAME AS A LIMITED PARTNER INTEREST UNDER PAL RULES (ONCE AGAIN)
Posted on October 12, 2009Code Section 469 provides that passive activity losses (PALs) cannot be used to offset nonpassive activity income, such as wages, dividends, or profits from nonpassive activities. A taxpayer will incur PALs as to losses from the conduct of a trade or business in which the taxpayer does not materially participate...
HOW NOT TO SET UP AND USE A FAMILY LIMITED PARTNERSHIP
Posted on October 07, 2009A recent Tax Court Memorandum decision provides another example of how not to set up and operate an FLP. In this case, the taxpayers managed to violate Section 2036(a), and also have an indirect gift of property contributed.Go to http://tinyurl.com/y9dfj5z for a diagramed summary of the case [click on the '+' to expand the diagram sections]...
AUTHOR ADVOCATES USE OF LLC'S TO HOLD NON-U.S. ASSETS
Posted on October 01, 2009In a recent article in Estate Planning, Michael Galligan advocates for the use of U.S. LLC's to hold the non-U.S. assets of U.S. persons for estate planning purposes. For my easy-to-read summary of the article, including the benefits and possible drawbacks of that planning approach, go to http://tiny...
VOLUNTARY DISCLOSURE PROGRAM EXTENDED UNTIL OCTOBER 15
Posted on September 21, 2009The IRS has extended until October 15, 2009 the deadline for entering the voluntary disclosure program for unreported offshore accounts from the current September 23 date. The IRS also announced that there will be no more extensions.
COMMUNITY PROPERTY PRINCIPLES DID NOT ATTACH TO COUPLE'S PROPERTY WHEN THEY MOVED TO COMMUNITY PROPERTY COUNTRY
Posted on September 16, 2009Noordin Charania owned substantial holdings in the stock of a U.S. corporation when he died. Even though he was a nonresident of the U.S., his estate was taxable on that stock for U.S. estate tax purposes based on the U.S. situs of stock of a U.S. corporation...
PROCEDURES FINALIZED FOR CHALLENGING SOME GIFT TAX DETERMINATIONS
Posted on September 12, 2009If a gift is reported on a gift tax return, the IRS may challenge the value of the transferred property. If the IRS increases the value, but the taxpayer has adequate unified credit to cover any increase in tax, there is no increase in actual tax that results at the time...
HARDSHIP DISTRIBUTION FROM RETIREMENT PLAN DOES NOT AVOID 10% PENALTY
Posted on September 08, 2009In today's economic hard times, many employees are seeking early distribution from their qualified retirement plans at work to help cover expenses. If the plan allows for it, a "hardship" distribution can be made if due to an immediate and heavy financial need of the employee and is in an amount necessary to meet the financial need...
OBAMA TO MAKE IT EASIER FOR EMPLOYEES TO SAVE FOR RETIREMENT
Posted on September 06, 2009In an effort to boost savings by employees, President Obama is seeking to make several changes that will make it easier for employees to save for retirement. Some of the changes can be implemented immediately by the President - others will require Congressional law changes...
IRA FOUND NOT EXEMPT FROM CREDITOR CLAIMS
Posted on August 29, 2009Federal bankruptcy law generally provides that an individual retirement account (IRA) that is exempt from income tax is an exempt bankruptcy asset that cannot be reached by creditors. However, such exemption is not bulletproof, much to the chagrin of Ernest Willis...
VALUATION DISCOUNTS ALLOWED FOR DISREGARDED ENTITY INTERESTS
Posted on August 25, 2009Under the "check the box" Treasury Regulations, an individual owning an interest in a single member LLC will be treated by default as owning the assets of the entity directly (absent an election to have the LLC taxed as a corporation). The Regulations provide that such disregarded entity treatment will be for all Federal tax purposes...
HIGHLIGHTS OF UBS SETTLEMENT
Posted on August 20, 2009The Internal Revenue Service and the Department of Justice have entered into an agreement that will result in the IRS receiving an unprecedented amount of information on United States holders of accounts at the Swiss bank UBS. Highlights of agreement include:--Pursuant to a treaty request, the IRS will receive information on accounts of various amounts and types, including bank-only accounts, custody accounts in which securities or other investment assets were held and offshore company nominee accounts through which an individual indirectly held beneficial ownership in the accounts...
WATCH OUT - DEADLINES APPROACHING FOR EXTENDED NOL CARRYBACKS
Posted on August 16, 2009Net operating losses (NOLs) generally may be carried back 2 years and forward 20 years. However, for NOLs arising in tax years ending after Dec. 31, 2007, the American Recovery and Reinvestment Act of 2009 permits an eligible small business (ESB) to elect to increase the NOL carryback period for 2008 NOLs from 2 years to 3, 4, or 5 years...
FBAR FILING DATE EXTENDED FOR SOME FILERS
Posted on August 12, 2009The area of FBAR filings (Report of Foreign Bank and Financial Accounts, Form TD F 90-22.1) has been a hotbed of activity recently, for practitioners, taxpayers, and the IRS. In October 2008, the IRS revised the FBAR and the accompanying instructions...
POP QUIZ - FLORIDA APPORTIONMENT
Posted on August 08, 2009BACKGROUND FACTS:Decedent dies, and his estate is subject to federal estate taxes. Part of his taxable estate assets pass under his Last Will and through his probate estate, and part of the assets consist of life insurance that passes outside of the probate estate...
BASIS OVERSTATEMENT DOES NOT TRIGGER 6 YEAR STATUTE OF LIMITATIONS
Posted on August 04, 2009Under the Internal Revenue Code, the statute of limitations imposed on the IRS for assessing additional income tax is 3 years after the later of the date the tax return was filed or the due date of the tax return. However, a 6-year period of limitations applies when a taxpayer omits from gross income an amount that's greater than 25% of the amount of gross income stated in the return...
DISCOUNTING VOIDED VIA STEP TRANSACTION DOCTRINE
Posted on August 01, 2009Oftentimes, taxpayers contribute assets to partnerships or LLCs, and then make a gift of ownership interests in the partnership or LLC and seek to apply a valuation discount to the gift. A recent District Court case voided the application of the discounts through the use of the step transaction doctrine...
CASH FOR CLUNKERS [FLORIDA]
Posted on July 30, 2009If you are fortunate (unfortunate?) enough to qualify for the cash for clunkers program, the federal government will provide a $3,500 or $4,500 voucher toward the purchase or lease of a new, more fuel efficient vehicle when the purchaser or lessee surrenders an eligible trade-in to a participating dealer...
IRS CONFIRMS PRECIOUS METAL ETF'S CAN GENERATE COLLECTIBLES GAINS
Posted on July 25, 2009Many investors purchase gold, silver, and other precious metals through exchange traded funds (ETFs). Since shares in ETFs are usually traded through stock exchanges, the question has arisen whether any long term gains on sale of such ETF metal shares will be subject to the standard 15% maximum income tax rate long term capital gains, or the 28% "collectibles" maximum tax rate that would otherwise apply to direct gains in such metals...
CASUALTY LOSSES AND CHINESE DRYWALL
Posted on July 16, 2009Many homeowners are suffering with damages to their residences from purportedly tainted Chinese drywall. The IRS has provided guidance on if and when damages may give rise to a casualty loss deduction under Code Section 163(h). The IRS Associate Chief Counsel indicates that such damages will meet the casualty loss requirements of being sudden, unexpected, or unusual, if the Environmental Protection Agency or the Consumer Safety Product Commission determines that such drywall emits chemical fumes that causes the extreme or unusual damages...
IRS PROVIDES MORE GUIDANCE (AND REQUIREMENTS) FOR COST SHARING DEVELOPMENT OF INTANGIBLES
Posted on July 11, 2009Section 482 of the Internal Revenue Code requires arms-length pricing for transactions occurring between commonly controlled taxpayers. A principal objective of these rules is to assure that a fair amount of income and thus tax occurs within the U.S. taxing jurisdiction - that is, it seeks to prevent the shifting of income out of the U...
