International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Wednesday, October 2, 2019

IRS releases draft 2019 Forms 1065, 1120-S, and Schedules K-1

IR-2019-160: The IRS issued a draft of the tax year 2019 Form 1065, U.S. Return of Partnership Income (PDF), and its Schedule K-1, Partner’s Share of Income, Deductions, Credits, etc (PDF). The changes to the form and schedule aim to improve the quality of the information reported by partnerships both to the IRS and the partners of such entities.

For example, among the changes is the addition of a checkbox that allows a taxpayer to indicate if certain grouping or aggregation elections have been made. The changes also reflect updates consistent with changes resulting from the Tax Cuts and Jobs Act.

The additional information requested in the draft Form 1065 and Schedule K-1 is intended to aid the IRS in assessing compliance risk and identifying potential noncompliance while ensuring that compliant taxpayers are less likely to be examined.  The IRS believes these changes to Form 1065 and Schedule K-1 will improve tax administration in the partnership arena, an area of critical importance to the IRS.

In addition, certain similar changes can be found in the draft of the tax year 2019 Form 1120-S, U.S. Income Tax Return for an S Corporation (PDF), and its Schedule K-1 , Shareholder’s Share of Income, Deductions, Credits, etc.,(PDF) which were also released today.

Over the past decade and a half, tax filings by partnerships have seen an increase. For calendar year 2004, about 2.5 million partnerships filed Form 1065; by calendar year 2017, that number had risen to more than 4 million, an increase of 59 percent. The rise in filings by partnerships was considerably greater than the rise in filing by C-corporations and S-corporations, combined, which rose about 14 percent over the same timeframe. This increase in filings reinforces the IRS’s need to improve the data available for its compliance selection processes. 

The draft 2019 Form 1065 and Schedule K-1, as well as the draft Form 1120-S and its Schedule K-1, are near-final forms. The drafts are intended to give tax practitioners a preview of the changes and software providers the information they need to update systems before the final version of the updated forms and schedules are released in December.

The IRS is now accepting comments until Oct 30 at IRS.gov/FormComments.

October 2, 2019 in Tax Compliance | Permalink | Comments (0)

Sunday, August 25, 2019

Tax Treaties Scrutinized, Re-negotiated in Wake of Mauritius Leaks Investigation

ICIJ collaborated with 54 journalists from 18 countries, including first-of-a-kind partnerships with reporters in Tanzania, Mauritius and the United States. Journalists explored more than 200,000 records, ranging from tax advice from major audit firms to audio recordings.  Read the ICIJ findings here.

August 25, 2019 in Tax Compliance | Permalink | Comments (0)

Saturday, August 24, 2019

ICIJ Publishes List of Mauritian Companies Used by Conyers’ Corporate Clients

ICIJ is publishing details of more than 200 companies as part of the investigation – that the Mauritius office of Conyers Dill & Pearman assisted.


DOWNLOAD THE DATA

August 24, 2019 in Tax Compliance | Permalink | Comments (0)

Monday, August 19, 2019

IRS has begun sending letters to virtual currency owners advising them to pay back taxes, file amended returns; part of agency's larger efforts

he Internal Revenue Service has begun sending letters to taxpayers with virtual currency transactions that potentially failed to report income and pay the resulting tax from virtual currency transactions or did not report their transactions properly.

"Taxpayers should take these letters very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties," said IRS Commissioner Chuck Rettig. "The IRS is expanding our efforts involving virtual currency, including increased use of data analytics. We are focused on enforcing the law and helping taxpayers fully understand and meet their obligations."

The IRS started sending the educational letters to taxpayers last week. By the end of August, more than 10,000 taxpayers will receive these letters. The names of these taxpayers were obtained through various ongoing IRS compliance efforts.

For taxpayers receiving an educational letter, there are three variations: Letter 6173, Letter 6174 or Letter 6174-A, all three versions strive to help taxpayers understand their tax and filing obligations and how to correct past errors.

Taxpayers are pointed to appropriate information on IRS.gov, including which forms and schedules to use and where to send them.

Last year the IRS announced a Virtual Currency Compliance campaign to address tax noncompliance related to the use of virtual currency through outreach and examinations of taxpayers. The IRS will remain actively engaged in addressing non-compliance related to virtual currency transactions through a variety of efforts, ranging from taxpayer education to audits to criminal investigations.

Virtual currency is an ongoing focus area for IRS Criminal Investigation.

IRS Notice 2014-21 (PDF) states that virtual currency is property for federal tax purposes and provides guidance on how general federal tax principles apply to virtual currency transactions. Compliance efforts follow these general tax principles. The IRS will continue to consider and solicit taxpayer and practitioner feedback in education efforts and future guidance.

The IRS anticipates issuing additional legal guidance in this area in the near future.

Taxpayers who do not properly report the income tax consequences of virtual currency transactions are, when appropriate, liable for tax, penalties and interest. In some cases, taxpayers could be subject to criminal prosecution.

August 19, 2019 in Tax Compliance | Permalink | Comments (0)

Saturday, August 17, 2019

Will Amazon and Altera Lead to an En Banc Redux?

A Ninth Circuit panel handed down the Amazon[1] decision on Friday (August 16) in favor of Amazon. On June 7, a different Ninth Circuit panel handed down Altera[2] in favor of the IRS.

Let's take ‘it must be the politics of the judges’ off the table.  Altera’s panel included the majority decision by two President Bill Clinton appointees and a vigorous dissent by a President Barack Obama appointee.  Amazon’s three-judge unanimous decision panel includes an appointee each of President’s Clinton and Obama, and a President George W. Bush appointee who wrote it (and received a unanimous Senate confirmation vote).  

The salient issue of both cases, and the cost sharing arrangement (CSA) cases that precede them, is whether the IRS’ can disregard the behavior of third-party comparable transactions and if so, then which U.S. inputs may the IRS insist be included.   

In Altera (i.e. the 2003 CSA regulations version), based on its re-do of the 1995 CSA regulations applicable to Amazon, the IRS sought to include the sharing of the stock-based compensation (SBC) costs incurred by the U.S. corporation.  In Amazon, the IRS doubled down and required Amazon’s foreign subsidiary, for the privilege of building out Amazon throughout Europe, to pay for Amazon’s U.S. intangible assets of value, including “residual-business assets” such as Amazon’s culture of innovation, the value of Amazon’s workforce in place, Amazon’s going concern value, goodwill, and growth options. 

