Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

A Member of the Law Professor Blogs Network

Friday, April 17, 2015

Congressmen Make Their Case for The Repeal of Estate Tax

Seal_of_the_United_States_Congress.svgIn an opinion piece Rep. Bill Flores and Sen. John Thune argue that it is time for the abolishment of the estate tax. The two congressman assert that it is small business owners and farmers that are penalized by this tax not the handful of super wealthy that are more commonly associated with the legislation. They also argue that the tax creates a drag on the economy and would create 139,000 new jobs if repealed. However, none of their predictions will likely be tested soon as there exist significant opposition from the White House which could scuttle the bill.

See Bill Flores & John Thune, Time For The Estate Tax To Die, USA Today, Apr. 16, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.

April 17, 2015 in Current Affairs, Estate Planning - Generally, Income Tax, New Legislation | Permalink | Comments (0) | TrackBack (0)

House of Representatives Votes to Repeal Estate Tax

The CapitolIn what could be a massive shift in tax law, the US House voted to repeal the estate tax 240-179 with significant Republican support. The change would result in the total abolishment of the tax and preserve the stepped up basis rule which is already in the code. However, this bill will face significant opposition both in the Senate and with President Obama who has already indicated he does not agree with the change. No matter what ultimately happens, this act will certainly bring out the political big guns in the foreseeable future.

See Ashlea Ebeling, House Votes 240-179 To Repeal Estate Tax, Forbes, Apr. 16, 2015.

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.

April 17, 2015 in Current Affairs, Estate Planning - Generally, Estate Tax, Income Tax, New Legislation | Permalink | Comments (0) | TrackBack (0)

Estate of Texas Millionaire Hit with Multi-Billion Dollar Tax Bill

Charles WylyThe estate of Dallas millionaire Charles Wyly has been assessed a $2 billion claim on back taxes by the IRS. The controversy arises over the income from a series of trust set up by Mr. Wyly in the well-known tax shelter the Isle of Man in the early 90’s. The Service claims the trust illegally hid income from 1992-2010 with most of the back taxes coming from interest and penalties. Sam Wyly, Charles’ brother, plans to fight the bill in Bankruptcy Court in order to reach global settlement agreement for a reduction in the amount owed.

See Mark Curriden, IRS Hits Sam Wyly, Late Brother's Estate with $3 Billion Tax Bill, Dallas Morning News, Apr 16, 2015.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

April 17, 2015 in Current Events, Income Tax, Trusts | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 15, 2015

Animal Rescue Charitable Deductions

Animal rescueEvery year, thousands of individuals volunteer their time and money to help animal-rescue organizations such as the Humane Society and the American Society for the Prevention of Cruelty to Animals (ASPCA).  When it comes to tax deductions for this noble work, the IRS has said that such expenditures are nondeductible personal expenditures, unless the rescuers show they incurred the expenses to further the efforts of charitable organizations.

Animal rescue volunteers can claim charitable deductions for the following outlays: animal food, medicines, litter boxes, pet dishes, cleaning supplies, garbage bags, paper towels, animal bedding, animal toys, veterinary fees, travel and some car costs.

See Julian Block, Charitable Deductions That Animal-Rescue Volunteers Can Write Off at Tax Time, Accounting Web, Apr. 13, 2015.

April 15, 2015 in Estate Planning - Generally, Income Tax | Permalink | Comments (0) | TrackBack (0)

Saturday, April 4, 2015

Transfer Stock for Retirement and Charity Using Trusts

6a00e008d9ca4a883401b7c761cd83970b-100wiAs business owners age they often plan for the disposition of their stock to fund retirement and provide money to charity after death. Through the use of a Charitable Remainder Trust a stockholder may provide themselves with income until death and leave the rest to charity all with a minimum of tax implications. This can be especially useful for corporations that are closely held as an Employee Stock Ownership Plan may be used to fund the trust and transfer ownership of the company to the next generation of management.

See Business Succession Plan Uses CRT and ESOP, Charitable Planning, Apr. 1, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.

April 4, 2015 in Estate Planning - Generally, Estate Tax, Income Tax, Trusts | Permalink | Comments (0) | TrackBack (0)

Thursday, March 26, 2015

Covering Your Basis

InvestmentWhen selling an asset such as a stock, you owe capital gains tax on the difference between the sale price and what you paid for it, which is your cost basis.  Yet, if you inherit certain assets, including marketable securities, you can “step up” their tax basis to whatever they were worth at the benefactor’s death.  This means highly appreciated inherited stock can be sold immediately with no capital gains, or later, when all the gains before you inherited are not counted.