IRS MAY ISSUE RELIEF FOR SWAP PARTICIPANTS WITH BANKRUPT QUALIFIED INTERMEDIARIES
Posted on July 07, 2009On May 24 of this year, I discussed how some taxpayers suffered economic losses in a Section 1031 exchange when funds or property were held for them by Qualified Intermediaries that went bankrupt. In letters sent by the IRS to a Senator and a Congressman, the has IRS indicated that even though like-kind exchanges run through such Qualified Intermediaries could not be completed due to the bankruptcy of a Qualified Intermediary and not through any fault of the taxpayers, the taxpayers still need to recognize gain (if there is gain) if the property they contributed to the exchange was disposed of by the Qualified Intermediary...
IRS CAN LEVY ON STOCK OPTIONS
Posted on July 03, 2009In a recent Chief Counsel Advice (CCA), the IRS determined that it may enforce a levy by seizing and selling a taxpayer's executive stock options. That the options had restrictions on transferability was found not to impede seizure and sale.In the CCA, the taxpayer owned vested nonqualified stock options (NQSOs) and qualified stock options (ISOs) in a corporation...
UNDUE INFLUENCE PERMISSIBLE FOR TRUST REVOCATIONS [FLORIDA]
Posted on June 29, 2009If an individual exercises undue influence in regard to the creation of a trust, the trust can be voided. Interestingly, if an individual exercises undue influence to convince a grantor to revoke his or her revocable trust, no challenge to the revocation is allowable...
REVISED ?INVERSION? REGULATIONS
Posted on June 24, 2009NOTE: The following discussion relates to a narrow area of tax law relating to the transfer of a U.S. corporation or its business to a foreign corporation, so it may be of interest only to a small segment of readers. Section 7874 was enacted to foreclose many tax benefits from the transfer of a U...
IRS COMMISSIONER JOINS WITH TREASURY SECRETARY TO CHANGE PERSONAL USE OF BUSINESS CELL PHONE RULES
Posted on June 18, 2009Numerous employers provide cell phones to their employees for business use. Unsurprisingly, such phones are often used by employees for both business and personal use. Code Section 132 provides that an employee may exclude from gross income the value of the cell phone use allocable to business use...
FOREIGNERS RELEASED FROM FBAR OBLIGATION
Posted on June 10, 2009We previously wrote about how the instructions to Form TD F 90-22-1 (Report of Foreign Bank and Financial Accounts) (commonly referred to as the ?FBAR?) were recently revised to include some non-U.S. persons in the reporting net. Likely due to public concerns that requiring non-U...
FDIC BANK INSURANCE ENHANCED COVERAGE EXTENDED THROUGH 2013
Posted on June 10, 2009In October 2008, presumably to avoid a run on the banks as the credit crisis threatened a financial panic, the FDIC expanded its $100,000 insurance coverage on FDIC-insured institutions to $250,000. This enhanced coverage was set to expire on December 31, 2009...
IRS CAN?T SEIZE RIGHTS TO FUTURE SEASON TICKETS, BUT TAXPAYER STILL A LOSER
Posted on June 07, 2009In many cities, season tickets to sports franchises are unavailable for immediate purchase for newcomers. Instead, potential buyers are placed on waiting lists ? sometimes for many years ? until an existing season ticket holder fails to renew. As many will attest, for the diehard fan season ticket rights can be a precious asset...
INTEREST RATES FOR TAX OVERPAYMENTS AND UNDERPAYMENTS (JULY 2009 QUARTER)
Posted on May 31, 2009The IRS has announced the interest rates for tax overpayments and underpayments for the calendar quarter beginning July 1, 2009. For noncorporate taxpayers, the rate for both underpayments and overpayments will be 4% (unchanged). For corporations, the overpayment rate will be 3% (unchanged)...
IRS PREVAILS IN COST SHARING CONTROVERSY
Posted on May 28, 2009The 9th Circuit Court of Appeals reversed the Tax Court in an interesting case involving issues of Section 482 cost sharing, precepts of regulatory interpretation, and penalties. The Section 482 cost sharing issue related to the question whether compensation expenses of a U...
EXTREME CARE NEEDED WHEN USING QUALIFIED INTERMEDIARIES IN SECTION 1031 EXCHANGES
Posted on May 24, 2009Section 1031 of the Internal Revenue Code allows taxpayers to exchange real property and other types of property for property of ?like-kind.? Since it is rare to find a buyer and seller with two properties that each is willing to exchange directly to the other, the Code allows for a deferred exchange where the seller sells his property, with the proceeds being used to buy a replacement property from a third party within certain time limits...
HSA CONTRIBUTION LIMITS ARE BUMPED UP
Posted on May 17, 2009HSAs (health savings accounts) are a useful tax benefit in this day and age of increasing medical insurance premium costs. As with most insurance coverages, a higher deductible allows for lower premium charges. However, the higher deductible leaves the insured with higher out-of-pocket medical costs...
USE OF QPRT ALLOWS SALE OF REMAINDER
Posted on May 14, 2009In the good old days, a taxpayer that owned a piece of property could sell the remainder interest, retain a term or life estate, and adopt a position that (a) no gift occurs, per the sale of the remainder for fair market value, and (b) at the end of the term interest or the death of the taxpayer, no estate tax applies to the retained term interest or life estate (which expired at death)...
IRS PROVIDES MORE GUIDANCE ON UNREPORTED OFFSHORE INCOME
Posted on May 11, 2009Last month, the IRS announced that it was adopting consistent guidelines for voluntary disclosure requests of taxpayers that relate to offshore undisclosed accounts and foreign entities. Disclosure issues would be settled, with the taxpayer being subject to the imposition of taxes and interest for the prior 6 years, with the taxpayer filing or amending all returns for that period, including required FBAR returns...
SALE OR SURRENDER OF LIFE INSURANCE CONTRACTS
Posted on May 07, 2009In today?s difficult financial times, more taxpayers than usual are cashing in or selling their life insurance policies. A recent Revenue Ruling addresses the IRS? view of the income tax consequences of such transactions. The salient points are summarized below...
DOCUMENTARY STAMP TAX LOOPHOLE ABOUT TO BE CLOSED [FLORIDA]
Posted on May 03, 2009Florida imposes documentary stamp taxes on the transfer of real property. Since the tax typically applies only to transfers of real property and not interests in corporations and LLC?s that own real property, one planning method to eliminate the tax is for the seller to first transfer the real property to an LLC, and then sell the LLC interests to the buyer, free of documentary stamp taxes...
HOMESTEAD & PROPERTY THE DECEDENT NEVER LIVED IN [FLORIDA]
Posted on April 30, 2009Florida?s Constitution provisions in regard to homestead can at times override a disposition of real property that is otherwise provided for in a decedent?s estate planning documents. A recent Florida case illustrates a point that many not be aware of...
FOREIGN CORPORATION ESCAPES $1 MILLION EXECUTIVE COMPENSATION DEDUCTION LIMITS
Posted on April 26, 2009Code Section 162(m) limits the deduction for compensation paid to certain highly paid employees of publicly held corporations to $1 million per year. A recent Private Letter Ruling addressed the applciation of this limitation to a foreign corporation whose American Depository Shares are publicly traded...
EMPLOYEE LEASING COMPANY OFFICER CAN BE RESPONSBILE FOR SECTION 6672 100% PENALTY
Posted on April 23, 2009The U.S. looks very unfavorably on employee withholding taxes that are not paid over to the IRS. Code Section 6672 is an important tool in the IRS' compliance arsenal. Under Section 6672, an individual who is responsible for the collection of the taxes can be held liable for a 100% penalty if collected taxes are not paid over...