The Amazon Ninth Circuit panel stated:

The dispositive issue in this case is whether, under the 1994/1995 regulations, the “buy-in” required for “pre-existing intangible property” must include compensation for residual-business assets. To answer this legal question, we consider the regulatory definition of an “intangible,” the overall transfer pricing regulatory framework, the rulemaking history of the regulations, and whether the Commissioner’s position is entitled to deference under Auer v. Robbins, 519 U.S. 452 (1997). We agree with the tax court that the definition of an “intangible” in § 1.482-4(b) was not intended to embrace residual-business assets.

Today’s Amazon decision and June’s Altera decision are incongruent and certainly will lead the full Ninth Circuit en banc to reconsider these cases and establish judicial consistency.  This is not a matter of distinguishing decisions because Amazon was determined under 1995 cost sharing regulations versus Altera under the 2003 regulations.  The fundamental issue is whether the IRS is allowed to disregard its own regulations about the arm’s length standard, ignoring evidence of third-party comparable transactions, when it does not like the outcome. The Ninth Circuit called the IRS out when it stated:

“The Commissioner’s reliance on Xilinx thus suffers the same defect as his “made available” argument based on § 1.482-7A(g)—he assumes the very conclusion he’s aiming to prove. Although the regulatory provisions the Commissioner cites are consistent with his position, they do not provide independent support and they are likewise consistent with Amazon’s view.”

In Xilinx, the Ninth Circuit relied upon the arm’s length standard to determine the intragroup cost allocation.  Xilinx was more similar to Altera in that the IRS position hinged on the sharing of the employee stock option costs. In Xilinx, the Ninth Circuit held that that employee stock option (“ESO”) expenses in cost-sharing agreements related to developing intangible property are not subject to reallocation under the applicable CSA pre-2003 regulations.  The Court concluded that third parties jointly developing intangibles and transacting on an arm’s length basis would not include ESO expenses in a cost sharing agreement.  The IRS issued an Action on Decision whereby the IRS acquiesced in the Xilinx outcome but with two caveats.[3]  The acquiescence only applied for taxable years prior to August 26, 2003 and the IRS did not acquiesce to the Court’s analysis of why the IRS lost. The IRS explained its acquiescence

“The Service acquiesces in the result only for such ESOs because the significance of the Ninth Circuit’s opinion is mooted by the 2003 amendments…”

I think that the IRS arguments in Amazon are more of a stretch than it made in Xilinx and I do not think that its 2003 amended regulations mooted the Xilinx issue, much less the Amazon one. I appreciate that the IRS attorneys are doing what good litigators do (I am not a litigator, just a transfer pricing academic): generate innovative arguments and keep probing when the law and the facts don’t support the client’s position. I like the IRS’ proposals for accounting for the value of the residual business assets of Amazon. It makes business sense from an integrated group, managerial economics, perspective.  But not from a transfer pricing tax-regulatory framework perspective that purports to measure itself by an arm’s length reflection of 3rd party transactions. At least, not for the years in question in either case.

To come back to the title of this post, will Amazon and Altera be left to stand side-by-side, the appearance of a split intra-circuit? Or will these two cases be onward distinguished by other panels based on the date of the applicable regulations?  The Amazon panel, in a footnote at page 6, might appear to favor the appearance of harmony:

This case is governed by regulations promulgated in 1994 and 1995. In 2009, more than three years after the tax years at issue here, the Department of Treasury issued temporary regulations broadening the scope of contributions for which compensation must be made as part of the buy-in payment. … In 2017, Congress amended the definition of “intangible property” …. If this case were governed by the 2009 regulations or by the 2017 statutory amendment, there is no doubt the Commissioner’s position would be correct.

However, Altera is a 2003 CSA regulation case, and thus not meant to be included in the pronouncement of the footnote.

Amazon @ Tax Court Level

In a 207 page opinion the Tax Court ruled March 23, 2017 that the IRS’s adjustment with respect to Amazon.Inc buy-in payment for an intragroup cost-sharing agreement (CSA) is arbitrary, capricious, and unreasonable.[1] Not a surprising loss given the decisions against the IRS on CSAs: VERITAS[2] in 2009 and the following year Xilinx[3]  The Tax Court held that Amazon’s choice of the comparable uncontrolled transaction (CUT) method with appropriate upward adjustments in several respects is the best method to determine the requisite buy-in payment.  Moreover, the Court found that the IRS abused its discretion in determining that 100 percent of Technology and Content costs constitute Intangible Development Costs (IDCs), and that Amazon’s cost-allocation method with adjustments supplies a reasonable basis for allocating costs to IDCs.

The Court found that the IRS committed a series of errors in calculating the buy-in value of the preexisting intangibles. Amazon’s valuation was based upon a limited useful life of seven years or less for the preexisting intangibles whereas the IRS’ commissioned Horst Frisch Report assumed that the intangibles have a perpetual useful life.  Under Amazon’s approach, after decaying or “ramping down” in value over a seven-year period, Amazon’s website technology as it existed in January 2005 would have had relatively little value left by year-end 2011. But approximately 58 percent of the Horst Frisch Report proposed buy-in payment, or roughly $2 billion, is attributable to cash flows beginning in 2012 and continuing in perpetuity.

One does not need a Ph.D. in economics to appreciate the essential similarity between the DCF methodology that Dr. Hatch employed in Veritas and the DCF methodology that Dr. Frisch employed here. (Amazon.com Inc., Tax Court 2017 at 76.)

Amazon cited the court’s decision in VERITAS[6] as one of the basis that the IRS’ adjustment with respect to the buy-in payment was arbitrary, capricious, and unreasonable.  Like in VERITAS, in Amazon.com Inc the Tax Court again rejected the IRS’ approach of “aggregation” of the intangibles to determine valuation, holding it neither yields a reasonable means nor the most reliable one.[7]   Specifically, the Court rejected the business-enterprise approach of aggregating pre-existing intangibles which are subject to the buy-in payment and subsequently developed intangibles which are not. Secondly, the Court noted that the business-enterprise approach improperly aggregates compensable “intangibles” such as software programs and trademarks with residual business assets such as workforce in place and growth options that do not constitute “pre-existing intangible property” under the cost-sharing regulations in effect during 2005-2006.  Finally, in this regard, the Court stated that the IRS ignored its own regulations whereby even if the IRS determines that a realistic alternative exists, the Commissioner “will not restructure the transaction as if the alternative had been adopted by the taxpayer,” so long as the taxpayer’s actual structure has economic substance.[8]

