Author: Elf
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A Potpourri of Potential Pitfalls To Avoid with Qualified Domestic Trusts
In Florida, when one or both spouses are not U.S. citizens, special planning is needed for their estate. If the surviving spouse is not a U.S. citizen, they cannot receive a marital deduction for estate tax unless the property is held in a Qualified Domestic Trust (QDOT). This rule was created to prevent noncitizen spouses…
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The New Limited Liability Company in Florida
In 1998, Florida stopped charging a tax on certain types of businesses called LLCs. This made lawyers reconsider which type of business they recommend to their clients. This article explains how the law changed and compares the benefits and costs of different types of businesses. In 1998 and 1999, new laws were passed in Florida…
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Intermediate Sanctions Under 4958: An Overview of the Proposed Regulaitons
Last year, new rules were proposed that would impose taxes on people in leadership positions at nonprofit organizations who receive too much money from the organization. These rules have been criticized for making it more complicated for anyone who works with a nonprofit to understand how they might be affected. For a long time, the…
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Understanding Estate Planning with Qualified Personal Residence Trusts
A QPRT is a type of trust where someone transfers their house to a trustee and retains the right to live in it for a certain number of years. It’s a way to save on taxes and make the most of the exclusion amount. However, it’s best to act fast, as there’s a possibility that…
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The Use of Disclaimers for Flexibility in Planning for Qualified Retirement Assets
Estate planning attorneys help couples prepare wills and trust agreements to minimize estate taxes. They create a plan, called an AB plan, for married couples to use two unified credits and shelter up to $1,300,000 after both spouses pass away. The attorney also helps the couple retitle their assets and designate beneficiaries for their retirement…
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The Use of Disclaimers for Flexibility in Planning for Qualified Retirement Assets
Estate planning attorneys help couples with a lot of money prepare their wills and trust agreements to minimize estate taxes. They create a plan called an AB plan, which allows the couple to use two credits to shelter up to $1,300,000 after both spouses pass away. The attorney also helps the couple retitle their assets…
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New Reporting Requirements on Payments Made to Attorneys Leave Practitioners Wondering Why
Basically, Congress passed a law that requires businesses to report any payments they make to lawyers for legal services. Before this law, businesses only had to report certain payments to lawyers, but now they have to report all of them. The IRS made some rules to explain how businesses should comply with this new law,…
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Estate of Simplot: The Tax Court Applies a Significant Premium to Voting Privileges
The Simplot case involves the transfer of stock in a family-owned company after the founder’s death. The court ruled that a “premium” should be applied to the transfer of minority voting stock, and that the premium for a controlling interest would be substantially greater. This decision could impact estate and gift tax reduction strategies involving…
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Weighing Your Options: Tax Planning for Incentive Stock Options
Stock options are a type of compensation that companies give to their employees. There are two main types of stock options: statutory and nonstatutory. Statutory options give special tax benefits to employees and don’t trigger income, but employers can’t deduct them. Nonstatutory options trigger income for employees and deductions for employers. Nonstatutory options are more…
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Getting the Most Tax Deferral From the Traditional IRA
You can save money on taxes by putting money in a traditional IRA. After you turn 70 ½, you have to start taking out a certain amount of money each year. If you die before that, naming a beneficiary for your IRA can help them keep getting payments over a longer time, which means they…
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Installment Reporting for Sales of S Corporation Stock with a 338(h)(10) Election
In January 5, 2000, the Treasury Department made a rule that says when people sell stocks in a certain way, they can spread out when they report the money they get for the stocks. This rule is helpful for people selling certain types of stocks, especially S corporation stocks. But a new rule from 1999…
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Generation-Skipping Transfer Tax: Its Bite Is Worse Than its Bark
Chapter 13 of the tax code has really complicated rules about the generation-skipping transfer (GST) tax. It’s a big deal because it can cause huge tax problems for families and their advisors. The GST tax rate is 55 percent and it applies to transfers of property from one generation to a generation two or more…
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The Florida Intangible Tax: The Real Voluntary Tax
Recent changes to the Florida Intangibles Tax (FIT) have basically gotten rid of it. The legislature lowered the rate by one-third and took trusts off the list of who has to pay the tax. For most people, paying the FIT is now voluntary, so it’s pretty easy to avoid. The old law used to make…
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Is Your Client’s Leased Property Depreciable? The IRS May Not Think So
The IRS has raised concerns about whether property that a taxpayer leases and sells can be depreciated. This is known as the “dual purpose property” issue. A recent IRS pronouncement stated that depreciation of leased property is allowed while it is being leased, but should be discontinued when it is available for sale or lease.…
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When Is a Manager a Managing Agent?
