On August 2, 2016, the Treasury Department issued proposed regulations under Section 2704 of the Internal Revenue Code. The proposed regulations, if adopted in their current form, essentially will eliminate all minority discounts or lack of control discounts and lack of marketability discounts for transfers between family members of interests in family-controlled businesses.
The proposed regulations accomplish this result in complex ways. But here are some points to consider as you decide whether to act quickly.
The regulations are “proposed.” This means that they are not currently in effect. The Internal Revenue Service has scheduled a public hearing on the regulations in Washington, DC on December 1, 2016. They take effect when the IRS announces that they are “final.” Thus, these regulations could take effect shortly after the hearing, sometime in 2017, years from now, or never (in theory). The IRS may change the regulations in meaningful ways before adopting them as final. (more…)
When someone inherits assets, he or she is supposed to have a tax basis in the inherited asset for income tax purposes equal to the “fair market value” of the inherited asset at the date of death. The IRS is concerned that it is losing billions of dollars due to improper basis reporting for inherited assets: that is, the executor reports the assets on the estate tax return at one value, and then when those same assets are later sold, exchanged, or transferred by the beneficiary, the beneficiary reports the basis at a higher value. To tackle this concern, all estates which file an estate tax return after July 31, 2015, also must now file, within 30 days after filing the estate tax return, new IRS Form 8971, and provide a Schedule A to each beneficiary. A beneficiary’s Schedule A must also be given to the beneficiary within the same time frame. (Note that for all estate tax returns filed between August 1, 2015 and May 31, 2016, the due date of Form 8971 was postponed to June 30, 2016, leading to a flood of recent filings.) (more…)
It has been somewhat of an epidemic. Lots of taxpayers have received calls from persons who claim to be from the IRS and who assert that the recipient of the call has an outstanding federal tax liability. The caller then threatens some kind of draconian penalty (e.g., the police will be immediately dispatched to arrest the recipient of the call) unless immediate payment is made by wire transfer, debit card, or some other mechanism whereby the caller can extort some quick money. (more…)
Under Internal Revenue Code § 664, a qualified charitable remainder unitrust each year during its term distributes to a non-charitable beneficiary a fixed percentage (5% or greater) of the value of trust assets, determined annually (the unitrust amount). Assets remaining in the CRUT at the end of its term are distributed to charity. Section 664(d) provides that a qualified CRUT may limit distributions to the non-charitable beneficiary to the lesser of the unitrust amount or trust income under fiduciary accounting principles (a net-income CRUT, or NICRUT), and may pay the non-charitable beneficiary any trust income in excess of the unitrust amount to the extent that aggregate distributions in prior years were less than the aggregate unitrust amounts as a result of the net-income limitation (a net-income with make-up CRUT, or NIMCRUT). (more…)
On December 18, 2015, the IRS released draft Form 8971, Information Regarding Beneficiaries Acquiring Property from a Decedent. Once Form 8971 is finalized, executors who are required to file estate tax returns will complete it and provide it to the IRS and beneficiaries in compliance with the new basis reporting laws passed earlier this year.
The Numbers Are In… er, Projected: Increases to the Estate, Gift, and Generation-Skipping Transfer Tax Exclusions.
While the official numbers will not be released until later this year, the following projections are unlikely to change since they are based on the average Consumer Price Index for the 12 month period ending August 31, 2015. (more…)
The Treasury recently issued final regulations that modify the rules for determining the basis of an income interest in a charitable remainder trust in order to curtail a perceived abuse of the general rules. To understand the perceived abuse, and the mechanics of these regulations, it is helpful to understand the context in which the issue arises. (more…)
The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the “Act”) was signed into law by President Obama on July 31, 2015. Under the Act, the due dates for certain federal income tax returns were changed.
For tax years beginning after December 31, 2015, the due date for federal income tax returns for Subchapter S corporations and partnerships (including limited liability companies treated as partnerships for income tax purposes) with calendar year ends will be March 15th following the close of the calendar year, and the 15th day of the third month following the close of the fiscal year, for fiscal year partnerships and S corporations. (more…)
On July 31, 2015, the laws addressing the basis of property acquired from a decedent were revised. Among other things, the new laws require an executor to provide to the IRS and to each estate beneficiary a statement identifying the value of each interest in property received by a beneficiary. (more…)