Amazon.com Inc. (2017), VERITAS, Xilinx, Altera, and Medtronic involved restructurings that transferred ownership of intellectual property and technology intangibles from a United States parent to a foreign subsidiary.  VERITAS granted its Ireland subsidiary the right to use certain preexisting intangibles in Europe, the Middle East, Africa, and Asia pursuant to its intragroup CSA. As consideration for the transfer of preexisting intangibles, its Ireland subsidiary made a $166 million buy-in payment to VERITAS based upon a CUT to calculate the payment.  The IRS in a notice of deficiency chose a discounted cash flow income method with a resulting buy-in payment adjustment of $2.5 billion.  Moreover, the IRS argued that the buy-in payment must take into account access to VERITAS’ research and development team, marketing team, distribution channels, customer lists, trademarks, trade names, brand names, and sales agreements.  The Tax Court found the IRS’s determinations arbitrary, capricious, and unreasonable, and that instead VERITAS’ CUT method with appropriate adjustments is the best method to determine the requisite buy-in payment. The Tax Court found that the IRS’ discounted cash flow method was improperly used when the IRS valued the buy-in payment as if the intangibles had a perpetual useful life.  The IRS issued an ‘action on decision’ that it disagreed with the Court’s factual determination and reasoning and thus would disregard the decision.[9]

How Do 3rd Parties Transact?

In Altera I, the Tax Court held that Treasury failed to support its belief with any evidence in the administrative record that third parties would share ESO costs, failed to articulate why all CSAs should be treated identically, and failed to respond to significant comments from the industry received during the regulatory drafting process.  Thus the Court held that Treasury’s final CSA regulations invalid because these failed to satisfy the U.S. Administrative Procedural Act required ‘reasoned decision making’ standard.[11]

The Court in Altera reported the following regarding 3rd party transactions:

Several of the commentators informed Treasury that they knew of no transactions between unrelated parties, including any cost-sharing arrangement, service agreement, or other contract, that required one party to pay or reimburse the other party for amounts attributable to stock-based compensation.

AeA provided to Treasury the results of a survey of its members. AeA member companies reviewed their arm's-length codevelopment and joint venture agreements and found none in which the parties shared stock-based compensation. For those agreements that did not explicitly address the treatment of stock-based compensation, the  [companies reviewed their accounting records and found none in which any costs associated with stock-based compensation were shared.

AeA and PwC represented to Treasury that they conducted multiple searches of the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system and found no cost-sharing agreements between unrelated parties in which the parties agreed to share either the exercise spread or grant date value of stock-based compensation.

Several commentators identified arm's-length agreements in which stock-based compensation was not shared or reimbursed. For example, (1) AeA identified, and PwC provided, a 1997 collaboration agreement between Amylin Pharmaceuticals, Inc., and Hoechst Marion Roussel, Inc. (Amylin-HMR collaboration agreement), that did not include stock options in the pool of costs to be shared; (2) PwC identified a joint development agreement between the biotechnology company AgraQuest, Inc., and Rohm & Haas under which only "out-of-pocket costs" would be shared; (3) PwC identified a 1999 cost-sharing agreement between software companies Healtheon Corp. and Beech Street Corp. that expressly excluded stock options from the pool of expenses to be shared. Additionally, in written comments, and again at the November 20, 2002, hearing, Ms. Hurley offered to provide Treasury with more detailed information regarding several agreements involving AeA member companies, provided that the companies received adequate assurances that their proprietary information would not be disclosed.

FEI submitted model accounting procedures from the Council of Petroleum Accountant Societies (COPAS) for sharing costs among joint operating agreement partners in the petroleum industry. FEI noted that COPAS recommends that joint operating agreements should not allow stock  options to be charged against the joint account because they are difficult to accurately value.

AeA, SoFTEC, KPMG, and PwC cited the practice of the Federal Government, which regularly enters into cost-reimbursement contracts at arm's length. They noted that Federal acquisition regulations prohibit reimbursement of amounts attributable to stock-based compensation.

AeA, Global, and PwC explained that, from an economic perspective, unrelated parties would not agree to share or reimburse amounts related to stock-based compensation because the value of stock-based compensation is speculative, potentially large, and completely outside the control of the parties. SoFTEC provided a detailed economic analysis from economists William Baumol and Burton Malkiel reaching the same conclusion.

Finally, the Baumol and Malkiel analysis concluded that there is no net economic cost to a corporation or its shareholders from the issuance of stock-based compensation. Similarly, Mr. Grundfest asserted that a company's "decision to grant options to employees * * * does not change its operating expenses" and does not factor into its pricing decisions.

AeA, SoFTEC, KPMG, and PwC cited regulations that prohibit contractors from charging the Federal Government for stock-based compensation. Treasury responded to this evidence by stating that "[g]overnment contractors that are entitled to reimbursement for services on a cost-plus basis under government procurement law assume substantially less entrepreneurial risk than that assumed by service providers that participate in QCSAs". ... However, this distinction rings hollow in the face of other evidence submitted by commentators that showed that even parties to agreements in which the parties assume considerable entrepreneurial risk do not share stock-based compensation costs.

AeA, Global, and PwC explained that, from an economic perspective, unrelated parties would be unwilling to share stock-based compensation costs because the value of stock-based compensation is speculative, potentially large, and completely outside the control of the parties. SoFTEC submitted Baumol and Malkiel's detailed economic analysis reaching the same conclusion. We found similar evidence to be relevant in Xilinx. See Xilinx Inc. v. Commissioner, 125 T.C. at 61. Treasury never directly responded to this evidence. Instead, Treasury construed these comments as objections to Treasury's selection of the exercise spread method and the grant date method as the only available valuation methods. ... Treasury responded that these methods are consistent with the arm's-length standard and are administrable. See id. Treasury, however, never explained how these methods could be consistent with the arm's-length standard if unrelated parties would not share them or why unrelated parties would share stock-based compensation costs in any other way.

The Baumol and Malkiel analysis also concluded that there is no net economic cost to a corporation or its shareholders from the issuance of stock-based compensation. Treasury identified  this evidence in the preamble to the final rule but did not directly respond to it. ... Instead, the preamble states that "[t]he final regulations provide that stock-based compensation must be taken into account in the context of QCSAs because such a result is consistent with the arm's length standard." Treasury, however, never explained why unrelated parties would share  stock-based compensation costs--or how the commensurate-with-income standard could justify the final rule--if stock-based compensation is not an economic cost to the issuing corporation or its shareholders. 

