Taxation & Estate Planning

PSYCHOLOGICAL FACTORS IN T&E LITIGATION SETTLEMENT

Posted on August 30, 2010
When dealing with clients on evaluating and settling estate and trust litigation, attorneys need to be cognizant of some psychological factors that may inhibit their clients from rationally acting or evaluating the case in their own self-interest. A recent article in the Estate Planning Journal discusses some of these factors...

OVERPAYMENT AND UNDERPAYMENT RATES ? 4TH QUARTER 2010

Posted on August 26, 2010

ESTATE SETTLEMENT RECIPIENTS LOSE A CHUNK TO THE IRS

Posted on August 22, 2010
Two brothers brought suit against their step-siblings and the estate of their step-mother for a share of ownership of real properties that were devised to them by their step-mother, but which were transferred out of the step-mother's death in the months before her death...

APPLICABLE FEDERAL RATES ? SEPTEMBER 2010

Posted on August 19, 2010

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NEW TAX ACT PROVISIONS

Posted on August 14, 2010
On August 10, the Education Jobs and Medicaid Assistance Act was signed into law. The new law contains several new provisions relating to the foreign tax credit. First, new Code §909 is added to the Internal Revenue Code. Without getting bogged down in the details, the new provision delays the foreign tax credit or deduction for a taxpayer until the foreign income that gives rise to the foreign tax is taken into account by the taxpayer ? if this never happens, then the credit or deduction is lost for good...

UPDATED TABLE ON FLORIDA HOMESTEAD RESTRICTIONS ON TRANSFER

Posted on August 09, 2010
Several years ago I posted my summary table on Florida?s homestead restrictions on transfer. As those who have dealt with these restrictions know, they can be difficult to both remember and correctly apply. I have now updated the table for the new election available to a surviving spouse on a bad devise to obtain a 50% tenancy in common interest in lieu of a life estate...

COVENANT NOT TO COMPETE DEFEATS PERSONAL GOODWILL CLAIM

Posted on August 05, 2010
Dr. Howard was the sole shareholder, officer, and director of his personal service corporation. Back in 1980, he entered into an employment agreement and a covenant not to compete with the corporation. In 2002, the corporation sold the practice. In the sale, $549,900 of the purchase price was paid to Dr...

KEY MAY 2010 FLORIDA PROBATE LAW CHANGES [FLORIDA]

Posted on August 02, 2010
The following summarizes the interesting recent changes made to Florida?s Probate Code. ------------------------------------------------------------- 1. Fla.Stats. § 655.935 - Safe Deposit Boxes ------------------------------------------------------------- 1...

THE PROS AND CONS OF MAKING GIFTS IN 2010

Posted on July 30, 2010
With a year without estate tax, and reversion to 2001 rules in 2011, 2010 surely goes down as one of the most challenging years in transfer tax planning. One of the big issues in 2010 is whether taxpayers should be making taxable gifts. As with most planning issues, there is no cut and dried answer - the circumstances of the taxpayer need to be considered...

PREPAID FORWARD CONTRACT TREATED AS A SALE

Posted on July 25, 2010
Prepaid forward contracts were a popular item in the early 2000?s. Such arrangements would allow the holder of substantially appreciated public stock (such as a founder whose stock had run up substantially in the bull market) to receive a payment of 75%-80% of the value of his or her shares, have an upside if the stock appreciated in value thereafter in the next few years, have no downside risk, and be able to defer income taxes on the funds paid until the transaction closed a few years later...

APPLICABLE FEDERAL RATES ? AUGUST 2010

Posted on July 20, 2010

DOES A TAX FRAUD GUILTY PLEA AUTOMATICALLY RESULT IN AN FBAR PENALTY?

Posted on July 17, 2010
A taxpayer through a company had Swiss bank account. He did not report the income from the accounts on his federal income tax return. The taxpayer also did not file the required FBAR disclosure form for the accounts. The taxpayer eventually plead guilty to tax fraud, conspiracy to defraud the United States and criminal tax evasion in connection with the Swiss bank accounts...

PREPAYING INDEBTEDNESS AT A DISCOUNT DOES NOT ALWAYS GIVE RISE TO CANCELLATION OF INDEBTEDNESS INCOME

Posted on July 14, 2010
Oftentimes, a debtor is able to negotiate with a creditor to pay off a debt at a discount. The debtor pockets the savings ? however its not a total win since the debtor may have to share some of the savings with the IRS. This is because the reduction in the amount due will often be characterized as cancellation of indebtedness income, which is subject to income tax...

30-DAY LETTERS VS. 90-DAY LETTERS IN ESTATE TAX AUDITS

Posted on July 10, 2010
In estate tax audit situations, the IRS only has a 3 year statute of limitations to assess additional taxes. If the IRS takes too long to initiate an audit, or the audit drags on too long, the taxpayer may lose an opportunity to have unagreed audit issues reviewed by an Appeals Office prior to the issuance of a 90-day letter...

CHARGING ORDERS AS EXCLUSIVE REMEDIES IN LLC?S ? PART ONE

Posted on July 08, 2010
A recent Florida Supreme Court case addressing whether a charging order is an exclusive remedy for a creditor of a member of an LLC as to the LLC interest is creating a stir. This posting addresses the case. A future posting will address the question of whether the exclusive remedy of charging orders issue should be garnering so much attention...