CLOSE PROXIMITY DOES NOT MEET WILL WITNESS REQUIREMENTS [FLORIDA]
Posted on April 16, 2009For a Last Will to be valid in Florida, two witnesses must sign. Further, the two witnesses must sign in the testator?s and each other?s presence. A recent Florida court indicates that if a witness is merely close by when the the other witness and the testator signs the Last Will, that alone is not enough to meet the ?presence? requirement...
NOT ALL SHAREHOLDER LOANS CREATE BASIS IN S CORPORATION STOCK
Posted on April 12, 2009Subject to other Code limitations, a stockholder of a Subchapter S corporation can deduct his or her pro rata share of losses of the corporation to the extent of basis in his or her shares or in any indebtedness of the S corporation to the shareholder...
RETURN EXTENSIONS CAN BE FILED ELECTRONICALLY
Posted on April 09, 2009Federal income tax returns are due for most individuals this April 15th. Taxpayers who cannot complete their return by then can file for an automatic 6 month extension for filing. Historically, taxpayers (or their return preparers) prepared a Form 4868 to obtain the extension...
TAX COURT BENDS OVER BACKWARDS TO IMPOSE EQUITABLE APPORTIONMENT
Posted on April 05, 2009Many states apportion estate taxes among beneficiaries of an estate and revocable trusts in proportion to the assets received by them that are subject to estate taxes, absent contrary language in the dispositive instruments. This is known as ?equitable apportionment...
IRS AMNESTY FOR UNDISCLOSED OFFSHORE ACCOUNTS AND ENTITIES
Posted on April 02, 2009The Internal Revenue Service ("IRS") recently announced a framework for resolving cases involving previously undisclosed foreign entities and offshore accounts held by or for the benefit of U.S. persons. The protocol set forth by the IRS will remain available to taxpayers up until September 23, 2009, unless sooner extended...
SO HOW HIGH CAN WE ANTICIPATE INCOME TAX RATES GOING?
Posted on March 21, 2009You would have to be living under a rock these days to be unaware of the massive spending coming out of Washington D.C. these days. The Associated Press reported today that President Obama's deficit estimates may be significantly lower than reality. As reported in today's Ft...
IRS ALLOWS APPLICATION OF LIKE-KIND EXCHANGE RULES TO TRADEMARKS AND TRADE NAMES
Posted on March 15, 2009In my September 28, 2008 posting, I discussed a 2006 technical advice memorandum (TAM 200602034) that extensively analyzed various Section 1031 issues, including like-kind exchanges of trademarks and trade names. That TAM provided that trademarks and trade names could not be exchanged tax-free under Section 1031 since they were too close akin to goodwill and going concern value, two items which cannot make use of the like-kind exchange rules...
INTEREST RATES FOR TAX OVERPAYMENTS AND UNDERPAYMENTS (APRIL 2009 QUARTER)
Posted on March 12, 2009The IRS has announced the interest rates for tax overpayments and underpayments for the calendar quarter beginning April 1, 2009. For noncorporate taxpayers, the rate for both underpayments and overpayments will be 4% (down from 5%). For corporations, the overpayment rate will be 3% (down from 4%)...
TAXPAYERS SHOULD USE IRS FOREIGN WITHHOLDING AUDIT PROCEDURES TO CHECK THEIR OWN COMPLIANCE
Posted on March 08, 2009Absent the application of a treaty or other exception, U.S. payors of U.S. source dividends, interest, rents, royalties, compensation, and other fixed or determinable annual or periodical gains, profits, and income (FDAPI) are required to withhold 30% of such payments and pay them over to the U...
FBAR GUIDANCE ON "DOING BUSINESS IN THE U.S."
Posted on February 22, 2009U.S. persons with interests in or signature authority over foreign accounts are generally required to report those interests to the Treasury Department on Form TD F 90-22.1 (commonly referred to as the 'FBAR'). Internal Revenue Code definitions of "U...
EXTENDED NOL CARRYBACK PERIOD IN RECOVERY ACT DISAPPOINTS MANY
Posted on February 18, 2009One of the few ?business friendly? tax provisions in the recently enacted Recovery Act is a temporary extension of the net operating loss (NOL) carryback period to 5 years from the usual 2. The purported benefit is to get cash into the hands of businesses who are presently suffering losses, by allowing them to carryback current losses to those earlier years and obtain income tax refunds...
BULLET POINT SUMMARY OF TAX PROVISIONS OF NEW STIMULUS ACT
Posted on February 14, 2009The House and Senate versions of The American Recovery and Reinvestment Act of 2009 has cleared the conference committee. Assuming passage by both houses of Congress, the following tax provisions will be in the version that goes to President Obama for signature...
SECTION 1031 EXCHANGES AND DOCUMENTARY STAMP TAXES [FLORIDA]
Posted on February 10, 2009Florida imposes documentary stamp taxes on deeds that transfer real property. In Section 1031 like-kind exchanges, an exchanged document will often be deeded twice ? first to an exchange accomodator titleholder (EAT), and then from the EAT to the ultimate purchaser...
BORROWING FROM A QUALIFIED PLAN
Posted on February 08, 2009In times of economic contraction, retirement plan participants often look to their plan as a source of loans to help them through cash flow difficulties. This is especially so for the many taxpayers that have a large part of their savings tied up in retirement plans...
NOL CARRYBACK WAIVER CAN BE VOIDED IN BANKRUPTCY
Posted on February 05, 2009A taxpayer with a net operating loss (NOL) can usually carryback that NOL for 2 years, and apply it in those prior years. Typically, the carryback will result in a refund of income tax. If the taxpayer makes an irrevocable election, it can forego the carryback and thus use the NOL in future years only...
PARTNERSHIP VALUATION DISCOUNTS AT RISK
Posted on January 31, 2009On January 9, 2009, Representative Earl Pomeroy introduced HR 436 ("Certain Estate Tax Relief Act of 2009"). The Bill would freeze the Federal estate tax exemption at $3,500,000 (the 2009 level), and retain the tax rate for estates exceeding that amount at 45 percent (50 percent for estates between $10 million and $23...
TAX PROVISIONS IN THE STIMULUS BILL
Posted on January 29, 2009The House of Representatives has passed the American Recovery and Reinvestment Tax Act of 2009. The Senate will take up the bill next week. Pending reconciliation of the two bills, we can?t tell what the final provisions will be. Nonetheless, based on common provisions in both bills, it is likely that the following tax provisions will soon be enacted into law: -a new tax credit of up to $500 for working individuals and $1,000 for working families, calculated at a rate of 6...
A CLOSET IS NOT ENOUGH [FLORIDA]
Posted on January 25, 2009Owners of a homestead in Florida are entitled to a reduction in their ad valorem taxes under the Florida Constitution homestead exemption. Fla.Stats. § 196.061 provides that ?[t]he rental of an entire dwelling previously claimed to be a homestead for tax purposes shall constitute the abandonment of said dwelling as a homestead?? (emphasis added)...
TRADEMARK LICENSING COSTS HAD TO BE CAPITALIZED BY PRODUCER
Posted on January 21, 2009The uniform capitalization rules require a manufacturer to capitalize various costs into its produced inventory. Licensing costs incurred in securing the contractual right to use a trademark or other similar right associated with property produced are indirect costs that must be capitalized (to the extent the costs are properly allocable to property produced) under Treas...
TAX RESULTS OF SETTLING DISPUTES INVOLVING QTIP TRUSTS
Posted on January 15, 2009Modifying, transferring beneficial interests in, or making distributions from a QTIP trust, in context of the settlement of trust litigation or otherwise, involves numerous complex tax issues, including Section 2519 gift taxes, other possible gifts, estate taxes and income taxes...
DOC STAMPS DUE ON DEED BETWEEN COMMONLY CONTROLLED ENTITY (FLORIDA)
Posted on January 10, 2009Beginning with Kuro, Inc. v. State, 713 So.2d 1021 (Fla.App. 2 Dist. May 15, 1998), and as finally confirmed by the Florida Supreme Court in Crescent Miami Center LLC in 2005, transfers of Florida real property from owners to wholly-owned entities are not subject to Florida documentary stamp taxes, at least when the property is unencumbered...