History of Cost Sharing Arrangement Regulations

Multinational groups share intellectual property (“IP”) within the group through license agreements or a cost sharing arrangement.  A cost sharing arrangement involves related parties (the “controlled participants”) sharing among themselves the costs and risks associated with efforts to develop intangible property in return for each having an interest in any intangible property that may be produced (referred to in the 1995 QCSA Regulations, amended in 2003, as covered intangibles and in the 2009 Temporary Regulations and 2011 Final Regulations as cost shared intangibles.  The QCSA Regulations were issued in 1995 and liberalized in 1996. The QCSA regulations were tightened with respect to stock-based compensation in 2003, proposed regulations to replace the QCSA Regulations were issued in 2005, and a CSA-Audit Checklist was issued for existing CSAs which effectively required increased buy-in payments for pre-existing intangibles.[12] The tightening process continued with the CSA-CIP issued in September 2007 (withdrawn), the Temporary Regulations effective January 5, 2009, and the Final Regulations effective December 16, 2011.  The CSA-CIP provided that certain transfer pricing methods (the Income Method and the Acquisition Price Method) which are similar to the specified transfer pricing methods, set forth in the Temporary Regulations and the Final Regulations would typically be the best methods under the QCSA Regulations, even though they constituted unspecified methods under the QCSA Regulations.

>My comments about the Nike case here<

[1] Amazon.Com, Inc. v. Comm’r, No. 17-72922 (9th Cir. Aug. 16, 2019). Available at http://cdn.ca9.uscourts.gov/datastore/opinions/2019/08/16/17-72922.pdf (accessed Aug. 16, 2019).

[2] Altera Corp. v Commr, __ F.3d. __ (9th Cir., June 7, 2019) (case no. 16-70496) [hereafter “Altera II”] reversing Altera Corp. v. Commr, 145 TC No 3 (July 27, 2015) [hereafter “Altera I”]. Available at http://cdn.ca9.uscourts.gov/datastore/opinions/2019/06/07/16-70496.pdf (accessed Aug. 16, 2019).

[3] IRS AOD 2010-03 (July 28, 2010). Available at https://www.irs.gov/pub/irs-aod/aod201003.pdf (accessed Aug. 16, 2019).

[1] Amazon.Com, Inc. v. Comm’r, 148 T.C. No. 8, Docket No. 31197-12, (March 23, 2017).  Available at https://www.ustaxcourt.gov/UstcInOp/OpinionViewer.aspx?ID=11148 (accessed March 23, 2017).  (Hereafter Amazon.com Inc. (2017)).

[2] Veritas Software Corp. v. Commissioner, 133 T.C. 297 (2009).

[3] Xilinx v. Comm’r, 598 F.3d 1191 (9th Cir. 2010).

[4] Altera v. Comm’r, 145 T.C. No. 3, Docket Nos. 6253-12, 9963-12 (July 27, 2015).

[5] Medtronic v. Comm’r, T.C. Memo. 2016-112, Docket No. 6944-11 (June 9, 2016).

[6] Veritas Software Corp. v. Commissioner, 133 T.C. 297 (2009).

[7] Amazon.com Inc. (2016) at 84.

[8] Amazon.com Inc. (2017)) at 84 referring to Sec. 1.482-1(f)(2)(ii)(A).

[9] IRS AOD 2010-05 (December 6, 2010). Available at https://www.irs.gov/pub/irs-aod/aod201005.pdf (accessed March 23, 2017).

[10] IRS AOD 2010-03 (July 28, 2010). Available at https://www.irs.gov/pub/irs-aod/aod201003.pdf (accessed March 23, 2017).

[11] Motor Vehicles Manufacturers Association v. State Farm, 463 U.S. 29 (1983).

[12] CSA-Audit Checklist is available at https://www.irs.gov/pub/irs-utl/tierisec482.pdf (accessed March 23, 2017).

August 17, 2019 in Tax Compliance | Permalink | Comments (0)

Friday, August 2, 2019

IRS Tax Data - Individual High Income Tax Returns

Individual High Income Tax Returns OneSheet, 2010 (PDF)
The OneSheet presents a project description, highlights of the data, and selected figures.

The Tax Reform Act of 1976 requires annual publication of data on individual income tax returns reporting income of $200,000 or more, including the number of such returns reporting no income tax liability and the importance of various tax provisions in making these returns nontaxable. The bulletin articles and related statistical tables present detailed data for these high income returns.


Statistical Tables

The following are available as Microsoft Excel® files. A free Excel viewer is available for download, if needed.

The tables are grouped into the following categories:

Returns With and Without U.S. Income Tax

 

Table 1 -- Number of Returns
Classified by: Size of Income Under Alternative Concepts
Tax Years: 2016 (XLS)  2015 (XLS)  2014 (XLS)  2013 (XLS)  2012 (XLS)  2011 (XLS)  2010 (XLS) 2009 (XLS)  2008 (XLS)  2007 (XLS)  2006 (XLS)  2005 (XLS)  2004 (XLS)  2003 (XLS)  2002 (XLS)  2001 (XLS)  2000 (XLS)  1999 (XLS)  1998 (XLS)  1997 (XLS)  1996 (XLS)  1995 (XLS)  1994 (XLS)  1993 (XLS)

 

Table 11 -- Number and Percentages of Returns
Classified by: Effective Tax Rate and Size of Income Under Alternative Concepts
Tax Years: 2016 (XLS)  2015 (XLS)  2014 (XLS)  2013 (XLS)  2012 (XLS)  2011 (XLS)  2010 (XLS) 2009 (XLS)  2008 (XLS)  2007 (XLS)  2006 (XLS)  2005 (XLS)  2004 (XLS)  2003 (XLS)  2002 (XLS)  2001 (XLS)  2000 (XLS)  1999 (XLS)  1998 (XLS)  1997 (XLS)  1996 (XLS)  1995 (XLS)  1994 (XLS)  1993 (XLS)
(Back to top)

