Taxation & Estate Planning

APPLICABLE FEDERAL RATES ? MAY 2010

Posted on April 25, 2010

IS A DEVISE TO AN ATTORNEY-DRAFTSMAN VOID? [FLORIDA]

Posted on April 22, 2010
The Florida Bar Rules provide that "[a] lawyer shall not solicit any substantial gift, or prepare on behalf of a client an instrument giving the lawyer or a person related to the lawyer any substantial gift unless the lawyer or other recipient of the gift is related to the client...

INCOME ON SURRENDER OF LIFE INSURANCE POLICY

Posted on April 18, 2010
Taxpayers often borrow funds from their life insurance policies. If the loans are not repaid, the insurance company may apply the cash surrender value of the policy to the loan balance (including accrued interest on the loans) when the total loan balance gets close to or exceeds the cash surrender value...

ARE DOMESTIC ASSET PROTECTION TRUSTS READY FOR PRIME TIME?

Posted on April 15, 2010
In theory, it should be possible to use a properly structured domestic asset protection trust (DAPT) to receive assets from a settlor and have the assets protected from the settlor?s creditors, while also having completed gift treatment and no estate tax inclusion for the settlor, even though the settlor remains a discretionary beneficiary of the trust...

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FAMILY PARTNERSHIP HOLDING ONLY DELL STOCK SUBJECTED TO LIMITS ON VALUATION DISCOUNTS

Posted on April 10, 2010
A recent case family limited partnership case involved a partnership whose principal asset was publicly traded shares of stock of Dell. The highly liquid nature of those assets was used by the IRS and the reviewing courts to limit the amount of applicable discounts that were sought based on transfer restrictions in the partnership agreement and for lack of marketability...

NO CHANGE IN PFIC REPORTING, YET

Posted on April 07, 2010
New Code Section 1298(f) (recently enacted under the HIRE Act) requires shareholders of a passive foreign investment company (PFIC) to report such information as the IRS requires on an annual basis. Questions have been raised as to what and when taxpayers should now be reporting...

BUNDLED INVESTMENT FEES GAIN ANOTHER REPRIEVE

Posted on April 04, 2010
In the 2008 Supreme Court case of Knight v. Comm., investment advisory fees paid by a trust were held to be subject to the ?greater than 2% of adjusted gross income? deduction limits of Code Section 67(a). Oftentimes, banks, brokers, and trust companies impose only one ?bundled? fee for all services performed...

TAX PROVISIONS IN HIRE ACT IMPOSE NEW COMPLIANCE BURDENS ON INTERNATIONAL COMMERCE AND INVESTING

Posted on April 02, 2010
Capital, and all of its blessings, flows to where it is treated best. The recently passed Hiring Incentives to Restore Employment Act of 2010 (the "HIRE" Act) imposes new obstacles to the flow of capital into and out of the U.S. While ostensibly limited to "reporting" requirements to address offshore tax evasion by U...

NEW ARTICLE PUBLISHED

Posted on March 29, 2010
For those who are interested, an article of mine was published this month in the March 2010 edition of the Journal of Taxation entitled "Regulations Shift Burden of Uncertain and Contested 2053 Claims and Expenses to Taxpayers." The article analyzes new Treasury Regulations that provide new and extensive rules for addressing when deductions can be taken for federal estate tax purposes for uncertain and contested claims and expenses...

NO SPOUSAL BENEFITS IN IRA OF DECEDENT WHEN OTHERS WERE THE DESIGNATED BENEFICIARIES

Posted on March 28, 2010
Surviving spouses of a decedents who are participants in a qualified ERISA retirement plan have significant statutory protections. These protections include mandatory survivor benefits for the surviving spouse that cannot be changed without the consent of the spouse...

ROYALTIES DID NOT HAVE TO BE CAPITALIZED

Posted on March 23, 2010
On January 21, 2009, we discussed how a manufacturer of kitchen items was required by the Tax Court to capitalize royalties paid to put Pyrex and Oneida trademarks on their kitchen tools. The Tax Court found that the trademarks were part of the production process, and thus could not be immediately expensed...

SUMMARY OF TAX PROVISIONS OF HEALTH CARE ACTS

Posted on March 22, 2010
I have prepared a summary of the tax provisions of the recent Health Care Acts. This summary assumes that both the Senate bill which was approved by the House on 3/22/2010, and the House reconciliation bill which will need to go back to the Senate for approval, will both be enacted and enter into law...

APPLICABLE FEDERAL RATES ? APRIL 2010

Posted on March 20, 2010

ATTORNEY FORFEITS $1 MILLION FEE [Florida]

Posted on March 18, 2010
William West, an attorney licensed to practice in North Carolina, entered into a contingency fee agreement with a beneficiary of a trust to handle a trust dispute in Florida. West handled the matter through mediation, and received a favorable result for his client...

INHERITED IRA DOES NOT RECEIVE FEDERAL BANKRUPTCY PROTECTION

Posted on March 13, 2010
A Bankruptcy Court in Texas has ruled that unlike a traditional individual retirement account (IRA), an inherited IRA is not an exempt asset in bankruptcy under federal bankruptcy exemptions. The basis of the ruling is two-fold. First, to be exempt, the funds in the IRA must be ?retirement funds...