OBAMA SURPRISES WITH BUSINESS TAX BREAKS
Posted on January 08, 2009In a surprising announcement, President-elect Obama has indicated that his upcoming stimulus package will include tax breaks for business. While lacking in details, the following breaks are expected to be included:an extension of the net operating loss carryback period to five years for 2008/2009 losses; a two-year extension of bonus first year depreciation;enhanced expensing for business property; andtax incentives for businesses that hire new workers...
DEPRECIATION DEDUCTIONS FOR LAND
Posted on January 03, 2009Land (but not buildings and improvements on the land) is not subject to the allowance for depreciation. However, there is one method of obtaining depreciating deductions for land. A recent private letter ruling summarizes the method and the limitations on its use...
IRS ALLOWS "EXTRA" CHANGE IN INVESTMENTS FOR 529 PLANS
Posted on December 29, 2008Section 529 plans are a popular method for savings and investments relating to education expenses. The plans allow investments to grow and be expended for qualified education expenses, free of income taxes. They also allow for contributors to use up to five years of present interest gift tax exclusions in one year, so as to avoid or limit gift taxes on funding of a plan account...
EXPANSION OF CONDUIT RULES
Posted on December 25, 2008Section 7701(l) of the Code authorizes the Treasury Department to prescribe regulations recharacterizing a multiple-party financing transaction as a transaction directly among any two or more of such parties where the Secretary determines that such recharacterization is appropriate to prevent the avoidance of any tax imposed by the Code...
APPLICABLE FEDERAL RATES ? JANUARY 2009
Posted on December 21, 2008The rates take a large reduction, per the Fed?s actions to bring down lending rates:
CREDITOR CONTINUITY OF INTEREST REGULATIONS ISSUED
Posted on December 16, 2008Corporations can often combine or be acquired without any of the parties recognizing gain or loss under the corporate reorganization provisions. One of the requirements for such treatment is that the equity owners of the target corporation continue their equity ownership via acquiring a substantial equity interest in the acquiring corporation (or a parent of the acquiring corporation) ? this requirement is known as the continuity of interest requirement...
REQUIRED DISTRIBUTIONS FROM IRA?S AND OTHER PENSIONS SUSPENDED FOR 2009
Posted on December 14, 2008IRA?s and other pension plans allow taxpayers to defer income taxes on contributed amounts and earnings until distribution. The deferral does not last forever ? under the required minimum distribution (RMD) rules, taxpayers must make certain prescribed minimum distributions each year after age 70 1/2...
IRS' INTERNATIONAL HIT LIST
Posted on December 10, 2008IRS Commissioner Douglas Shulman recently spoke to the George Washington University International Tax Conference. The Commissioner addressed several areas that the IRS is concerned about in the international arena. With such expressions of concern, taxpayers with interests in these areas should be forewarned that stricter or adverse IRS attention to these areas can be anticipated (although some of these areas are already feeling the heat)...
IRS EXPRESSES HOSTILITY TO ROLLOVERS AS BUSINESS START-UPS
Posted on December 06, 2008Many taxpayers have funds in IRA accounts. If they want to use the funds for a business venture, a distribution of the funds is needed. Such distributions are generally taxable, and if the owner is not old enough, a 10% penalty tax to boot is imposed...
TEST FOR RESIDENT ALIEN STATUS
Posted on December 04, 2008For individuals who are not U.S. citizens, Code Section 7701(b) provides rules for determining whether the U.S. will treat them as resident aliens (and thus generally subject their worldwide income to U.S. income tax). I recently prepared a map of the test for a client ? for those who are interested it can be accessed here (http://tinyurl...
HIDDEN TRAPS ABOUND IN THE AREA OF EMPLOYER OWNED LIFE INSURANCE
Posted on November 27, 2008Generally, life insurance proceeds are received by the beneficiary free of income taxes. However, in 2006, an important exception to that rule was applied for employer owned life insurance taken out on the life of an employee (EOLI). We first discussed the new exception under Code Section 101(j) back in August 2006 when it was enacted...
IRS ASSERTS NONOWNER CONTRIBUTIONS TO PARTNERSHIPS ARE TAXABLE
Posted on November 23, 2008Both corporations and partnerships at times receive "capital contributions" from persons other than shareholders or partners/members. For example, such business entities often receive grants and subsidies from federal, State, and local governments...
SEPARATION DOES NOT EQUAL DIVORCE
Posted on November 15, 2008A husband and wife enter into a prenuptial agreement. The agreement provides that it continues to apply even through "separation and reconciliation." Instead of separating and reconciling, the couple divorces and remarries. The issue arises whether the agreement continues to apply to the new marriage...
IRS TARGETS SALE OF CHARITABLE TRUST INTEREST TRANSACTION
Posted on November 12, 2008Taxpayers often use charitable remainder trusts to avoid current tax on appreciated property. This is usually accomplished by the contribution of appreciated property to a charitable remainder trust, and then the trust sells the asset. Since the trust is tax-exempt, no current income tax is due on the sale...
OBAMA AND ESTATE TAXES -WHAT TO EXPECT?
Posted on November 08, 2008Presently, the unified credit is scheduled to shelter $3.5 million in assets per person in 2009. In 2010, there is no estate tax. In 2011, the unified credit is scheduled to return to $1 million. What can we expect of President-Elect Obama? Of course, its too soon to tell, but his campaign promise was to make permanent the 2009 rates and credit - a $3...
Creditor Protection for Athletes
Posted on November 08, 2008I had the pleasure to lecture on the topic of asset/creditor protection for athletes to the Sports Financial Advisors Association Conference today. If you would like to read my outline, I have posted it online at http://tinyurl.com/6mmwc5.
DIVISION OF TRUST MINIMIZES SECTION 2519 DAMAGE
Posted on November 05, 2008Section 2519 serves as a backstop to the marital deduction provisions of the Internal Revenue Code. When property passes into a QTIP trust for the benefit of a spouse, the transferor spouse (or the estate of the transferor spouse) avoids gift or estate taxes by electing the gift or estate tax marital deduction...
APPEALS COURT CHANGES ITS MIND ON HOMESTEAD EXEMPTION [FLORIDA]
Posted on November 01, 2008Florida's Constitution provides that if a decedent's homestead passes to the heirs of the decedent, third party creditors of the decedent cannot reach or levy against the homestead. What happens if the decedent provides in his or her last Will that the homestead is devised to a child, but should be used (along with other non-homestead property that is specifically devised) to pay debts of the decedent if there are insufficient other assets? Florida's 3rd District Court of Appeals had previously provided that the constitutional protection trumps the decedent's direction, and thus the homestead would continue to be exempt from creditors of the decedent...
PENALIZE FIRST, ASK QUESTIONS LATER
Posted on October 23, 2008U.S. persons and entities with interests in non-U.S. corporations take heed ? noncompliance with information reporting requirements will soon lead to automatic imposition of substantial U.S. penalties. The reporting at issue is for Form 5471, which must be filed by U...
ENHANCED BROKER REPORTING
Posted on October 22, 2008A new provision enacted under the Emergency Economic Stabilization Act of 2008 has stepped up the record keeping and reporting obligations of securities brokers. Brokers are presently required to report sale information to the IRS each year, to assist the IRS in determining if taxpayers are properly reporting their securities gains and losses...
NEW TAX LAW DEFUSES TAXPAYER VS. PREPARER CONFLICT
Posted on October 15, 2008As previously discussed, changes to preparer penalties had created a conflict between tax return preparers and taxpayers. The essence of the controversy was that taxpayers could report a tax issue based upon a "reasonable basis," and would be insulated from penalties if the position turned out to be wrong...