Returns With and Without Worldwide Income Tax

Table 2 -- Number of Returns
Classified by: Size of Income Under Alternative Concepts
Tax Years: 2016 (XLS)  2015 (XLS)  2014 (XLS)  2013 (XLS)  2012 (XLS)  2011 (XLS)  2010 (XLS) 2009 (XLS)  2008 (XLS)  2007 (XLS)  2006 (XLS)  2005 (XLS)  2004 (XLS)  2003 (XLS)  2002 (XLS)  2001 (XLS)  2000 (XLS)  1999 (XLS)  1998 (XLS)  1997 (XLS)  1996 (XLS)  1995 (XLS)  1994 (XLS)  1993 (XLS)
Table 12 -- Number and Percentages of Returns
Classified by: Effective Tax Rate and Size of Income Under Alternative Concepts
Tax Years: 2016 (XLS)  2015 (XLS)  2014 (XLS)  2013 (XLS)  2012 (XLS)  2011 (XLS)  2010 (XLS) 2009 (XLS)  2008 (XLS)  2007 (XLS)  2006 (XLS)  2005 (XLS)  2004 (XLS)  2003 (XLS)  2002 (XLS)  2001 (XLS)  2000 (XLS)  1999 (XLS)  1998 (XLS)  1997 (XLS)  1996 (XLS)  1995 (XLS)  1994 (XLS)  1993 (XLS)
(Back to top)

Returns With and Without U.S. Income Tax and With Income of $200,000 or More Under Alternative Concepts

 

Table 3 -- Distribution of Returns
Classified by: Ratio of Adjusted Taxable Income to Income Per Concept
Tax Years: 2016 (XLS)  2015 (XLS)  2014 (XLS)  2013 (XLS)  2012 (XLS)  2011 (XLS)  2010 (XLS) 2009 (XLS)  2008 (XLS)  2007 (XLS)  2006 (XLS)  2005 (XLS)  2004 (XLS)  2003 (XLS)  2002 (XLS)  2001 (XLS)  2000 (XLS)  1999 (XLS)  1998 (XLS)  1997 (XLS)  1996 (XLS)  1995 (XLS)  1994 (XLS)  1993 (XLS)

 

Table 5 -- Income, Deductions, Credits, and Tax
Classified by: Tax Status
Tax Years: 2016 (XLS)  2015 (XLS)  2014 (XLS)  2013 (XLS)  2012 (XLS)  2011 (XLS)  2010 (XLS) 2009 (XLS)  2008 (XLS)  2007 (XLS)  2006 (XLS)  2005 (XLS)  2004 (XLS)  2003 (XLS)  2002 (XLS)  2001 (XLS)  2000 (XLS)  1999 (XLS)  1998 (XLS)  1997 (XLS)  1996 (XLS)  1995 (XLS)  1994 (XLS)  1993 (XLS)

 

Table 7 -- Number of Returns and Percentages
Classified by: Item With the Largest Tax Effect and Item With the Second Largest Tax Effect
Tax Years: 2016 (XLS)  2015 (XLS)  2014 (XLS)  2013 (XLS)  2012 (XLS)  2011 (XLS)  2010 (XLS) 2009 (XLS)  2008 (XLS) (XLS)  2007 (XLS)  2006 (XLS)  2005 (XLS)  2004 (XLS)  2003 (XLS)  2002 (XLS)  2001 (XLS)  2000 (XLS)  1999 (XLS)  1998 (XLS)  1997 (XLS)   1996 (XLS)  1995 (XLS)  1994 (XLS)  1993
(Back to top)

Returns Without U.S. Income Tax and With Income of $200,000 or More Under Alternative Concepts

 

Table 9 -- Number of Returns with Itemized Deductions, Credits, and Tax Preferences, as Percentages of Income
Tax Years: 2016 (XLS)  2015 (XLS)  2014 (XLS)  2013 (XLS)  2012 (XLS)  2011 (XLS)  2010 (XLS) 2009 (XLS)  2008 (XLS)  2007 (XLS)  2006 (XLS)  2005 (XLS)  2004 (XLS)  2003 (XLS)  2002 (XLS)  2001 (XLS)  2000 (XLS)  1999 (XLS)  1998 (XLS)  1997 (XLS)  1996 (XLS)  1995 (XLS)  1994 (XLS)  1993 (XLS)
(Back to top)

Returns With and Without Worldwide Income Tax and With Income of $200,000 or More Under Alternative Concepts

 

Table 4 -- Distribution of Returns
Classified by: Ratio of Adjusted Taxable Income to Income Per Concept
Tax Years: 2016 (XLS)  2015 (XLS)  2014 (XLS)  2013 (XLS)  2012 (XLS)  2011 (XLS)  2010 (XLS) 2009 (XLS)  2008 (XLS)  2007 (XLS)  2006 (XLS)  2005 (XLS)  2004 (XLS)  2003 (XLS)  2002 (XLS)  2001 (XLS)  2000 (XLS)  1999 (XLS)  1998 (XLS)  1997 (XLS)  1996 (XLS)  1995 (XLS)  1994 (XLS)  1993 (XLS)

 

Table 6 -- Income, Deductions, Credits, and Tax
Classified by: Tax Status
Tax Years: 2016 (XLS)  2015 (XLS)  2014 (XLS)  2013 (XLS)  2012 (XLS)  2011 (XLS)  2010 (XLS) 2009 (XLS)  2008 (XLS)  2007 (XLS)  2006 (XLS)  2005 (XLS)  2004 (XLS)  2003 (XLS)  2002 (XLS)  2001 (XLS)  2000 (XLS)  1999 (XLS)  1998 (XLS)  1997 (XLS)  1996 (XLS)  1995 (XLS)  1994 (XLS)  1993 (XLS)

 

Table 8 -- Number of Returns and Percentages
Classified by: Item With the Largest Tax Effect and Item With the Second Largest Tax Effect
Tax Years: 2016 (XLS)  2015 (XLS)  2014 (XLS)  2013 (XLS)  2012 (XLS)  2011 (XLS)  2010 (XLS) 2009 (XLS)  2008 (XLS)  2007 (XLS)  2006 (XLS)  2005 (XLS)  2004 (XLS)  2003 (XLS)  2002 (XLS)  2001 (XLS)  2000 (XLS)  1999 (XLS)  1998 (XLS)  1997 (XLS)  1996 (XLS)  1995 (XLS)  1994 (XLS)  1993 (XLS)
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Returns Without Worldwide Income Tax and With Income of $200,000 or More Under Alternative Concepts

 

Table 10 -- Number of Returns with Itemized Deductions, Credits, and Tax Preferences, as Percentages of Income
Tax Years: 2016 (XLS)  2015 (XLS)  2014 (XLS)  2013 (XLS)  2012 (XLS)  2011 (XLS)  2010 (XLS) 2009 (XLS)  2008 (XLS)  2007 (XLS)  2006 (XLS)  2005 (XLS)  2004 (XLS)  2003 (XLS)  2002 (XLS)  2001 (XLS)  2000 (XLS)  1999 (XLS)  1998 (XLS)  1997 (XLS)  1996 (XLS)  1995 (XLS)  1994 (XLS)  1993 (XLS)
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Bulletin Articles

The Bulletin articles are in PDF format.  A free Adobe® reader is available for download, if needed.