There are several ways to minimize capital gains tax.  One includes making charitable donations.  For gifts of marketable securities to a public charity, donors are entitled to an income tax deduction for up to 30 percent of adjusted gross income if the stock is held for more than a year. 

Another tax-planning tool is to convert a Traditional IRA to a Roth.  Although you must pay income tax on the amount you are converting, after that no income tax is collected on distributions by you or your heirs.  Moreover, any withdrawals by you or your heirs do not get added to taxable income. 

Finally, married couples who live in a community property state have a basis advantage.  Most of what you acquire once you are married and living in a community property state, you and your spouse are each considered a half-owner.  Thus, when the first spouse dies, both halves of the property get a step up in basis, effectively minimizing capital gains tax if the surviving spouse sells the property.

See Deborah L. Jacobs, What Every Investor Needs to Know About Basis, Morningstar, March 25, 2015.

March 26, 2015 in Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax | Permalink | Comments (0) | TrackBack (0)

Monday, March 23, 2015

Tax Court Limits Charitable Deduction For Estate

GavelWhen Eileen Belmont died, the bulk of her estate was left to charity including a post-death cash distribution from her retirement plan. But a legal challenge by her brother caused the money to be used to defend the will but after the estate claimed a charitable tax deduction on the amount.

In Estate of Belmont v. Commissioner, the Tax Court denied the deduction because the amount had not been permanently set aside for future distribution to the charity. To be considered permanently set aside, the court stated, the possibility the money would not go to the charity must be “so remote as to be negligible.”  Since there were many indicators the money would be required to fend off the brother’s challenge the estate should have known the set aside would not be permanent and waited to make the deduction until a later taxable year.

See Jillian Merns, Estate Loses Out On Charitable Deduction, Wealth Management, March 16, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.

March 23, 2015 in Estate Administration, Income Tax, New Cases, Wills | Permalink | Comments (0) | TrackBack (0)

Thursday, March 19, 2015

Avoiding the IRA "Double Tax"

Tax CutWhen an IRA account holder dies, their estate may be facing the "double tax" of both federal income and estate taxes on the IRA, as well as possible state income and estate taxes. A possible solution to the heavy taxes is designating a charity as the beneficiary.

See  Russell E. Towers, How to Eliminate the "Double Tax" at Death, Life Health Pro, March 16, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.

March 19, 2015 in Estate Planning - Generally, Estate Tax, Income Tax, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 18, 2015

Article on Bitcoin

Sasha KleinSasha A. Klein (Sabadell Bank & Trust, Palm Beach, Florida) and Andrew R. Comiter (Comiter, Singer, Baseman & Braun, LLP, Palm Beach, Florida) recently published an article entitled, Bitcoin: Are You Ready for This Change for a Dollar?, 29 Probate & Property No. 2, 11 (March/April 2015).  Provided below is the introduction from the article:

Welcome to a world that includes virtual currency. Whether you are a skeptic or supporter, virtual currency is unavoidable. The most prominent virtual currency is bitcoin. On can't pass the water cooler without hearing the work "bitcoin"--from discussions on its fluctuating value, alleged identification of its creator, and collapse of the main exchange, to the likelihood of its success. Bitcoin continues to gain consumer confidence and become more accepted as a legitimate medium of exchange, resulting in the world's heightened interest, including that of the IRS. How will bitcoin be taxed in the United States? This article provides an overview of the taxation of bitcoin under Notice 2014-21 (the "Notice"), issued by the IRS on March 25, 2014, and the resulting tax issues. Before discussing the tax implications, this article first provides background on bitcoin.

March 18, 2015 in Articles, Income Tax | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 17, 2015

Court Finds for Taxpayer in IRS Dispute Over Virgin Island Tax Credits

Beyer Blog IRS LogoThe estate of a taxpayer that had transferred his residency to the U.S. Virgin Islands has won a victory concerning claimed benefits under an economic development tax incentive program.  The case arose when the IRS issued a deficiency notice in 2010 for the returns of the taxpayer from 2002-2004.

In Estate of Sanders v. Commissioner, the Tax Court held that the Service failed to issue notice, settle the matter administratively, or file for an extension within the three year statutory period and was barred from reexamining the old returns. This decision could bring relief to many Virgin Islands residents who took advantage of tax breaks in the early 2000’s and did not have their returns reexamined with the limitation period. However, this respire might be brief as the IRS will likely litigate potentially fraudulent claims to island residence rather than any specific transaction.

See Josh Ungerman, IRS Expected To Issue Hundreds of Deficiency Notices TO USVI Residents, Forbes, Feb. 16, 2015.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this case to my attention.

March 17, 2015 in Current Affairs, Income Tax, New Cases | Permalink | Comments (0) | TrackBack (0)