Archive for Estate Planning Tax

Start 2015 Tax Planning Now! Part 3

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Tax Code Changes Create Challenges

Inheritance taxes and estate planning are a growing concern for affluent baby boomers. What are some of the major issues?

In addition to the double step-up in basis on community property discussed above, the baby boom generation will benefit from some of the most generous estate tax loopholes in history. For example, married couples have complete spousal exemption from estate and gift tax when transferring property to each other. This has not always been the case.

For 2015, every person has a lifetime net gift and estate tax exemption up to $5.43 million. Considering that the top gift and estate tax rate is 40%, this exemption represents an Read more

Estate Tax Inequities (Changing Domiciliary)

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Last year, Joan Rivers died with an estate of roughly $100 million. In her last will and testament she described herself as a resident of New York State but a domiciliary of the State of California. What’s the difference?

Prior to 2000, there was no difference and all estates that paid federal taxes had to pay state death taxes based on a pickup chart listed on the tax return. It was a graduated tax predicated on the size of the estate; every estate, however, irrespective of domicile, paid the same amount on a percentage basis to the state of domicile. Circa 2000, the IRS disconnected the state death tax payments from the federal tax. The result was that some states chose not to have any state death tax while other states levied a substantial tax of their own. Read more

Endowments – Good Or Bad For Churches?

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An endowment is a donation of money or property to a non-profit organization for the ongoing support of the organization. It may be structured that the organization leaves the principal amount intact and is only permitted to spend the income from the investments in the endowment funds. Less commonly, the gift may be structured allowing the organization to spend the principal amount. If this is the case, there may be restrictions placed upon the amount of principal that may be spent annually. Many non-profit organizations, most notably colleges and universities may have endowments of millions of dollars. It is less common for a church to have endowment funds, although it is not unheard of.

Not everyone favors a church having endowment funds. Some feel that any funds in Read more

IRS Issues Guidance on Estate-Gift Tax Pre-Appeals Conference Procedures

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IRS’s Small Business/Self-Employed (SB/SE) Division has issued interim guidance to its estate and gift tax auditors on procedures to use in connection with a taxpayer whose estate tax, gift tax, generation-skipping transfer tax, fiduciary income tax, or information return is being examined by estate/gift tax auditors, being eligible for an IRS Appeals conference.

After an IRS auditor completes an examination of a taxpayer’s tax return with respect to which the auditor wishes to propose adjustments, IRS provides the taxpayer a letter, a “30-day letter,” together with a computation report of proposed adjustments to the tax return. Read more

The Smart Choice! Durable Power of Attorney

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Today I received a frantic telephone call from the adult daughter of a senior citizen client for whom I prepared an estate plan 10 years ago. Unfortunately, the man, who is a widower, had a serious stroke. He is alive but is not communicative. The daughter called and asked if I had prepared a Durable Power Of Attorney. Even though I had prepared a Will and a Living Will, the client had insisted that he did not want a Power Of Attorney.

Specifically, this client is a very private person and wanted to be in complete control of all of his assets. I had suggested that we establish a Trust, with him being the Trustee and having one of his children as a Co-Trustee who could take over if he came incapacitated. That was rejected. Read more

So What is the FATCA Deadline for Trusts?

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The Financial Times (FT) ran a story on Saturday 18 October about confusion over the Foreign Account tax Compliance Act (FATCA) deadline for trusts. Trustees of private family trusts are being urged to register with the US tax authority or risk non-compliance with new counter-tax avoidance legislation.

Investment-based trusts that are managed by a discretionary fund manager are considered, according to the US tax authority’s definitions, to be “financial institutions” and must therefore meet FATCA requirements.

The first step is to apply for a so-called “global intermediary identification number” or GIIN. Failure to meet FATCA’s reporting obligations could result in a 30 percent withholding tax Read more

Compliance 2014 – Capital Acquisitions Tax – Ireland

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The 2010 Finance Act introduced a fixed pay and file date for all gifts and inheritances with a “valuation date” after 14th June 2010. As a result, the Capital Acquisitions Tax year runs from 1st September to 31st August in the following year.

C.A.T. arising on gifts/inheritances, where the “valuation date” falls within the twelve month period ending on 31st August in a particular tax year, must be paid and filed with Revenue by the 31st October of that year.

What do we mean by “Valuation Date”?

The “valuation date” is the date on which the property making up the gift or inheritance is valued. The “valuation date” for a gift is the date the individual receives the gift but Read more

Capital Gains Exemption – What You Need to Know

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Tax Saving of Claiming Capital Gains Exemption

A Canadian business owner who carries on an active business through a corporation may be eligible for an $800,000 lifetime capital gains exemption (indexed for inflation after 2014) on the sale of his/her corporation shares or on the deemed disposition of his/her corporation shares immediately before his/her passing. For a Canadian business owner in the top marginal tax bracket, the claim of the $800,000 lifetime capital gains exemption will result in a tax saving ranging from $156,000 to $200,000, depending on the province in which the business owner is a resident.

How to Qualify for the Capital Gains Exemption

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Estate Tax Audits Are On The Rise

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There’s an important—yet unspoken—phenomenon in the world of estate tax:

As the number of estate tax filings has been decreasing nationwide since 2001, there’s been a corresponding increase in the Internal Revenue Service’s audit coverage rate of estate tax returns—from 20 percent to nearly 100 percent.

Have an Estate Tax Audit Problem?

Estate Tax Audits Require an Experienced Tax Attorney

Connect with me on TaxConnections. Read more

Australian “Significant Investor” Residence Visa Applicants Need To Consider Tax And Estate Planning Issues.


Australia’s 2012 “significant investor” residence visa scheme has attracted some 1,000 applicants who have committed to invest AUD4 billion in businesses or other complying investments. To date, the vast majority of applicants have been from Chinese nationals.

The scheme might have been expected to attract some interest from Russian entrepreneurs and investors. However, Australia’s personal tax rates may be a distraction (an effective maximum marginal rate of 49% currently applies to income in excess of AUD180,000 pa). Furthermore, the current geopolitical situation around Ukraine and the flight MH17 atrocity may now deter potential applicants who might be regarded as associates of the Russian leadership. Read more

Canadians With US Rental Property – What Are The Cross-Border Tax Implications?

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Canadians earning income from US rental property can be fraught with unexpected tax problems, which could severely hurt their after-tax return on investment. It is important to consult a cross-border tax professional before the purchase to understand all the US and Canadian tax implications of owning US rental property and to make the best decision for their situation on the right structure to own and finance the purchase of US rental property.

This is the first of a series of articles on the cross-border tax considerations of investing in US rental property. If you are planning to purchase US rental property, you need to have some basic understanding of the following US and Canadian tax law before you can make a sound decision on how you should own and finance the purchase of US rental property. Read more

IRC 1014 And The Significance of Stepped Up Basis In Estate Planning

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According to Internal Revenue Code Section 1014 the basis of property acquired from a decedent is the fair market value of the property at the date of the decedent’s death. This is often referred to as stepped up basis and it is profoundly significant for US taxpayers dealing with the myriad of issues surrounding estate planning or tax preferential transfer of assets.

For those of you not used to the term ‘basis’ it generally is defined as the cost or value of an investment, asset or something that is owned, given or inherited at the time it was acquired. It also refers to any investment in improvements made to the asset while you owned it. Read more