TAX AMNESTY WINDOW OPEN UNTIL SEPTEMBER 30 [FLORIDA]

Posted on July 04, 2010
Did you buy some artwork out of state that you brought back to Florida and did not pay Florida use taxes on? Did you forget that your ?c? corporation has to pay Florida corporate income taxes? Did you sell items upon which  you should have collected Florida sales tax? If a taxpayer answers yes to any of these, or has any other failures to pay Florida taxes, a tax amnesty program opened on July 1 and will run through September 30, 2010...

MUTABILITY DOCTRINE

Posted on July 01, 2010
When tax issues turn on international conflict of laws analysis, attempting to determine tax consequences can become a hair-pulling exercise. A recent Tax Court case provides a good illustration. On its face, the tax issue was fairly simple. A married resident and domiciliary of Belgium died while owning a significant amount of shares in a U...

GIFT TAX GROSS-UP DOES NOT APPLY TO NONRESIDENTS

Posted on June 15, 2010
Under Code Section 2035(b), if a U.S. person makes a gift and pays gift tax within 3 years of his or her death, the amount of the gift tax is included in his or her gross estate for federal estate tax computation purposes. In an interesting ruling, the IRS has indicated that such inclusion will not apply if the decedent is a nonresident alien of the U...

HOMESTEAD CAN STILL BE SUBJECT TO FRAUDULENT CONVEYANCE WHEN IRS INVOLVED [Florida]

Posted on June 10, 2010
A transferee of an insolvent debtor that receives property from the debtor may be required to disgorge the received property or its equivalent value to the debtor?s creditors, if the transfer to the transferee was a ?fraudulent conveyance.? However, a fraudulent conveyance only applies to a transfer of property of a debtor...

DESIGNATED BENEFICIARY COULD NOT BE CREATED THROUGH A POST-DEATH TRUST REFORMATION

Posted on June 06, 2010
Individual retirement account (IRA) assets can be made payable to a trust at the death of the account owner. If the trust has a ?designated beneficiary? under the Code and Regulations, the payout from the IRA can typically be spread (and tax deferral maximized) over the lifetime of the designated beneficiary...

SALE RESTRICTIONS AND FORFEITURE RISK DID NOT INHIBIT CONSTRUCTIVE RECEIPT

Posted on June 02, 2010
In a recent District Court case, a taxpayer sold a partnership interest in exchange for shares of stock. The stock had significant restrictions, including limits on the ability to sell the received stock for up to 5 years, and the taxpayer would have to forfeit shares if they went into competition with the buyer of the partnership interests, if they quit working for the buyer, or were fired for cause or poor performance...

APPLICABLE FEDERAL RATES ? JUNE 2010

Posted on May 30, 2010

TAX COURT COMBINES GIFT AND SALE TRANSACTION

Posted on May 23, 2010
In a recent Tax Court decision, the Court applied the step transaction doctrine to collapse a separate gift and sale of LLC interests to gift trusts into a gift transaction. Perhaps the precedential value of the case can be limited due to some bad facts present in the case, but the broad use of the step transaction doctrine simply by reason of a taxpayer bifurcating transfers into a gift and sale element so as to be able to use available gift and generation skipping tax exemptions is quite troubling...

A METHODOLOGY FOR DISCOUNTING JOINT OWNERSHIP INTERESTS

Posted on May 19, 2010
Federal transfer taxes are based on the value of the property transferred. When the property transferred is a joint interest in property, some reduction from the pro rata share of the full value of the property is appropriate since a willing buyer would not pay 100% of the pro rata share of the value due to restrictions on enjoyment of the property or freely liquidating the property...

TAX COMPETITIVENESS SURVEY

Posted on May 16, 2010
A theme we have often mentioned is that capital flows to where it is best treated. Obviously, the level of tax imposed on businesses is a key element of how capital is treated in any given jurisdiction. A 2010 KPMG guide analyzes the current tax competitiveness of 10 major countries, and 41 major cities in those countries...

TRUSTEE FEES

Posted on May 10, 2010
We are often asked what a reasonable trustee fee is. Like many states, Florida does not provide a statutory schedule as to what is a reasonable fee. One way to get a feel for an appropriate fee is to see what professional trustees charge. A recent blog posted its survey results as to current rates being charged by various trustees...

ANOTHER CHINK IN THE ASSET PROTECTION ARMOR?

Posted on May 09, 2010
A recent federal case involving Florida's creditor protection law is generating a significant amount of commentary and criticism. While this case involves Florida creditor protections, the larger question of federal interests overriding state creditor protections has relevancy in all states...

TURNABOUT [FLORIDA]

Posted on May 04, 2010
Florida attorneys often help their clients use Florida?s homestead protection to protect assets from claims of creditors pursuant to Article X, Section 4 of the Florida Constitution. In a recent case, the client used the homestead protection to stiff his law firm in regard to their fee...

MORE ON EXEMPT ORGANIZATION STATUS REVOCATIONS

Posted on May 02, 2010
Earlier this week, I wrote about how exempt organizations that do not file their Form 990?s for 3 consecutive years face automatic revocation of their status. The day after that was written, the IRS released a FAQ discusing the issue. The FAQ did not bring any real relief to taxpayers, but did answer some questions...

TIDAL WAVE OF EXEMPT ORGANIZATION STATUS REVOCATIONS LOOMS

Posted on April 26, 2010
Most organizations that are exempt from Federal income tax are required to file a Form 990 or some variation thereof on an annual basis. Previously, smaller organizations were exempt from the filing requirements. Smaller organizations can often still file with a short-form filing on an e-postcard Form 990-N...

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