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Archive for Estate Planning Tax

Federal Estate Tax Returns: IRS Says No Closing Letters!

Tax Advisor - Ron Marini

The IRS is the federal agency which has the most direct contacts with Americans. Dealing with the IRS is never easy when addressing federal estate tax returns. The starting point is 75,000 pages (in fine print) of the Internal Revenue Code and Regulations which Americans must somehow master to file accurate tax returns including estate taxes.

To make life even more difficult, irrespective of the IRC and Regulations, the IRS creates a number of procedural requirements necessary to complete various tasks involving the IRS’ contacts with taxpayers. One such situation involving the filing of Federal Estate Tax Returns (forms 706 and 706-NA) has been the automatic issuance of closing letters (IRS Letter 627, catalogue # 40285J) when the IRS has completed reviewing these forms. Under Section 6324 of the IRC, the IRS has a 10 year lien on all property which appears on an estate tax return. In order to avoid personal liability, the executor of the estate and anyone else who had contact with either the assets or proceeds of the estate (see Section 2203) can be held liable for any unpaid tax unless one receives a form 5173, Federal Transfer Certificate which frees everyone from this potential liability.  Form 5173 was always issued in tandem with with the automatic issuance of the federal closing letter. Read more

Foreign Trust Protection for Foreign Assets: A Myth Busted!

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It is not uncommon anymore that a US Citizen has parents and elders living in foreign countries who may have set up trusts in those countries under (obviously) its laws. There are also US Citizens who have expatriated to/ now live in foreign countries and set up trusts for their children there.

Today’s post was prompted by questions from several clients about an urban legend that seems to be perpetuating itself out there: “You do not have any US tax reporting requirements if you are a US citizen/ permanent resident and your foreign assets and/ investments are in a foreign trust.”

If you have believed this to be true and set up a trust in a foreign country or are thinking of taking this step or are just Read more

Issues Concerning Filing a Form 706NA?

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On September 23, 2015, we posted “Some Nonresidents with U.S. Assets Must File Estate Tax Returns” where we discussed that deceased nonresidents who were not American citizens are subject to U.S. estate taxation with respect to their U.S.-situated assets.

Many foreigners owning property or assets in the United States are in violation of 706-NA filing requirements because of a number of misunderstandings. The basic rule is pretty clear-if a foreign decedent has assets in the United States with a gross value in excess of $60,000, the estate is supposed to file a tax return with the Internal Revenue Service.

Many people think of numerous reasons not to file. The main one relates to mortgages or liens against the US property. Assume that a property in Florida is worth $150,000 and there is a $100,000 mortgage held by Bank of X. Read more

US Citizens Living Abroad Are Required To File A US Estate Tax Form

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American citizens are subject to U.S. estate taxation with respect to their worldwide assets. An estate tax return, Form 706, United States Estate (and Generation-Skipping) Tax Return, Estate of a citizen or resident of the United States, is required for a deceased American citizen, if the fair market value at death of the decedent’s worldwide assets exceeds the “unified credit exemption” amount in effect on the date of death. However, if the U.S. citizen made substantial lifetime gifts, and used the applicable “unified credit exemption” amount to eliminate or reduce any gift tax on the lifetime gifts, a U.S. estate tax return may still be required even if the value of the decedent’s worldwide assets is less than the “unified credit exemption” amount at the date of death (due to the decrease in the “unified credit exemption” for the lifetime gifts). To determine the “unified credit exemption” amount for American citizens Read more

September 2015 Business Tax Due Dates

TaxConnections Tax Blog

September 15 –  Corporations

File a 2014 calendar year income tax return (Form 1120 or 1120-A) and pay any tax, interest, and penalties due. This due date applies only if you timely requested an automatic 6-month extension.

September 15 – S Corporations

File a 2014 calendar year income tax return (Form 1120S) and pay any tax due. This due date applies only if you requested an automatic 6-month extension.

September 15 – Corporations Read more

Recent Important Tax Changes

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Introduction

The three month highway funding extension was passed by the House July 29 and by the Senate July 30. The president signed the bill into law on July 31. The law contains several important tax provisions changing the due dates for partnership and C corporation returns, FinCEN Form 114-Report of Foreign Bank and Financial Accounts (FBAR), several common tax returns and several other IRS information returns It also overrules the Supreme Court’s Home Concrete decision, requires that additional information be reported on mortgage information statements, and requires consistent basis reporting between estates and beneficiaries. Read more

To File Or Not To File Form 706?

