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Archive for Estate Tax

Tax Cuts And Jobs Act: IRS Final Regulations On Estate/Gift Tax

DARLENE HART - Tax Cuts And Jobs Act Estate/Gift Tax

The Tax Cuts and Jobs Act (TCJA), enacted in December 2017, increased the life-time exclusion amount of transfers subject to Estate/Gift tax from $5 million to $10 million. Adjusted for inflation, this amount is $11.4 million in 2019. The TCJA also provides that this higher amount will revert to its pre-TCJA amount after 2025.

The IRS has now issued TCJA final regulations to address concerns that an estate tax could apply to gifts exempt from gift tax by the increased TCJA amounts in excess of the historic exclusion amount.

The final regulations provide a special rule that allows the estate to compute its estate tax credit using the higher of the TCJA exclusion amount or the or the pre-TCJA amount applicable on the date of death with respect to gifts made during the decedent’s lifetime.

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Know The IRS’s Foreign Tax Traps: Unexpected Situations Taxpayers Found Themselves Caught In

Mitchell R. Miller - Estate And Trust Lawyer, Beverly Hills, CA

In spite of the IRS’s information campaign, many people still do not know that the IRS has mounted a huge enforcement effort in the international arena to get people to report foreign accounts and foreign income. And if you have foreign assets, you might be surprised that this enforcement effort could apply to you.

Specifically, the IRS has for all practical purposes eliminated bank secrecy for U.S. citizens and residents, forcing foreign banks to identify all their U.S. account holders. In many cases, foreign banks have simply kicked out all their U.S. depositors. And the penalties for not reporting foreign accounts, income and transactions grow larger every year.

In one recent case, a federal jury held that a man who had failed to report the existence of his foreign account or include the interest from the account in his income was liable for a penalty of 150% of the highest value of the account. That’s right — ONE AND A HALF TIMES THE ENTIRE VALUE OF THE ACCOUNT!

And that’s only the penalty. There’ll be tax, interest on the tax, and interest on the penalty to boot!

What types of foreign items are you required to report?

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President Trumps Tax Reform Bill Increases Inheritance Tax Deduction To $11,800,000

Charles Woodson, Estate Tax, Inheritance Tax Expert

A frequent question is whether inheritances are taxable. This is a frequently misunderstood question related to taxation and can be complicated. When someone passes away, all of their assets will be subject to inheritance taxation, and whatever is left over after paying the inheritance tax passes to the decedent’s beneficiaries.

Sound bleak? Don’t worry, very few decedents’ estates ever pay any inheritance tax, primarily because the code exempts a liberal amount of the estate from taxation; thus, only very large estates are subject to inheritance tax. In fact, with the passage of the Tax Cuts & Jobs Act (tax reform), the estate tax deduction has been increased to $11,180,000* for 2018 and is inflation adjusted in future years. That generally means that estates valued at $11,180,000* or less will not pay any federal estate taxes and those in excess of the exemption amount only pay inheritance tax on amounts in excess of the exemption amount. Of interest, there are less than 10,000 deaths each year for which the decedent’s estate exceeds the exemption amount, so for most estates, there will be no estate tax and the beneficiaries will generally inherit the entire estate.

* Note that, as with anything tax-related, the exemption is not always a fixed amount. It must be reduced by prior gifts in excess of the annual gift exemption, and it can be increased for a surviving spouse by the decedent’s unused exemption amount.

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Foreign Investment Into The U.S. Part II: Who Is A U.S. Person?

The U.S. income tax and estate tax both function under a system with only two possibilities, a taxpayer is either a U.S. person/domiciliary or not a U.S. person, referred to as a non-resident alien (“NRA”). There is no middle ground, it is an all or nothing system. Since U.S. tax law is based on this distinction, the first step in any analysis is determining the correct category.

The U.S. laws do not define who is an NRA, rather, they define who is a U.S. person, or for estate taxes a U.S. domiciliary. Therefore, NRAs will be anyone who does not meet the definition of a U.S. person or domiciliary. Due to these rules, before we can decide how a foreigner will be taxed in the U.S., we must first make sure they are in fact a foreigner under the laws.

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Stepped Up Basis In Estate Planning IRC 1014

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. Read more