High Income Tax Returns 
2016 (PDF)  2014 (PDF)  2013 (PDF)  2012 (PDF)  2011 (PDF)  2010 (PDF)  2009 (PDF)  2008 (PDF)  2007 (PDF)  2006  2005 (PDF)  2004  2003 (PDF)  2002  2001 (PDF)  2000  1999 (PDF)  1998 (PDF)  1997 (PDF)  1996 (PDF)  1995 (PDF)  1994 (PDF)  1993 (PDF)

August 2, 2019 in Tax Compliance | Permalink | Comments (0)

Thursday, July 25, 2019

ICIJ breaks ground again: Mauritius Leaks! 200,000 files from Conyers Law Firm Analyzed

ICIJ has published a series of articles analyzing 200,000 files, Mauritius Leaks exposing Western corporations, High Net Wealth Individuals, Fund Managers, and African oligarchs.

  • New leak reveals how multinational companies used Mauritius to avoid taxes in countries in Africa, Asia, the Middle East and the Americas
  • Law firm Conyers Dill & Pearman and major audit firms, including KPMG, enabled corporations operating in some of the world’s poorest nations to exploit tax loopholes
  • A private equity push into Africa backed by anti-poverty crusader and rock star Bob Geldof benefited from Mauritius’ treaties that divert tax revenue away from Uganda and elsewhere
  • Multi-billion dollar U.S. companies Aircastle and Pegasus Capital Advisers cut taxes through confidential contracts, leases and loans involving Mauritius and other tax havens
  • Officials from countries in Africa and Southeast Asia told ICIJ that tax treaties signed with Mauritius had cost them greatly and that renegotiating them was a priority

Read ICIJs expose here

July 25, 2019 in Tax Compliance | Permalink | Comments (0)

Wednesday, July 24, 2019

Nike State Aid case analysis: Would you pay $100 for a canvas sneaker designed the 20's?

Where does the residual value for "Just Do it" and the 'cool kids' retro branding of All Stars belong? I have received several requests in the U.S. about my initial thoughts on the EU Commission’s 56-page published (public version) State Aid preliminary decision with the reasoning that The Netherlands government provided Nike an anti-competitive subsidy via the tax system.  My paraphrasing of the following EU Commission statement [para. 87] sums up the situation:

The Netherlands operational companies are remunerated with a low, but stable level of profit based on a limited margin on their total revenues reflecting those companies’ allegedly “routine” distribution functions. The residual profit generated by those companies in excess of that level of profit is then entirely allocated to Nike Bermuda as an alleged arm’s length royalty in return for the license of the Nike brands and other related IP”

The question that comes to my mind is: "Would I pay $100 for a canvas sneaker designed the 20's that I know is $12 to manufacture, distribute, and have enough markup for the discount shoe store to provide it shelf space?" My answer is: "Yes, I own two pair of Converse's Chuck Taylor All Stars." So why did I spend much more than I know them to be worth (albeit, I wait until heavily discounted and then only on clearance).  From a global value chain perspective: "To which Nike function and unit does the residual value for the 'cool kids' retro branding of All Stars belong?"

infograph

U.S. international tax professionals operating in the nineties know that The Netherlands is a royalty conduit intermediary country because of its good tax treaty system and favorable domestic tax system, with the intangible profits deposited to take advantage of the U.S. tax deferral regime that existed until the TCJA of 2017 (via the Bermuda IP company).  Nike U.S., but for the deferral regime, could have done all this directly from its U.S. operations to each country that Nike operates in.  No other country could object, pre-BEPs, because profit split and marketing intangibles were not pushed by governments during transfer pricing audits.

The substantial value of Nike (that from which its profits derive) is neither the routine services provided by The Netherlands nor local wholesalers/distributors.  The value is the intangible brand created via R&D and marketing/promotion.  That brand allows a $10 – $20 retail price sneaker to sell retail for $90 – $200, depending on the country.  Converse All-Stars case in point.  Same  $10 shoe as when I was growing up now sold for $50 – $60 because Converse branded All-Stars as cool kid retro fashion.

Nike has centralized, for purposes of U.S. tax deferral leveraging a good tax treaty network, the revenue flows through NL.  The royalty agreement looks non-traditional because instead of a fixed price (e.g. 8%), it sweeps the NL profit account of everything but for the routine rate of return for the grouping of operational services mentioned in the State Aid opinion. If Nike was an actual Dutch public company, or German (like Addidas), or French – then Nike would have a similar result from its home country base because of the way its tax system allows exemption from tax for the operational foreign-sourced income of branches.  [Having worked back in the mid-nineties on similar type companies that were European, this is what I recall but I will need to research to determine if this has been the case since the nineties.]

I suspect that when I research this issue above that the NL operations will have been compensated within an allowable range based on all other similar situated 3rd parties.  I could examine this service by service but that would require much more information and data analysis about the services, and lead to a lesser required margin by Nike. The NL functions include [para 33]: “…regional headquarter functions, such as marketing, management, sales management (ordering and warehousing), establishing product pricing and discount policies, adapting designs to local market needs, and distribution activities, as well as bearing the inventory risk, marketing risk and other business risks.”

By example, the EU Commission states in its initial Nike news announcement:

Nike European Operations Netherlands BV and Converse Netherlands BV have more than 1,000 employees and are involved in the development, management and exploitation of the intellectual property. For example, Nike European Operations Netherlands BV actively advertises and promotes Nike products in the EMEA region, and bears its own costs for the associated marketing and sales activities.

Nike’s internal Advertising, Marketing, and Promotion (AMP) services can be benchmarked to its 3rd party AMP providers.  But by no means do the local NL AMP services rise to the level of Nike’s chief AMP partner (and arguably a central key to its brand build) Wieden + Kennedy (renown for creating many industry branding campaigns but perhaps most famously for Nike’s “Just Do it” – inspired by the last words of death row inmate Gary Gilmore before his execution by firing squad).