After October 1, 1999, Florida law governs how companies can be held responsible for punitive damages. A court case called Schropp v. Crown Eurocars, Inc. explained two ways a company can be held responsible. The first way is if the company was negligent in hiring or keeping an employee who caused harm. The second way…
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The 11th Circuit Standard for Determining the Priority Status of Tax Claims Involving Successive Ban
The 11th Circuit ruled that bankruptcy courts have the power to pause the three-year period for certain tax claims. This issue has been argued in various courts and has led to inconsistent results for debtors and the IRS. A key purpose of bankruptcy is to give a fresh start to honest debtors, but there are…
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Making Principal Invasions under Florida Law when an Interested Party is Serving as Trustee
Sometimes, a client may want to name a family member, like a spouse, to be in charge of a trust they’re setting up. In the past, there were tax concerns and worries about fairness when a family member was named as trustee. But now, there’s a law in Florida that helps address the tax issue.…
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Regulating Donor Advised Funds
President Bush’s tax reduction plan is not final yet and might take months to get approved. Whatever plan is adopted is likely to be controversial, but it will also contain provisions to protect the public. One of the agreed upon policies is that money meant for public good cannot be used for private benefit. Donor…
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Entity Selection Revisited: Will Gitlitz Provide Continuing Vitality for S Corporations?
Simply put, S corporations are not as popular as other types of entities in Florida for lawyers. However, a recent Supreme Court decision confirmed that S corporations have an advantage when it comes to certain tax consequences. The decision addressed whether shareholders of S corporations can increase their stock basis due to certain income, and…
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Evaluating and Making a Choice of No Entity for Real Property Held for Investment or Lease
A tax co-tenancy is an investment structure for real estate that offers some tax advantages. It doesn’t require a separate tax return, allows for separate like-kind exchanges, and provides a step-up in basis when a co-tenant dies. This can be a good option for investors who want to simplify their taxes and have more flexibility…
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Rethinking the Valuation of Family Limited Partnerships Holding Passive Assets
Appraisers have a hard time figuring out how much to discount the value of an interest in a family limited partnership (FLP) because FLPs are different from regular business entities. Non-family members wouldn’t want to buy into an FLP, so the discount could be as high as 80%. But owners wouldn’t want to sell at…
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Sunset and the Economic Growth and Tax Relief Reconciliation Act of 2001
In 2001, President Bush signed a tax law that made changes to the Internal Revenue Code. This law included several provisions, such as temporary tax cuts that would expire in 2011 unless new legislation was passed to make them permanent. The law also created a new 10 percent tax bracket and gradually reduced tax rates…
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The Economic Growth and Tax Relief Reconciliation Act of 2001: Estate, Gift, and Generation-skipping Transfer Tax Law Changes
The Economic Growth and Tax Relief Reconciliation Act of 2001 made temporary changes to the federal estate, gift, and generation-skipping transfer taxes. The act gradually increased the exemption amount for estate tax over eight years, eventually repealing the estate tax in 2010. However, the act also includes a sunset provision, which means the estate tax…
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The Continuing Evolution of the New Innocent Spouse Rules as Implemented and Interpreted by the Internal Revenue Service and the Courts, Part I
In 1998, new laws were made to help people who were innocent spouses and unfairly being held responsible for joint tax debts. These laws made it easier for innocent spouses to get relief from the IRS. This article will discuss the old rules, the new rules, and how the courts have interpreted them. Part II…