"SHORT SALE" CONTROVERSY RESOLVED [FLORIDA]
Posted on October 11, 2008In my posting of September 6, 2008, I discussed the controversy that had arisen over real property "short sales" in Florida. If you recall, a "short sale" occurs when a buyer purchases encumbered real property for less than the existing debt on the property, and the existing lender allows the buyer to obtain the property without a mortgage lien relating to the portion of the debt that the buyer is not taking over...
SURPRISE! NEW FBAR EXPANDS OFFSHORE ACCOUNT REPORTING
Posted on October 09, 2008There are three certainties in life - death, taxes, and increases in U.S. information reporting requirements. In compliance with the third of these certainties, the U.S. Treasury Department has issued a new FBAR form that expands reporting of foreign accounts beyond those previously required...
TAX CHANGES ENACTED AS PART OF THE BAILOUT LAW
Posted on October 04, 2008The bailout law passed by Congress included a number of tax provisions - some related to the bailout and some not. Some of the principal changes include:a. Compensation Deductions Limited. The new law limits to $500,000 the compensation deduction for pay of principal officers of employers who have assets acquired by the federal government that meet the thresholds including in the new law...
IRS TO EASE LOSS CARRYOVER RESTRICTIONS
Posted on October 01, 2008Code Section 382 limits trafficking in net operating losses by imposing restrictions on use of net operating losses of a corporation after a substantial change in ownership. One of the restrictions that arises after such a change in ownership is that the available net operating losses are effectively written down to the fair market value of the corporation at the time of change in ownership...
EXPANSIVE DEFINITION OF GOODWILL IN LIKE-KIND EXCHANGES
Posted on September 28, 2008Under Code Section 1031, taxpayers can exchange property of like-kind without incurring current gain - that is, they can defer gain recognition by rolling over their tax basis into the replacement property. While most often applied to real property, such exchanges can include exchanges of trade or business property...
IRS REMINDS TAXPAYERS OF A FIRPTA WITHHOLDING TRAP
Posted on September 24, 2008Internal Revenue Code Section 897 subjects foreign taxpayers to U.S. income tax on their gains from sales and dispositions of U.S. real property interests. Code Section 1445 imposes a 10% withholding tax, to be collected by purchasers, when a foreign taxpayer sells a U...
IRS TWISTING ARMS TO REMOVE ELECTRONIC FILING FEES
Posted on September 17, 2008If you are one of the brave ones that prepares and files your own federal income tax return, you probably use one of the commercial tax preparation software programs to assist you. When you are ready to file your tax return, the programs typically prompt you to file your tax return electronically...
IRS CHANGES PUBLIC SUPPORT ADVANCE RULING PROCEDURES FOR SECTION 501(c)(3) ORANIZATIONS
Posted on September 13, 2008Under the Internal Revenue Code, there are advantages for a Section 501(c)(3) organization to be classified as a "publicly supported" organization. To be "publicly supported," that organization must meet certain mathematical tests demonstrating a broad base of donor support (as compared to a small non-public pool of donors, such as a single family)...
INTEREST RATES FOR TAX OVERPAYMENTS AND UNDERPAYMENTS (OCTOBER 2008 QUARTER)
Posted on September 10, 2008The IRS has announced the interest rates for tax overpayments and underpayments for the calendar quarter beginning October 1, 2008.For noncorporate taxpayers, the rate for both underpayments and overpayments will be 6%.For corporations, the overpayment rate will be 5%...
DOC STAMP "SHORT SALE" RULING EXPECTED SOON [FLORIDA]
Posted on September 06, 2008Florida imposes documentary stamp taxes on the transfer of real property, based on the amount paid for the property. Amounts paid for the property include mortgage indebtedness that encumbers the property.The declines in real property values has given rise to a substantial increase in real property "short sales...
EXTENSION PERIODS TO SHORTEN FOR PARTNERSHIPS, ESTATES & TRUSTS
Posted on September 04, 2008Presently, partnerships, estates and trusts are generally obligated to file their income tax return by April 15, and can obtain 6 month extensions to October 15 (such dates are extended to the next business day if they fall on a weekend or federal holiday)...
VACATION!
Posted on September 04, 2008Hopefully, you have noticed an absence of postings over the last two weeks. I have been on vacation - posts to restart shortly.
CONVERSION PROPERTY MAY HAVE LIMITED SECTION 121 EXCLUSION
Posted on August 24, 2008Code Section 121 allows taxpayers to exclude up to $250,000 of gain from sale of a principal residence from federal income taxation ($500,000 for married couples). To qualify for the exclusion, the sold residence must have been used as the taxpayer's principal residence for at least 2 years in the 5 years preceding sale...
FRINGE BENEFITS AND 2% SHAREHOLDERS OF S CORPORATIONS
Posted on August 17, 2008S corporations may pay fringe benefits for the benefit of its shareholders, as well as its other employees. However, special rules apply as to whether these benefits will be taxable to shareholders who receive them if those shareholders own 2% or more of the stock of the corporation...
DAY TRADER IS ONLY AN INVESTOR
Posted on August 14, 2008Successful stock market day traders like to be characterized as mere investors for federal income tax purposes - this allows them to pay taxes on their trading gains at preferential capital gains rates. Unsuccessful stock market day traders want to avoid the "investor" label, and instead they want to be characterized as engaged in the trade or business of trading...
MORE ON PROTECTION OF ASSETS AT BANK AND BROKERAGES
Posted on August 10, 2008We recently addressed the FDIC insurance limits on various types of bank accounts. Not all accounts with banks are FDIC insured. Many don't need it - that is, some assets are effectively owned by the client so they are not impacted by a failure of the institution itself...
IS THERE LIFE LEFT IN THE COHAN RULE?
Posted on August 06, 2008For income tax purposes, taxpayers are required to maintain permanent books of account and records sufficient to sufficient to establish the amount of gross income, deductions, credits, or other matters reported to the IRS (Treas.Regs. §1.6001-1(a))...
FDIC DEPOSIT INSURANCE LIMITATIONS
Posted on August 02, 2008Over the past several weeks, several banks have failed, and their depositors paid out by the FDIC. While the FDIC may pay out more than the insured amount, the actual amount of deposit insurance per account at a given bank is $100,000 (or $250,000 for certain IRA's and other similar deferred accounts)...
NO DEDUCTION FOR SEMINAR EXPENSES
Posted on July 31, 2008Internal Revenue Code Section 212(1) allows a deduction to individual taxpayers for expenses relating to the production or collection of income. Therefore, if one attended a seminar to learn investment trading techniques, that should be deductible, right?That's what Carl Jones thought, when he deducted the expenses of a day-trading seminar that he attended to improve his day trading skills...
GOOD FOR THE GOOSE...GOOD FOR THE GANDER?
Posted on July 26, 2008Since U.S. transfer taxes (estate and gift taxes) are calculated on the value of the property transferred, taxpayers seek low values while the IRS seeks high values. When the asset in question is an interest in a business entity (e.g., stock in a corporation), valuation experts recognize that the stock of an entity may be worth less than the value of the assets owned...
NO VALUATION DISCOUNT FOR RMA'S
Posted on July 23, 2008A restricted management account (RMA) is an account under which the owner of cash and/or securities places those items in the hands of an investment manager to manage for an extended period of time. The account agreement usually provides that the items will be kept under such management for a fixed number of years...
TAX NOTES ARTICLE
Posted on July 21, 2008On July 10, I commented on recent IRS guidance relating to interest expense deductions of partners in securities trading partnerships. A more detailed analysis of that guidance was published on pages 98 & 99 of the July 14, 2008 edition of Tax Notes...
SHELL OIL SURVIVES ANTI-STUFFING ATTACK
Posted on July 15, 2008In 1992, several Shell Oil affiliates transferred various properties to Shell Frontier Oil & Gas Inc. in a Section 351 transaction. As a Section 351 transfer, the shareholders of Shell Frontier received a basis in their Shell Frontier stock equal to the basis of the property transferred to Shell Frontier...
