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William Byrnes (Texas A&M) tax & compliance articles

Archive for September, 2019

Byrnes & Bloink’s TaxFacts Intelligence Weekly – Actionable Analysis for Financial Advisors

Posted by William Byrnes on September 20, 2019


2019’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

Texas A&M University School of Law has launched its International Tax online curriculum for graduate degree candidates. Admissions is open for Spring (January) semester for the transfer pricing courses.  Texas A&M University is a public university of the state of Texas and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). 

IRS Releases Guidance on Failure to Cash Distribution Checks

The IRS has released guidance providing that when a check for a fully taxable distribution from a qualified plan is mailed to a plan participant, but not cashed, it is considered to have been “actually distributed” from the plan and is taxable to the participant in the year of distribution. Further, the failure to cash the check did not change the plan administrator’s withholding obligations with respect to the distribution and did not change the obligation to report the distribution on Form 1099-R (assuming the distribution exceeds the applicable reporting threshold). Despite these findings, the IRS was careful to note that it continues to consider the issue of uncashed distribution checks in situations involving missing participants. For more information on the withholding requirements that may apply to qualified plan distributions, visit Tax Facts Online. Read More

December 31 Opportunity Zone Deadline Fast Approaching

Investors who are considering an opportunity zone investment should be advised that now is the time to take advantage of the new rules in order to maximize the potential for deferral. December 31, 2019 is the final day that investors can elect to roll their gains into opportunity zone funds in order to obtain the full 15% reduction in the amount of the deferred gain. Generally, taxpayers can defer capital gains tax by rolling gains into a qualified opportunity fund (gains may be deferred until December 31, 2026). If the investment is held for at least seven years, the taxpayer will receive a 15% reduction in the amount of the deferred gain (so that the funds are invested for a full seven years). In turn, the fund has 180 days to acquire qualified property once the taxpayer invests the gain. Because gain on the sale of Section 1231 property is not determined until year-end, taxpayers wishing to roll over Section 1231 gain should be advised to track 1231 sales carefully to determine whether such sales will result in gain (treated as long-term capital gain) or loss (treated as ordinary loss). For more information on the opportunity zone rules, visit Tax Facts Online. Read More

IRS Extends Nondiscrimination Relief for Closed Defined Benefit Plans

Many employers who have closed defined benefit plans to new participants have continued to allow groups of “grandfathered” employees to earn benefits under the closed defined benefit plans. Because of this, many of these plans have had difficulties meeting the applicable nondiscrimination requirements as more of these grandfathered employees become “highly compensated” over time. Proposed regulations published in 2016 contain special rules to make it easier for these plans to satisfy the nondiscrimination requirements and Notice 2014-5 was released to provide temporary relief if certain conditions are satisfied. The proposed regulations modify the rules applicable to defined benefit replacement allocations (DBRAs) that allow some allocations to be disregarded when determining whether a defined contribution plan has a broadly available allocation rate in order to allow more allocations to satisfy the rules. Further, the regulations provide a special nondiscrimination testing rule that can apply if a benefit or plan feature is only made available to grandfathered employees in a closed plan. In anticipation of the finalization of these regulations, Notice 2019-49 expands the nondiscrimination relief to plan years beginning before 2021, so long as the conditions in Notice 2014-5 are satisfied. For more information the nondiscrimination rules, visit Tax Facts Online. Read More

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TaxFacts Intelligence Weekly of September 13, 2019 – Actionable Analysis for Financial Advisors

Posted by William Byrnes on September 14, 2019


2019’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

Texas A&M University School of Law has launched its International Tax online curriculum for graduate degree candidates. Admissions is open for Spring (January) semester for the transfer pricing courses.  Texas A&M University is a public university of the state of Texas and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). 

IRS PLR Approving CLAT Structure Provides Option for High-Net Worth Estate Planning

The IRS has recently released a private letter ruling approving a charitable lead annuity trust (CLAT) structure that may prove useful in estate planning for high net worth clients. In the case at issue, the taxpayer proposed to set up a revocable trust where the trust would first pay certain debts and expenses and then distribute the trust assets to other individuals and trusts if the taxpayer predeceased his spouse. Should the spouse die first, the trust would have paid the relevant debts, made distributions to individuals and trusts and then transfer the remaining assets to the CLAT, which would then pay a 5% annuity to the charity based upon the initial trust’s fair market value. The IRS approved this structure even though in most cases, the CLAT must have a payout stream that lasts a predetermined number of years to qualify for tax preferential treatment (deduction of the present value of annuity payments for the estate). Here, the IRS determined that it would eventually be possible to calculate that specified payout term once the CLAT was funded from the revocable trust after payment of debts, expenses and distributions to other beneficiaries. For more information on charitable lead trusts, visit Tax Facts Online. Read More

Recent Ninth Circuit Case Highlights Importance of Disclosing Transactions Substantially Similar to “Listed Transactions”

The IRS identifies certain types of transactions as having the potential for tax avoidance, and thus requires that taxpayers disclose these transactions affirmatively in order to avoid penalties. The IRS can impose penalties for failing to disclose a listed transaction, but also has authority to impose penalties for failure to disclose a transaction that it deems to be “substantially similar” to a transaction that is specifically listed. The case at hand involved a situation where a company participated in a group life insurance term plan in order to fund cash-value life insurance that the sole shareholder and employee owned. While the structure at issue was not specifically listed, the IRS determined that the transaction was substantially similar to other listed transactions and imposed a $10,000 penalty for every year that the taxpayer failed to disclose the transaction. For more information on the exemptions that may apply in cases involving prohibited transactions, visit Tax Facts Online. Read More

Reminder to Clients: 401(k) Exceptions for Early Withdrawal Liability Differ From IRAs

Most clients understand that they may be entitled to claim an exemption from the generally applicable 10 percent early withdrawal penalty if retirement accounts are tapped prior to age 591/2 where the funds are used for certain specified purposes. However, a recent Tax Court case highlights the need for clients to understand that the exceptions vary depending upon whether the account is a 401(k) or an IRA. In this case, the taxpayer used 401(k) account funds withdrawn early to fund the purchase of her home and attempted to claim an exception to the penalty. However, the exception for purchasing a home only applies in the case of IRA funds–and the courts strictly apply the exception even in cases where the error resulted from an honest mistake. Because of this, it’s important that clients be advised as to the detailed requirements that apply depending upon the type of account involved. For more information on the exceptions to the early withdrawal penalties, visit Tax Facts Online. Read More

Tax Facts Team
Molly Miller
Publisher
William H. Byrnes, J.D., LL.M
Tax Facts Author
Jason Gilbert, J.D.
Senior Editor
Robert Bloink, J.D., LL.M.
Tax Facts Author
Connie L. Jump
Senior Manager, Editorial Operations
Alexis Long, J.D.
Senior Contributor
Patti O’Leary
Senior Editorial Assistant
Danielle Birdsail
Digital Marketing Manager
Emily Brunner
Editorial Assistant

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