Taxation & Estate Planning

APPLICABLE FEDERAL RATES?JUNE 2013

Posted on May 20, 2013
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FLORIDA LLC ACT REVISION [FLORIDA]

Posted on May 15, 2013
My partner, Rick Josepher, was involved through the Florida Bar in a major update to Florida?s limited liability company provisions which were recently enacted into law. The following is a summary regarding the new provisions that he prepared. In its session which ended May 3rd, the Florida legislature  enacted legislation (herein, the ?New Act?) which substantially amends the Florida?s existing Limited Liability Company Act...

CORPORATE SUSPENSION BLOCKS TAX COURT ACCESS

Posted on May 11, 2013
Most states will suspend or involuntarily dissolve a corporation if it does not pay local taxes or fees. Such suspensions and dissolutions can typically be reversed after the corporation files to be restored and pays any back taxes and fees (and probably a penalty)...

FLORIDA BAR CLE PRESENTATION - TAX AND COMPLIANCE REQUIREMENTS IN WEALTH PROTECTION STRUCTURES

Posted on May 07, 2013
For anyone that is interested, I will be speaking on the above topic on Thursday afternoon on May 18. Since the Bar now broadcasts its CLE live on the Internet, you can watch it online if you register (and pay!). Below is the full program. For more information or to register, go here and search in May for course number 1461R...

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OVDI PRE-CLEARANCE LETTERS AND THEIR REVOCABILITY

Posted on May 07, 2013
The first step a taxpayer with undisclosed or unreported offshore accounts or assets undertakes in seeking to enter the Offshore Voluntary Disclosure Initiative (OVDI) is to apply for pre-clearance from the IRS Criminal Investigation Lead Development Center...

IRS GOES BACK 41 YEARS TO ASSESS GIFT TAX

Posted on May 04, 2013
If a taxpayer does not file a tax return, the statute of limitations for most federal taxes never commences. Thus, in theory, the IRS can go back as many years it wants to such an ?open? year to audit and assess tax.In practice, the IRS rarely goes back too far...

IRS CHASING DOWN ?QUIET DISCLOSURES?

Posted on April 29, 2013
In a recent report, the General Accounting Office (GAO) encourages the IRS to do more to uncover and pursue taxpayers who made quiet disclosures in regard to their non-U.S. accounts.In recent years, the IRS has encouraged taxpayers with non-U.S. accounts and non-U...

UNUSUAL RESULTS IN OFFSHORE ACCOUNT CASE

Posted on April 28, 2013
79 year-old Mary Estelle Curran received good new when she was sentenced for criminal tax evasion and failing to file reports of foreign bank accounts on UBS Swiss accounts she inherited from her husband.The good news was that the judge awarded no jail time and only probation, and then immediately revoked the probation...

BAD PLANNING IN FOREIGN ASSET PROTECTION TRUST SCENARIO

Posted on April 26, 2013
Foreign asset protection trusts are often established by U.S. persons to shield their assets from creditors. Typically, assets transferred to the trust can be paid to or applied for the benefit of the U.S. grantor(s) and their family members only in the discretion of the trustee...

APPLICABLE FEDERAL RATES?MAY 2013

Posted on April 22, 2013
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IS THE IRS READING EMAILS WITH A SEARCH WARRANT?

Posted on April 17, 2013
Last week, the ACLU created a stir when it suggested that the IRS may be reading taxpayers? emails without obtaining a search warrant. Read more about that from the ACLU here. At least at some point in time in the past, according to the IRS? 2009 ?Search Warrant Handbook,? the IRS believed that the Fourth Amendment protections against unreasonable searches and seizures did not apply to email messages stored on a server...

PART-TIME LANDLORDS THAT WORK FULL TIME WILL HAVE A HARD TIME QUALIFYING AS REAL ESTATE PROFESSIONALS

Posted on April 14, 2013
Taxpayers that own rental real estate property will often want to qualify as ?real estate professionals? under Section 469 (the ?passive loss rules?). If they do that, their losses from their real estate activities can be used to offset other income beyond the $25,000 that is allowed ? otherwise, they can only apply those losses against passive activity income...

SO MUCH FOR "PERMANENT" - TRANSFER TAX RATES AND EXEMPTIONS ARE BACK IN PLAY

Posted on April 11, 2013
Late last year, Congress and the President agreed to "permanent" transfer tax revisions that set the unified credit equivalent exemption at $5.25 million in 2013, indexed it for inflation, and set the maximum rate at 40%. At long last, the moving target of exemption and rate changes that have varied annually since 2001 was dead and buried...

TAXPAYERS WAIT TOO LONG FOR ASSIGNMENT

Posted on April 10, 2013
If a taxpayer owns appreciated property and transferors it to another, and that successor owner sells the property, the gain from the sale is reportable by the successor owner, not the donor. However, if the gift occurs too close to the sale date, the assignment of income doctrine will attribute the gain back the transferor...

GRANDFATHERED BUY-SELL AGREEMENTS

Posted on April 07, 2013
Code §2703 severely restricts the ability of a buy-sell agreement to control estate tax values in a closely held entity. A recent private letter ruling reminds us that older agreements are not subject to Code §2703.More particularly, agreements entered into before October 8, 1990, and that are not ?substantially modified? after that date are not subject to Code §2703...

PERSONAL USE OF CORPORATE PROPERTY IN A USRPI HOLDING COMPANY STRUCTURE

Posted on March 31, 2013
To insulate the ultimate individual owners from U.S. estate taxes, nonresident aliens often hold U.S. real property in a U.S. corporation, which corporation is owned by a foreign corporation. The foreign corporation is owned by the ultimate nonresident alien owners (either directly or through intermediate non-U...