LIMITS ON CONTRACTUAL RELEASES [FLORIDA]
Posted on July 12, 2008Contracts often contain release or exculpatory language that seek to protect a party from liability for future activities. Such clauses are disfavored in the law because they relieve one party of the obligation to use due care and shift the risk of injury to the party who is probably least equipped to take the necessary precautions to avoid injury and bear the risk of loss...
INVESTMENT INTEREST EXPENSE IN TRADING PARTNERSHIPS
Posted on July 10, 2008Earlier this year, in Revenue Ruling 2008-12, the IRS ruled that the interest expense of a partnership engaged in trading activities for the account of its owners is characterized as investment interest expense of limited partners for those who do not materially participate in the business...
TAX PREPARER PENALTIES - PROPOSED REGULATIONS
Posted on July 06, 2008The IRS has issued Proposed Regulations under §6694, to assist tax return preparers in avoiding penalties under that provision. So long as tax return preparer has a "reasonable basis" for a return position, the penalty can be avoided through proper disclosure if the position later turns out to be wrong...
U.S. UNDERTAKES WHOLESALE REWRITE OF TAX EXPATRIATION RULES
Posted on July 02, 2008Effective this past June 17, the U.S. undertook a wholesale revision as to how it will tax its expatriates ? persons giving up their U.S. citizenship or long-term permanent residency. In lieu of the special 10 year sourcing rules that previously applied, the U...
REVISED EXEMPT ORGANIZATION FILING AND DISCLOSURE REQUIREMENTS
Posted on June 26, 2008The IRS has provided recent guidance as to the revisions to various filing and disclosure requirements that impact exempt organizations. Many of these requirements were changed as part of the Pension Protection Act of 2006, but not all exempt organizations are aware of the changes...
CHANGES IN OWNERSHIP OF REAL ESTATE NOW MUST BE REPORTED [FLORIDA]
Posted on June 26, 2008The assessed value of real property is typically adjusted by the county tax appraisers upon a sale of real estate, based on the amount paid for the real estate. However, if the real estate is owned by an entity, such as a corporation, LLC, or partnership, and it is the ownership interests in the entity that are sold (and not the real estate itself), the property appraiser typically has no notice of the sale or the price involved, and thus no valuation adjustment based on the sale usually occurs...
INTERNATIONAL USE OF QPRTs
Posted on June 22, 2008Qualified personal residence trusts ("QPRTs") are most often used in wholly domestic U.S. estate planning. A QPRT is a trust established to hold a personal residence of the grantor. The grantor retains the rent-free use of the residence for a fixed number of years...
APPLICABLE FEDERAL RATES - JULY 2008 [CORRECTED]
Posted on June 21, 2008July 2008 Applicable Federal Rates Summary:SHORT TERM AFR - Semi-annual Compounding - 2.41% (2.07%/June -- 1.63%/May -- 1.84%/April -- 2.24%/March)MID TERM AFR - Semi-annual Compounding - 3.42% (3.20%/June -- 2.72%/May -- 2.85% /April -- 2.95%/March)LONG TERM AFR - Semi-annual Compounding - 4...
APPLICABLE FEDERAL RATES - JULY 2008
Posted on June 19, 2008July 2008 Applicable Federal Rates Summary:SHORT TERM AFR - Semi-annual Compounding - 2.06% (2.07%/June -- 1.63%/May -- 1.84%/April -- 2.24%/March)MID TERM AFR - Semi-annual Compounding - 3.10% (3.20%/June -- 2.72%/May -- 2.85% /April -- 2.95%/March)LONG TERM AFR - Semi-annual Compounding - 4...
LIKE-KIND EXCHANGE PERMITTED WITH PARTNERSHIP INTERESTS
Posted on June 17, 2008Internal Revenue Code Section 1031 allows taxpayers to swap a business or investment property for a new business or investment property without recognizing gain on the exchange. However, these ?like-kind? exchange rules do not apply to exchanges of partnership interests (Code Section 1031(a)(2)(D))...
Corporate vs. Individual Trustees
Posted on June 13, 2008One of the key decisions to be made when preparing a trust is who should serve as trustee. The first part of that decision is whether the trustee should be an individual or a corporation (that is, a bank or trust company). There are distinct advantages and disadvantages to using both individuals and entities...
IRS TO STUDY USE OF "COMMENSURATE DOCTRINE"
Posted on June 10, 2008Private foundations are generally required to distribute 5% of their assets each year for charitable purposes. Beyond that, there is little in the law that requires tax-exempt charitable organizations to distribute or spend their assets for their stated charitable purposes...
RECORD RETENTION GUIDELINES
Posted on June 08, 2008The question often comes up of how long taxpayers should retain their tax and business records. There is no hard and fast answer to this question.Some records are worth holding on to forever, since it can be hard to determine whether an issue from those documents may be relevant in a later tax years...
INTEREST RATES FOR TAX OVERPAYMENTS AND UNDERPAYMENTS (JULY 2008 QUARTER)
Posted on June 06, 2008The IRS has announced the interest rates for tax overpayments and underpayments for the calendar quarter beginning July 1, 2008.For noncorporate taxpayers, the rate for both underpayments and overpayments will be 5%.For corporations, the overpayment rate will be 4%...
DOCUMENTARY STAMP TAX RETURNS FOR REAL ESTATE TRANSFERS [FLORIDA]
Posted on June 02, 2008Florida imposes documentary stamp taxes on transfers of real property. The amount of the stamp taxes is based on the consideration paid for the real property. So as to allow computation of the taxes, taxpayers previously used Form DR-219 to report the amount of consideration paid for the real property...
APPLYING SUBSTANTIAL ECONOMIC EFFECT RULES WITH PASS-THROUGH PARTNERS
Posted on May 31, 2008Under Code §704(b), allocations of partnership items of income, gain, loss, deduction and credits must have "substantial economic effect" to be respected for federal income tax purposes. The economic effect of an allocation is substantial if there is a reasonable possibility that the allocation will affect substantially the dollar amounts to be received by the partners from the partnership, independent of tax consequences...
WAIVER OF DIVIDENDS
Posted on May 28, 2008Generally, a taxpayer entitled to income cannot simply say "don't pay me" and avoid being taxed on the income. In that situation, under the doctrine of constructive receipt the taxpayer will have to report the income, and then further account for the disposition of the income that they should have received - for example, such forfeited income could be treated as a gift...
CHARITABLE DEDUCTION AVAILABLE FOR SPECIAL LICENSE PLATES
Posted on May 24, 2008While not a big dollar item, the IRS has released a letter it issued to a member of the U.S. House of Representatives regarding the ability of a constituent to deduct amounts paid to the State of Minnesota for a special license plate relating to the conservation of natural habitats...
APPLICABLE FEDERAL RATES - JUNE 2008
Posted on May 21, 2008May 2008 Applicable Federal Rates Summary:SHORT TERM AFR - Semi-annual Compounding - 2.07% (1.63%/May -- 1.84%/April -- 2.24%/March -- 3.09%/February )MID TERM AFR - Semi-annual Compounding - 3.20% (2.72%/May -- 2.85% /April -- 2.95%/March -- 3.48%/February)LONG TERM AFR - Semi-annual Compounding - 4...
RECENT GIFT TAX FLP CASE
Posted on May 18, 2008Family limited partnership cases typically involve the valuation of partnership interests for estate tax purposes. The same valuation principles are generally involved for gift tax purposes when the subject of a gift is a limited partnership interest...
LATE FILING RELIEF FOR FIRPTA TAX AND WITHHOLDING ISSUES
Posted on May 14, 2008Code Section 897 imposes U.S. income tax on foreign persons disposing of U.S. real property interests (including the disposition of interests in U.S. corporations owning significant real property interests - USRPHC's). Code Section 1445 imposes withholding obligations on buyers and transferees of such U...
IRS UPDATES LIEN PRIORITY REGULATIONS
Posted on May 11, 2008Like any lien on property, federal tax liens on property of a delinquent taxpayer raise questions of priority of payment against other lienholders. Under Code Section 6323, the holder of a security interest (including a mortgagee or pledgee) is protected against a general tax lien if, before the IRS files notice of lien, the security interest is in existence, even if it came into existence after the tax lien arose...