There is some value that should be allocated for the headquarters management of the combination of services on top of the service by service approach.  Plenty of competing retail industry distributors to examine though.  If by example the profit margin range was a low of 2% to a high of 8% for the margin return for the combination of services, then Nike based on the EU Commission’s public information falls within that range, being around 5%.

The Commission contends that Nike designed its transfer pricing study to achieve a result to justify the residual sweep to its Bermuda deferral subsidiary.  The EU Commission states an interesting piece of evidence that may support its decision [at para 89]: “To the contrary, those documents indicate that comparable uncontrolled transactions may have existed as a result of which the arm’s length level of the royalty payment would have been lower…”.  If it is correct that 3rd party royalty agreements for major brand overly compensate local distributors, by example provide 15% or 20% profit margin for local operations, then Nike must also.  [I just made these numbers up to illustrate the issue]

All the services seem, on the face of the EU Commission’s public document, routine to me but for “adapting designs to local market needs”.  That, I think, goes directly to product design which falls under the R&D and Branding.  There are 3rd parties that do exactly this service so it can be benchmarked, but its value I suspect is higher than by example ‘inventory risk management’.  We do not know from the EU document whether this ‘adapting product designs to local market’ service was consistent with a team of product engineers and market specialists, or was it merely occasional and outsourced.  The EU Commission wants, like with Starbucks, Nike to use a profit split method.  “…a transfer pricing arrangement based on the Profit Split Method would have been more appropriate to price…”.  Finally, the EU Commission asserts [para. 90]: “…even if the TNMM was the most appropriate transfer pricing method…. Had a profit level indicator been chosen that properly reflected the functional analysis of NEON and CN BV, that would have led to a lower royalty payment…”.

But for the potential product design issue, recognizing I have not yet researched this issue yet, based on what I know about the fashion industry, seems rather implausible to me that a major brand would give up part of its brand residual to a 3rd party local distributor.  In essence, that would be like the parent company of a well-established fashion brand stating “Let me split the brand’s value with you for local distribution, even though you have not borne any inputs of creating the value”.  Perhaps at the onset of a startup trying to create and build a brand?  But not Nike in the 1990s.  I think that the words of the dissenting Judge in Altera (9th Cir June 2019) are appropriate:

An ‘arm’s length result is not simply any result that maximizes one’s tax obligations’.

The EU Commission obviously does not like the Bermuda IP holding subsidiary arrangement that the U.S. tax deferral regime allows (the same issue of its Starbucks state aid attack), but that does not take away from the reality that legally and economically, Bermuda for purposes of the NL companies owns the Nike brand and its associated IP.  The new U.S. GILTI regime combined with the FDII export incentive regime addresses the Bermuda structure, making it much somewhat less comparably attractive to operating directly from the U.S. (albeit still produces some tax arbitrage benefit).  Perhaps the U.S. tax regime if it survives, in combination with the need for the protection of the IRS Competent Authority for foreign transfer pricing adjustments will lead to fewer Bermuda IP holding subsidiaries and more Delaware ones.

My inevitable problem with the Starbucks and Nike (U.S. IP deferral structures) state aid cases is that looking backward, even if the EU Commission is correct, it is a de minimis amount (the EU Commission already alleged a de minimis amount for Starbucks but the actual amount will be even less if any amount at all).  Post-BEPS, the concept and understanding of marketing intangibles including brands is changing, as well as allowable corporate fiscal operational structures based on look-through (GILTI type) regimes. More effective in the long term for these type of U.S. IP deferral structures is for the EU Commission is to spend its compliance resources on a go-forward basis from 2015 BEPS to assist the restructuring of corporations and renegotiation of APAs, BAPAs, Multilateral PAs to fit in the new BEPS reality.  These two cases seem more about an EU – U.S. tax policy dispute than the actual underlying facts of the cases.  And if as I suspect that EU companies pre-BEPS had the same outcome based on domestic tax policy foreign source income exemptions, then the EU Commission’s tax policy dispute would appear two-faced.

I’ll need to undertake a research project or hear back from readers and then I will follow up with Nike Part 2 as a did with Starbucks on this Kluwer blog previously.  See Application of TNMM to Starbucks Roasting Operation: Seeking Comparables Through Understanding the Market and then My Starbucks’ State Aid Transfer Pricing Analysis: Part II.  See also my comments about Altera:  An ‘arm’s length result is not simply any result that maximizes one’s tax obligations’.

Want to help me in this research or have great analytical content for my transfer pricing treatise published by LexisNexis? Reach out on profbyrnes@gmail.com

Prof. William Byrnes (Texas A&M) is the author of a 3,000 page treatise on transfer pricing that is a leading analytical resource for advisors.

July 24, 2019 in BEPS, Tax Compliance | Permalink | Comments (0)

Monday, July 22, 2019

Boosting the Value of IRA Planning Strategies After the Tax Cut Law

Advisors must continue effectively communicating with the client to ensure that popular IRA planning strategies are executed properly. Read our analysis here

July 22, 2019 in Tax Compliance | Permalink | Comments (0)

Tuesday, July 2, 2019

Taxpayer First Act

This bill revises requirements for the Internal Revenue Service (IRS) regarding its organizational structure, customer service, enforcement procedures, cybersecurity and identity protection, management of information technology, and use of electronic systems.

The bill includes provisions that

  • establish the IRS Independent Office of Appeals to resolve federal tax controversies without litigation;
  • require the IRS to develop comprehensive customer service and IRS personnel training strategies;
  • exempt certain low-income taxpayers from payments required to submit an offer-in-compromise;
  • modify certain tax enforcement procedures and requirements;
  • establish requirements for responding to Taxpayer Advocate Directives;
  • establish a Community Volunteer Income Tax Assistance Matching Grant Program;
  • require the IRS to give public notice of the closure of taxpayer assistance centers;
  • modify procedures for whistle-blowers;
  • establish requirements for cybersecurity and identity protection;
  • provide notification to taxpayers of suspected identity theft;
  • require the appointment of a Chief Information Officer who shall develop and implement a multiyear strategic plan for IRS information technology needs;
  • modify requirements for managing IRS information technology;
  • expand electronic filing of tax returns;
  • prohibit the rehiring of certain IRS employees who were removed for misconduct;
  • require mandatory e-filing by tax-exempt organizations and notice before revocation of tax-exempt status for failure to file; and
  • increase penalties for failure to file tax returns.

The bill also requires the IRS to implement

  • an Internet platform for Form 1099 filings,
  • a fully automated program for disclosing taxpayer information for third-party income verification using the Internet, and
  • uniform standards and procedures for accepting electronic signatures.