SPRINGING LIFE INSURANCE - MORE

Posted on March 07, 2010
Last week, we discussed the Matthies case, which tagged a taxpayer with a substantial deficiency in a ?pension rescue?/springing life insurance situation involving the use of valuation mechanisms and life insurance to attempt to remove assets from a qualified retirement plan through the purchase and sale of a life insurance contract whose value was depressed through the existence of substantial surrender charges...

2009 FBAR REPORTING RELIEF

Posted on March 06, 2010
Treasury Form TD F 90-22.1 (commonly known as the ?FBAR?) is used by taxpayers to report financial interests in, or signature authority over, foreign accounts. Several official announcements have come out recently that address some of the filing requirements...

INTEREST RATES FOR TAX OVERPAYMENTS AND UNDERPAYMENTS (APRIL 2010 QUARTER)

Posted on March 03, 2010
The IRS has announced the interest rates for tax overpayments and underpayments for the calendar quarter beginning April 1, 2010. For noncorporate taxpayers, the rate for both underpayments and overpayments will be 4% (unchanged). For corporations, the overpayment rate will be 3% (unchanged)...

GUARANTIES ARE MORE AKIN TO SERVICES THAN INTEREST

Posted on February 28, 2010
Code Section 881(a) imposes a 30% withholding tax on non-U.S. corporations receiving  fixed or determinable, annual or periodic (FDAP) income from U.S. sources (subject to reduction under applicable treaties). Does this tax apply to a guaranty fee paid by a U...

SPRINGING INSURANCE COMES UNSPRUNG

Posted on February 25, 2010
For awhile, ?springing? insurance was a popular method of avoiding tax on IRA and qualified retirement plan assets. A recent case hammered the taxpayer who entered into such an arrangement. While there are variations, the typical arrangement involved the creation of a pension plan in a closely-held entity, which received a roll-over distribution from the taxpayer?s IRA...

APPLICABLE FEDERAL RATES ? MARCH 2010

Posted on February 20, 2010

IS THERE A ?PRISON MAILBOX RULE??

Posted on February 17, 2010
The Internal Revenue Code ?mailbox rule? provides that for purposes of most Code filing deadlines, a taxpayer will meet the deadline if the item is mailed on or before the required filing date (as evidenced by the postmark on the item). That is, the item does not have to be received by the IRS or other applicable recipient by the filing date ? it is enough if it is properly mailed by that date...

ESTATE TAX REPEAL AND YOUR ESTATE PLANNING DOCUMENTS

Posted on February 14, 2010
The following is a communication we will be sending out to our firm?s clients and friends. Since it is of relevance to all of our readers, I am also posting it here. As you are most likely aware, we are now 1 1/2 months into an unprecedented period when the federal estate tax does not apply...

PROPOSED TAX REDUCTIONS [FLORIDA]

Posted on February 11, 2010
Florida Governor Charlie Crist is proposing a 1% reduction in the corporate income tax rate, from 5.5% to 4.5%, on the first $1 million of a corporation's taxable income as part of various proposed tax relief measures. The governor is also recommending a  10?day back to school sales tax holiday...

RUBIN ON TAX ON YOUR IPHONE

Posted on February 07, 2010
A number of readers have indicated they would like to be able to read Rubin on Tax while waiting in lines, such as at the grocery store. Okay, maybe not many. Maybe not any. Nonetheless, if you have an iPhone and would like to be able to read your dose of Rubin on Tax whenever and wherever you want, now you can do so...

WHEN WILL DISCLOSURE OF ?AMOUNTS? ON A RETURN CONSTITUTE REASONABLE DISCLOSURE FOR AVOIDING PENALTIES?

Posted on February 06, 2010
Taxpayers can avoid the Code §6662 penalty for substantial underpayment of income tax by adequately disclosing amounts on the income tax return. A recent Revenue Procedure provides details as to when the inclusion of ?amounts? on a return constitutes adequate disclosure for this purpose...

WHEN WATER IS AS THICK AS BLOOD [FLORIDA]

Posted on February 04, 2010
We all know the expression ?blood is thicker than water.? Presumably, that is what a trust settlor had in mind when she made a class gift to her grandchildren, and included language that such grandchildren would only include ?descendants by blood.? The settlor?s son married his wife in 1966...

IRS ADVISES THAT §2511(c) MEANS WHAT IT SAYS

Posted on February 02, 2010
Starting this year, Code §2511(c) takes effect. This provision provides that notwithstanding any other provision of §2511, and, except as provided in regulations, a transfer in trust shall be treated as a transfer of property by gift, unless the trust is treated as a wholly owned grantor trust...

ESTATE TAX IMPONDERABLES

Posted on January 30, 2010
I had the pleasure of attending and speaking at the 2010 University Of Miami Heckerling Institute on Estate Planning in Orlando this past week. A lot of the focus was on the inapplicability of federal estate taxes in 2010, and the return of those taxes in 2011 at the rates and credits applicable in 2001...

DEDUCT YOUR 2010 HAITI CONTRIBUTIONS ON YOUR 2009 RETURN

Posted on January 28, 2010
As an incentive to encourage charitable gifts to Haiti earthquake relief efforts, a new law was enacted this week. The new law allows taxpayers making charitable contributions to Haiti relief after January 11, 2010 and before March 1, 2010 to deduct the contributions on their 2009 income tax return (instead of waiting to take the deduction on their 2010 income tax returns)...

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