IRS ALLOWS SEPARATE ENTITY TREATMENT FOR SERIES LLC
Posted on May 06, 2008A series limited liability company is an entity that allows for the creation of separate ventures ("Portfolios") as part of one LLC. Each Portfolio will typically have separate liabilities, assets, management, and members. Since there is only one entity filed with the applicable state, costs for forming new entities are avoided, administrative fees and costs are reduced, and one filing with the SEC possibly can be used for multiple Portfolios (as compared to forming a separate LLC for each venture)...
AVOIDING PENALTIES ON LATE IRA ROLLOVERS
Posted on May 03, 2008Individuals may transfer funds from one qualified retirement plan or IRA into another without triggering income tax if the transfer is completed within 60 days. If the rollover is not completed by the 60th day, bad things can result - principally, the potential income taxes on the transferred amount, with applicable penalties and interest, the potential loss of deductions and exemptions due to the phase-outs based on resulting increase in adjusted gross income, and a 10% penalty on early withdrawal for taxpayers under age 59 1/2...
FOREIGN PARTNERS CAN REDUCE WITHHOLDING
Posted on April 30, 2008Under Internal Revenue Code Section 1446, foreign partners of a partnership that is engaged in a U.S. trade or business are subject to withholding of taxes attributable to their allocable share of the effectively connected income of that partnership. This can be unfair to a partner who would not have to pay taxes on that income due to other deductions available to the partner...
IRS TO USE REGULATIONS TO WRITE KOHLER DECISION UNDER SECTION 2032 OUT OF THE LAW
Posted on April 26, 2008Under Code Section 2032, an estate can elect to value its assets for estate tax purposes on a date that is six months after the death of the decedent, instead of on the date of death. Thus, an estate can reduce its estate taxes if the overall value of those assets has declined in that six month period...
IRS PROVIDES COMFORT ON METHOD OF CREATING GRANTOR TRUSTS
Posted on April 23, 2008A grantor trust generally is a trust whose income is taxed, in whole or in part, to the grantor/settlor, and not the trust or other beneficiaries. Grantor trust status is often intentionally sought as a way to shift tax incidents to the grantor and thus in effect allow transfers to the trust to effectively occur through the tax payments of the grantor without incurring a gift tax, or to avoid income tax consequences for transactions between the grantor and the trust...
APPLICABLE FEDERAL RATES - MAY 2008
Posted on April 20, 2008May 2008 Applicable Federal Rates Summary:SHORT TERM AFR - Semi-annual Compounding - 1.63% (1.84%/April -- 2.24%/March -- 3.09%/February -- 3.16%/January)MID TERM AFR - Semi-annual Compounding - 2.72% (2.85% /April -- 2.95%/March -- 3.48%/February -- 3...
RELIEF FOR RETURN PREPARERS PENALTIES MAY BE COMING
Posted on April 16, 2008In recent months, the IRS has set up a conflict of interest between tax return preparers and their taxpayer clients. They have done this by requiring that for a return preparer to avoid a penalty on an erroneous tax position without specifically highlighting/disclosing the tax position, the preparer generally has to have a more likely than not belief that the reported position was correct...
ASSISTANCE FOR THOSE WHO CAN'T PAY THEIR TAXES IN FULL BY APRIL 15
Posted on April 13, 2008As previously discussed, taxpayers should endeavor to file their income tax returns by April 15, even if they cannot fully pay their taxes on time, so as to avoid the late filing penalty. The late payments will still be subject to interest (presently at 6% per year) and the late payment penalty of 1/2 of 1% per month...
ENCUMBRANCES CAN DRAMATICALLY ALTER ESTATE PLAN RESULTS
Posted on April 10, 2008When a testator specifically leaves real estate or other property under his estate planning documents, and that property is encumbered by debt, it is important that the estate planner determine the testator's desires as to the debt and make proper provision for it...
PENALTY REFRESHER
Posted on April 07, 2008As surely as April 15 comes every year, there will be taxpayers who do not file their income tax returns on time or who do not pay their income taxes on time. Here's a quick refresher on penalties relating to income tax filings, courtesy of the IRS:FILING LATE: If you do not file your return by the due date (including extensions), you may have to pay a failure-to-file penalty...
CREDIT CARD HOLDER COULD NOT ESCAPE DISCHARGE OF INDEBTNESS INCOME ON WRITE-OFF OF DEBT
Posted on April 03, 2008As the economy moves closer to (or deeper into, depending on who you believe) recession, the number of credit card holders who will obtain reductions in their credit card debt from the issuer is likely to increase. Those debtors will eventually learn that the discharge of debt is taxable to them...
ESTATE TAX LIEN NOT DIVESTED BY SALE
Posted on April 01, 2008When an individual dies, his or her assets are subject to a 10 year estate tax lien in favor of the IRS for any unpaid estate taxes. Many would think that the lien would be divested as to any third party purchaser of estate assets for fair value, since the purchaser would not have any involvement in the computation or payment of estate taxes...
APPRAISAL RIGHTS DEEMED NOT SOLE REMEDY WHERE PRIOR BAD ACTS OF CORPORATE PRINCIPALS [FLORIDA]
Posted on March 30, 2008Under Florida corporate law, minority shareholders of corporations are protected from majority shareholders who engage in undesirable merger, sale, or other major corporate transactions by demanding that their minority shares be purchased for fair value ("appraisal rights")...
APPLICABLE FEDERAL RATES - APRIL 2008
Posted on March 26, 2008April 2008 Applicable Federal Rates Summary:-Short Term AFR - Semi-annual Compounding - 1.84% (2.24%/March -- 3.09%/February -- 3.16%/January)-Mid Term AFR - Semi-annual Compounding - 2.85% (2.95%/March -- 3.48%/February -- 3.55%/January)-Long Term AFR - Semi-annual Compounding - 4...
IRS CONTINUES TO ASSERT THAT COMPENSATORY STOCK OPTIONS ARE A SHARED EXPENSE UNDER SECTION 482
Posted on March 24, 2008The qualified cost sharing regulations under Section 482 are an arrow in the IRS' quiver in its attempts to limit the ability of U.S. companies to develop an intangible, deduct the costs in the U.S., but then have a significant portion of the income earned in a non-U...
LATE CONVERSION TO LIFETIME PAYOUT FROM INHERITED IRA ALLOWED
Posted on March 22, 2008When an IRA owner dies before the required beginning date of required IRA distributions, a nonspouse beneficiary of the IRA can either take the IRA out over the beneficiary's remaining life expectancy, or take the entire IRA out within 5 years of the IRA owner's death (by December 31st of the 5th year after such death)...
THEFT LOSS VS. WORTHLESS SECURITY LOSS
Posted on March 18, 2008A taxpayer will often prefer a theft loss deduction to a deduction for a worthless investment security. One advantage of theft loss treatment is that the loss is not a capital loss, unlike the worthless security loss. The timing of the loss may also be more advantageous for a theft loss, since the loss for a worthless security cannot be used until the security is entirely worthless (or the security is otherwise sold)...
INTEREST RATES FOR TAX OVERPAYMENTS AND UNDERPAYMENTS (APRIL 2008 QUARTER)
Posted on March 15, 2008The IRS has announced the interest rates for tax overpayments and underpayments for the calendar quarter beginning April 1, 2008.For noncorporate taxpayers, the rate for both underpayments and overpayments will be 6%.For corporations, the overpayment rate will be 5%...
TEST YOUR FLORIDA HOMESTEAD LAW KNOWLEDGE [FLORIDA]
Posted on March 11, 2008An interesting homestead case gives us the opportunity to test our knowledge of Florida law. Here are the facts. Husband owns the homestead. He executes a valid deed that transfers the homestead to create a life estate interest in himself and his wife as tenants by the entireties, and a remainder interest after their deaths to one of his children...
