Taxation & Estate Planning

LIMITS ON CONTRACTUAL RELEASES [FLORIDA]

Posted on July 12, 2008
Contracts 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, 2008
Earlier 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, 2008
The 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, 2008
Effective 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...

To access this complete feed in the blog feed reader login or register for free.

REVISED EXEMPT ORGANIZATION FILING AND DISCLOSURE REQUIREMENTS

Posted on June 26, 2008
The 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, 2008
The 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, 2008
Qualified 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, 2008
July 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, 2008
July 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, 2008
Internal 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, 2008
One 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, 2008
Private 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, 2008
The 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, 2008
The 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, 2008
Florida 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, 2008
Under 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, 2008
Generally, 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, 2008
While 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, 2008
May 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, 2008
Family 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, 2008
Code 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, 2008
Like 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, 2008
A 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, 2008
Individuals 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, 2008
Under 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, 2008
Under 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, 2008
A 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, 2008
May 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, 2008
In 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, 2008
As 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...

Bloggers, promote your law blog by nominating your blog for inclusion in USLaw.com's Law Blog Directory and RSS Reader. Benefits described.