Category: Tax

Legislation, MSK Blog, Tax, Trusts & Estates

California State Board of Equalization Gutted

By Jeffrey D. Davine

The Taxpayer Transparency and Fairness Act of 2017

Established by the California Constitution in 1879, the California State Board of Equalization (the “BOE”) has been the agency charged with administering most of the taxes imposed by California.  In addition, the BOE was the tribunal whose function was to decide taxpayer appeals of decisions by the California Franchise Tax Board (the “FTB”) concerning income tax matters.  All of this is about to change with the passage of AB 102.  AB 102, which is named the “Taxpayer Transparency and Fairness Act of 2017” (the “Act”), was signed into law by Governor Brown on June 27th.  The Act effectively cuts the legs out from underneath the BOE.

Background

In March of this year, the California Department of Finance issued a derisive report asserting that the BOE misallocated tax revenues, used BOE employees to assist elected BOE members with political activities, and attempted to improperly affect BOE audits.  In response, and at the urging of the Governor, the Act was passed by the California Legislature. Continue reading “California State Board of Equalization Gutted”

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Legislation, MSK Blog, Tax, Trusts, Trusts & Estates

Proposed IRS Regulations Could End Most Valuation Discounts for Family Entities

By Allan Cutrow and Jeffrey Eisen

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.

  1. 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. Continue reading “Proposed IRS Regulations Could End Most Valuation Discounts for Family Entities”
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Tax, Trusts & Estates

4 Things Beneficiaries Who Receive IRS Form 8971’s Schedule A Must Know

By Jacey L. Hayes

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.) Continue reading “4 Things Beneficiaries Who Receive IRS Form 8971’s Schedule A Must Know”

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Tax, Trusts & Estates

IRS Confirms – No More Phone Calls (At Least Not Initially)

By Jeffrey D. Davine

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.  Continue reading “IRS Confirms – No More Phone Calls (At Least Not Initially)”

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Charitable Organizations, Estate Planning, Tax, Trusts & Estates

Valuation Rule for Early Termination of Net-Income Charitable Remainder Unitrusts

By David Wheeler Newman

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). Continue reading “Valuation Rule for Early Termination of Net-Income Charitable Remainder Unitrusts”

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Legislation, Tax, Trusts & Estates

Where Do You Think You’re Going?

By Jeffrey D. Davine

Maybe nowhere if you owe the IRS more than $50,000.

Congress recently passed H.R.22. It was signed by the President on December 4th and it became Public Law No: 114-94. The law is known as the “Fixing America’s Surface Transportation Act” (“FAST”).

For taxpayers who owe the IRS more than $50,000, the FAST Act might be more appropriately classified as the STOP Act because it may prevent them from leaving the country. Continue reading “Where Do You Think You’re Going?”

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Tax, Trusts & Estates

Regulations Modify Basis Rules for Term Interests in CRTs

By David Wheeler Newman

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. Continue reading “Regulations Modify Basis Rules for Term Interests in CRTs”

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Tax, Trusts & Estates

New Due Dates for Certain Entity Federal Income Tax Returns

By Robin C. Gilden

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. Continue reading “New Due Dates for Certain Entity Federal Income Tax Returns”

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Tax, Trusts & Estates

Don’t Get Scammed by the “IRS”

By Jeffrey D. Davine

Many people have either received, or know someone who has received, a phone call or an e-mail from someone claiming to be the “IRS” threatening the recipient with all kind of horrifying consequences if he or she doesn’t immediately send money to the IRS to satisfy an outstanding tax debt purportedly owed or provide the requestor with certain personal information. The threats range from the seizure of bank accounts or property to the police showing up at the recipient’s door waving handcuffs. Continue reading “Don’t Get Scammed by the “IRS””

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