July 2, 2019 in Tax Compliance | Permalink | Comments (0)

Friday, June 28, 2019

Should Tax Hikes Need Supermajority Vote? Bloink & Byrnes Go Thumb to Thumb

read the debate transcript here: A Democratic leader's proposal is meant to protect lower- and middle-income taxpayers.

June 28, 2019 in Tax Compliance | Permalink | Comments (0)

Wednesday, June 26, 2019

IRS’ New 199A Real Estate Safe Harbor: Bloink & Byrnes Go Thumb to Thumb

read the full debate: Is the proposed Revenue Procedure that would provide a safe harbor for rental real estate businesses good?  

June 26, 2019 in Tax Compliance | Permalink | Comments (0)

Monday, June 24, 2019

Focus on 401(k)s: The NUA Tax Minimization Strategy by William Byrnes & Robert Bloink

With tax season drawing to a close, clients who are nearing retirement should take stock of the assets held within their 401(k)s while it is still early in the year to determine whether the potentially valuable net unrealized appreciation (NUA) tax minimization strategy might work for them in 2019 or the coming years. read about it here on ThinkAdvisor

June 24, 2019 in Tax Compliance | Permalink | Comments (0)

Sunday, June 23, 2019

Repeal SALT Cap, Raise Corporate Tax: Bloink & Byrnes Go Thumb to Thumb

read the full debate transcript here: Democrats have proposed increasing the corporate tax rate in order to offset a repeal of the controversial deduction cap.

June 23, 2019 in Tax Compliance | Permalink | Comments (0)

Saturday, June 22, 2019

Tax Reform Ruined Roth IRA Conversions, but Hope Exists by William Byrnes & Robert Bloink

Despite this, tax reform may have actually opened a huge window for clients looking to do Roth conversions while minimizing their tax liability for these conversions. The new tax rate system, combined with the general “moodiness” of the stock market of late, have created conditions that can make Roth IRA conversions attractive for an entirely new group of clients despite the inability to undo the transaction at a later date.  With proper planning, these clients may be able to benefit substantially from a Roth conversion strategy without even jumping income tax brackets.

June 22, 2019 in Tax Compliance | Permalink | Comments (0)

Thursday, June 20, 2019

Is the Financial Transaction Tax Just a ‘Crazy Democratic’ Idea? Bloink & Byrnes Go Thumb to Thumb

Bloink and Byrnes debate their opinions on ThinkAdvisor about the viability of the tax and the implications if this bill is passed.

House Democrats introduced a bill in March that would impose a tax on certain types of financial transactions, including a 0.1% tax on various securities transactions, including sales of stocks, bonds and derivatives. While the bill would generally exempt initial securities issuances and short-term debt from the tax, most securities transactions and taxpayers who invest would be subject to the tax at some point.

We asked Professors Robert Bloink and William Byrnes, who write for ALM’s Tax Facts and hold opposing political views, to share their opinions about the viability of the financial transactions tax and the potential implications if this bill is passed.  Read the debate on ThinkAdvisor here

June 20, 2019 in Tax Compliance | Permalink | Comments (0)

Wednesday, June 19, 2019

Should Out-of-State Trusts Be Taxed: Debate between William Byrnes and Robert Bloink

read the debate on ThinkAdvisor here: The Supreme Court will decide if taxing out-of-state trusts is overkill or a way to keep the wealthy from dodging taxes.

The US Supreme Court in April agreed to resolve a conflict stemming from a case involving whether a state can constitutionally tax a trust when a trust beneficiary resided within the state, but did not receive any income from the trust.  In the case of North Carolina Department of Revenue v. Kimberly Rice Kaestner, the North Carolina Supreme Court ruled for the beneficiary in that case, finding that the North Carolina state-level tax on the New York-based trust was unconstitutional because it violated the due process clause of the U.S. constitution.

Currently, 11 states tax trusts based on the residency of trust beneficiaries—although nearly all states tax trust income once the beneficiary actually receives that income.  Courts in various states have disagreed over whether the residency-based tax is constitutional.

We asked Professors Robert Bloink and William Byrnes, who write for ALM’s Tax Facts and hold opposing political views, to share their opinions as to whether the US Supreme Court should affirm the state court decision, and the potential implications of the Court’s final decision.

read the debate on ThinkAdvisor here

June 19, 2019 in Tax Compliance | Permalink | Comments (0)

Saturday, June 15, 2019

5-Nation Tax Crime Group Cites Progress In Joint Crackdown (read it on 2019 Law360's Tax Authority)

The heads of a five-nation group that's cracking down on transnational tax crimes said Wednesday that their first year of collaboration has sparked new cases and sped development of existing ones but hasn't yet led to a prosecution.  

However, group members - from the U.S., Canada, the United Kingdom, the Netherlands and Australia - said they have been involved in over 50 investigations involving "sophisticated international enablers of tax evasion, including a global financial institution and its intermediaries who facilitate taxpayers to hide their income and assets."

read the full story on Lexis' Law360 Tax Authority: 2019 Law360 156-166

June 15, 2019 in Tax Compliance | Permalink | Comments (0)

Friday, June 14, 2019

Unpacking IRS’ 199A Regs: Final vs. Proposed Rules

While the final regulations largely follow the proposed regulations, they do contain some twists that may come as a surprise to clients who are currently in the midst of calculating their 2018 tax liability. Importantly, small business clients have the surprise option of relying on either the proposed regulations or the final regulations in finishing their 2018 taxes—although the final regulations become mandatory beginning in 2019. Despite this, clients must take an all-or-nothing approach to choosing which set of regulations to follow for 2018, making it important that they understand the important aspects of both the proposed and the final regulations now.  The analysis is here

June 14, 2019 in Tax Compliance | Permalink | Comments (0)

Thursday, June 13, 2019

Section 1035-Your Way Out of Obsolete Life Insurance Trusts by William Byrnes & Robert Bloink

The 2017 tax reform law doubled the estate tax exemption, to $11.4 million per person ($22.8 million per married couple) in 2019, meaning that, for all but the fortunate few clients, the estate tax itself may seem irrelevant. For some clients, dismantling existing life insurance trusts may be the smartest move—but not without considering both the repercussions of that approach and carefully planning for any continuing life insurance needs, where a tax-free replacement strategy may be key to safeguarding future financial protection.

June 13, 2019 in Tax Compliance | Permalink | Comments (0)