Taking a closer look at tax laws

In our Estate Tax Counsel’s 32 year career as a senior attorney at IRS International Estate Tax, perhaps the greatest bone of contention, certainly the hardest fought issue, was over domicile, whether to file a Form 706 or a Form 706 NA.  The stakes in terms of tax dollars often was in the millions of dollars. The estate of a US citizen or domiciliary is subject to FET on a world-wide basis  while nonresident aliens estates are subject to tax on assets with a “situs” in the US pursuant to section 2104 of the IRC.

There is no dispute about the fact that if a decedent is a US citizen dying with an estate of over $5.4 million, a 706 needs to be filed. What about US residents? If the resident is not a citizen, it may well raise the issue of which tax return is correct. Most attorneys and accountants deal with income tax, not estate tax. There is a sharp dichotomy between the Read more

Spotlight On Expatriate Tax Experts – September 21st 2015 – Internet Tax Summit

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With an estimated 8.7 Million expatriates living around the world, many are unaware of their U.S. tax filing obligations. For those following the issues surrounding FATCA, they are well aware that expatriates are angry and scared. For the two-thirds of the U.S. expatriates who are still unaware, we bring knowledgeable experts who will explain what is happening and get you up to date at the Internet Tax Summit scheduled September 21-25th 2015. The first day of the Internet Tax Summit, expatriates will be able to go online and learn what is happening from tax experts, get answers, and get the help they need.  You can expect this historical, free online event is certain to get millions of expatriates up to speed on the only country in the world with citizen based taxation. We promise the information you learn will be STUNNING! Read more

Own A Villa In South of France? Some Pleasant News For Estate Tax!

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Property ownership in continental Europe is often fraught with some unique issues upon death. Most countries including Italy, Spain and France impose “forced heir-ship” rules. Accordingly, a portion of the property must pass to the children of the decedent at the time of death; spouse of the decedent can not be made the sole beneficiary of the Estate. As a result spouse cannot sell the property at his or her own will and must obtain consent form the children prior to selling. This causes many issues for the U.S. beneficiaries in terms of Estate tax.

Effective from August, 2015, the EU have decided to change these rules. The new EU rules envisage that the citizens of the U.S. can make a choice in their will that the U.S. law would apply to foreign property in an EU state. This would enable them to bequeath the Read more

Planning Your IRA Withdrawal?

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Advance planning can, in many cases, minimize or even avoid taxes on IRA distributions and other qualified plan distributions. When contemplating future retirement and when to begin tapping taxable IRA and other qualified retirement accounts, taxpayers need to consider a number of important issues.

Early Distributions (before 59.5) – If funds are withdrawn before reaching age 59 ½, the taxpayer is also subject to a 10% early withdrawal penalty (and state penalties if applicable) in addition to the income tax on the IRA distribution, unless what is referred to as the substantially equal payment exemption is utilized. Under this exception, an early retiree can begin taking substantially equal payments at least once a year over the owner’s life or joint lives of the owner and designated beneficiary. The payments must Read more

New BEA Filing Requirements – Once Every 5 Years for U.S. Persons With Foreign Affiliates

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Pursuant to the requirements of the International Investment and Trade in Services Survey Act and related statutes, the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA) collects information on international trade in services, foreign direct investment in the United States, and outbound U.S. investment overseas.

BEA uses this information to compile a number of different economic and statistical reports that are, in turn, used for budgetary purposes and to help set U.S. economic and monetary policy. Information submitted to BEA is confidential and is to be used for such economic and statistical reporting purposes only.

The BEA recently imposed new filing requirements on U.S. persons with foreign affiliates Read more

Start 2015 Tax Planning Now! Part 4 (Final)

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Tax Code Changes Create Challenges

How do you work and coordinate with attorneys and financial planners?

We make it a point to communicate with the client’s attorney and financial planner anytime we see anything of financial or legal significance that has happened or is likely to happen. For example, in some cases, by combining the estate and gift tax exemption with the proper use of certain irrevocable trust, millions of dollars in estate and gift taxes may be avoided. If we see that a client may potentially benefit from this type of strategy, we will work closely with his/her attorney and financial planner to implement a plan.

 

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