PARTIAL WIN FOR GOLFER IN TREATY CASE

Posted on March 27, 2013
A recent Tax Court case addressed some interesting athlete and treaty issues. The Court ended up siding with the golfer on some, but not all, of the golfer's positions.Sergio Garcia is a professional golfer. In the tax years at issue, he was a party to an endorsement agreement with TaylorMade Golf Co...

APPLICABLE FEDERAL RATES?APRIL 2013

Posted on March 24, 2013
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NRA GAIN ON SALE OF PARTNERSHIP INTEREST TREATED AS CREATING EFFECTIVELY CONNECTED INCOME

Posted on March 17, 2013
Nonresidents are generally not subject to U.S. income taxes on their capital gains if present in the U.S. for less than 183 days in the tax year. Code Section 741 treats the gain from the sale or exchange of a partnership interest as capital gain (subject to some limited exceptions)...

MERE RECORDING OF DEED DOES NOT COMMENCE FOUR YEAR STATUTE OF LIMITATIONS ON FRAUDULENT CONVEYANCE [FLORIDA]

Posted on March 12, 2013
Under fraudulent conveyance law, a creditor of a debtor can reach property of the debtor that the debtor transferred to third parties if the transfer is a fraudulent conveyance. However, Fla.Stats. §726.110(1) provides that an action to reach such transferred property must be commenced within 4 years of the transfer, or if later, within 1 year after the transfer was or could reasonably have been discovered...

CO-GUARANTORS LIMIT AMOUNT AT RISK

Posted on March 10, 2013
Code §465 limits deductions for taxpayers in business and investment activities to the amount the taxpayer has "at risk" in the venture. Amounts of owners that are contributed to capital are generally at risk. Also at risk are amounts that are borrowed by the venture, and for which the taxpayer is personally liable for repayment or has pledged property as security for repayment...

ADDING ACCRUED INTEREST TO PRINCIPAL BALANCE DOES NOT GENERATE A DEDUCTION

Posted on March 06, 2013
Cash basis taxpayers may deduct ?qualified residence interest? when paid. Qualified resident interest is generally interest on a loan taken out to purchase a qualified residence, or to refinance it within certain dollar limits. In a recent Tax Court case, a taxpayer accrued interest on his home mortgage...

WHEN IS A NOTICE ADDRESSED TO A PERSON OUTSIDE OF THE UNITED STATES?

Posted on March 03, 2013
Seems like a simple question, but is it? Is a notice addressed to a person outside of the U.S. if at the time of mailing the person is physically in the U.S., even though they reside outside of the U.S.? What about if it was mailed to a U.S. address? What if it was mailed to a U...

LIMITED REACH OF THE ESTATE TAX

Posted on February 26, 2013
With the increase of the unified credit equivalent amount to $5.25 million and its indexing for inflation, clearly there will be a lot less fewer estates subject to estate tax than when exemptions were lower. The Congressional Research Service issued a report on February 15, 2013 that estimates the number of estates that will be subject to the tax, and these figures are REALLY LOW...

APPLICABLE FEDERAL RATES?MARCH 2013

Posted on February 23, 2013
I?ve made a few changes this month. I?ve changed some formatting, but more importantly I have added the §7520 rates to the chart. Also, I am including a new chart that shows 20 years of the long term AFR rate, to give some long term perspective on where rates currently stand...

DID THE TAX COURT ERR IN KITE?

Posted on February 17, 2013
Code Section 2519 is a notoriously difficult section to apply. In 2009, I wrote on article on it for Estate Planning, and ever since I?ve been providing a lot of assistance to others on its operation. So I am always interested when a new Section 2519 opinion comes out...

LLC?S ELECTING TO BE ?S? CORPORATIONS

Posted on February 15, 2013
Most entities operating as ?S? corporations are corporations formed under state law. However, under the check-the-box rules, a limited liability company (LLC) can elect to be taxed for federal tax purposes as a corporation. With such an election, the LLC can then elect to be taxed as an ?S? corporation, if it otherwise meets Subchapter S requirements...

IN-PLAN ROTH ROLLOVERS NOW PERMITTED

Posted on February 10, 2013
Previously, if you held assets in a 401(k) plan and you were under the age of 59 1/2, you were unable to transfer some or all of your plan assets to a Roth plan under the 401(k) plan. A Roth plan allows for later distributions from the plan to be made without income taxes to the plan participant (which is the opposite treatment of IRAs and other qualified pension plans, which are tax deductible on contribution and taxable when distributions are later made)...

DISCLAIMER OF INCOME INTEREST WAS NOT TAXABLE FOR NONRESIDENT

Posted on February 07, 2013
Code §2501(a)(2) provides that, except as to certain expatriates, U.S. gift taxes do not apply to the transfer of intangible property by a nonresident not a citizen of the United States. This exemption is big enough to drive a truck through, though of course, a truck is TANGIBLE property so a gift of a truck in the U...

OBAMACARE TAXES, AND SALES OF PARTNERSHIP AND SUBCHAPTER ?S? INTERESTS

Posted on February 01, 2013
Have you given any thought to how Obamacare?s new 3.8% tax on investment income and gains will apply to sales of interests in partnerships and Subchapter S corporations? No, I didn?t think so. Here is a general overview, including information on a hidden, and frankly nauseating, compliance burden that may apply at times...

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