EARNINGS AND PROFITS NEEDED FOR CRIMINAL TAX EVASION RELATING TO DIVIDEND DISTRIBUTION
Posted on March 08, 2008A shareholder of a corporation wrote checks from the corporation to his wife and girlfriend. He did not report any income from such transfers. The government asserted that this was tax evasion and obtained a criminal conviction. The shareholder appealed, claiming that he should have been able to present evidence that the corporation had no earnings and profits and that the distributions were thus not taxable up to the shareholder's basis in his shares, applying the general rules of Sections 301 and 316 (relating to corporate nonliquidating distributions)...
IRS REJECTS KOHLER DECISION
Posted on March 05, 2008In 2006, the Tax Court held that post-death changes in the character of stock owned by a decedent pursuant to a tax-free reorganization would be allowed to affect the alternative valuation date value of the stock for estate tax purposes. Herbert V. Kohler, Jr...
IRS STRICTLY CONSTRUES EXCESS COMPENSATION LIMITS
Posted on March 03, 2008Code Section 162(m)(1) denies an income tax deduction to publicly traded corporations to the extent compensation paid to certain key employees ("covered employees") exceeds $1 million. However, compensation that is contingent on performance goals being met will not be counted as compensation subject to this limitation...
DEDUCTIBILTY FOR HEDGE FUND INTEREST IS LIMITED
Posted on February 29, 2008The classification of an expense of a trade or business as a ?passive loss? or ?investment interest? is not usually desirable for individual taxpayers, since such losses can only be offset against certain specified types of income. If such classification is avoided, these limitations on use are likewise avoided...
THE BAD NEWS/GOOD NEWS FOR SMALL EXEMPT ORGANIZATIONS
Posted on February 27, 2008First, the bad news. Unlike in prior years, small tax-exempt organizations (organizations with less than $25,000 in gross receipts) now must file an annual Form 990. The good news is that the filing can be made with a Form 990-N, which is one of the shortest tax returns around...
APPLICABLE FEDEAL RATES - MARCH 2008
Posted on February 25, 2008March 2008 Applicable Federal Rates Summary: -Short Term AFR - Semi-annual Compounding - 2.24% (3.09%/February -- 3.16%/January -- 3.84%/December) -Mid Term AFR - Semi-annual Compounding - 2.95% (3.48%/February -- 3.55%/January -- 4...
SOME PERSONAL USE OF DWELLINGS WILL NOT JEOPARDIZE SECTION 1031 EXCHANGE
Posted on February 21, 2008Section 1031 exchanges are a popular mechanism for owners of real property to exchange one property for another without recognizing gain on appreciation at the time of the exchange. To qualify, the property being disposed of (the "disposition property"), and the property that is acquired in the exchange (the "replacement property"), must both be used in a trade or business of the taxpayer or held for investment...
LOSS OF DEDUCTIONS RULE REVIVED
Posted on February 19, 2008Under IRS regulations, foreign corporations and nonresident aliens who do not file a U.S. income tax return within certain time limits forfeit the ability to take otherwise available deductions against their income that is taxable in the U.S. While the regulations do not require that the return be filed on time, generally if the return is not filed within 18 months of the due date the deductions are lost...
HOW NOT TO DOCUMENT SHAREHOLDER LOANS
Posted on February 14, 2008The shareholders of wholly owned corporations often end up paying for corporate expenses out of their own wallets or checkbooks, or with their own credit cards. Sometimes this is just a matter of convenience for an occasional expense - othertimes, when the corporation is short of cash this may be a regular occurrence...
"SAVE OUR HOMES" PORTABILITY DEADLINES [FLORIDA]
Posted on February 11, 2008On January 29, 2008, Florida voters approved a constitutional amendment that allows owners of Florida homesteads to transfer all or a part of their Save Our Homes homestead exemption caps from an old homestead to a new homestead. The Florida Department of Revenue has provided information on procedures that must be followed if a taxpayer wants to transfer his or her exemption to a new homestead...
HIGHLIGHTS OF THE ECONOMIC STIMULUS ACT OF 2008
Posted on February 09, 2008Congress is continuing its 80 year tradition of spending to spur the economy through its passage on February 7 of the Economic Stimulus Act of 2008 ("ESA"), which President Bush is expected to sign. Here are some of the major highlights: A tax credit to taxpayers...
DEVELOPMENT RIGHTS ARE LIKE-KIND PROPERTY
Posted on February 06, 2008Section 1031(a)(1) provides that no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment...
POWER OF ATTORNEY HOLDER COULD NOT MODIFY TRUST [FLORIDA]
Posted on February 04, 2008A common estate planning document is a durable power of attorney. This POA typically grants broad authority to the designee to act on behalf of the principal. A durable POA will survive the incapacity of the principal, providing an alternative to guardianship in the event a principal becomes unable to act for himself or herself...
ACQUISITION OF HOMESTEAD STATUS DID NOT TRIGGER 1,215 DAY LOOKBACK PERIOD [FLORIDA]
Posted on January 31, 2008A number of States, including Florida, provide valuable creditor protection for homesteads, and such protections can act to exempt a homestead from the reach of creditors in a bankruptcy proceeding. Because of perceived abuses of these protections, Section 522(p)(1) of the Bankruptcy Code was enacted...
FORMULA TRANSFER OKAYED BY TAX COURT
Posted on January 28, 2008A hot topic today in estate planning is the use of formula clauses to avoid unexpected gift or estate taxes. Such clauses aim to reduce tax exposure based on uncertainty in valuation of transferred property. That is, when property is gifted or passes at death, the amount of gift or estate tax depends on the valuation...
IRS INCREASES AUDIT ACTIVITY
Posted on January 25, 2008The IRS has released information in regard to its 2007 audit and enforcement activity. The information shows a clear trend towards more audits. Audits of individuals with more than $1 million in income increased 84% over the prior year. 1 out of 11 of such taxpayers were audited in 2007...
DEDUCTION OF BUSINESS LOSSES BY ESTATES AND TRUSTS REMAINS UNCERTAIN
Posted on January 22, 2008Losses from business activities undertaken by a trust or estate may be suspended under the passive activity loss (PAL) rules, and thus may not be available to offset other non-passive income of the trust or estate just as if the trust or estate is an individual...
APPLICABLE FEDERAL RATES - FEBRUARY 2008
Posted on January 19, 2008February 2008 Applicable Federal Rates Summary: -Short Term AFR - Semi-annual Compounding - 3.09% (3.16%/January -- 3.84%/December -- 4.07%/November) -Mid Term AFR - Semi-annual Compounding - 3.48% (3.55%/January -- 4.09%/December -- (4.34%/November) -Long Term AFR - Semi-annual Compounding - 4...
TRUST INVESTMENT FEES ARE SUBJECT TO 2% DEDUCTION FLOOR
Posted on January 17, 2008The question of whether trust expenses for investment advisory fees are fully deductible or may be deducted only to the extent they exceed 2% of adjusted gross income has been resolved by the U.S. Supreme Court. The Court ruled that such expenses will usually be subject to the 2% floor...
CLAIM INFORMATION INCLUDED IN PETITION FOR ADMINISTRATION QUALIFIES AS A PROBATE CLAIM [FLORIDA]
Posted on January 10, 2008Creditors 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, 2008As 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, 2008Mrs. 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, 2008Earlier 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...
NEW PREPARER PENALTIES CREATE INTERESTING DYNAMICS
Posted on January 01, 2008Applying 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, 2007A 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, 2007January 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, 2007Common 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, 2007Before 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, 2007Code 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, 2007Insurance 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, 2007Auditors 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, 2007The 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, 2007A 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, 2007The 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, 2007Assets 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, 2007December 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, 2007The 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, 2007Unbeknownst 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, 2007Estate 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, 2007Most 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, 2007Currently, 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, 2007The 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, 2007In 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, 2007An 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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