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

Archive for the ‘Estate Tax’ Category

Must Santa Claus Pay Tax? End of Year Gift Tax Facts

Posted by William Byrnes on December 15, 2014


Find out which of your clients need to pay the federal gift tax and what the annual exclusion amount is for 2014 and 2015

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This book provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to http://www.nationalunderwriter.com/2015-tax-facts-on-individuals-small-business.html or call 1-800-543-0874.

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Why Are Many Baby Boomer Retirees Worried?

Posted by William Byrnes on April 21, 2014


“The 10,000 baby boomer that reach retirement age each day in America are waking up to the probability that they will outspend their retirement plan designed twenty or thirty years ago, forcing a drastic reduction in quality of life style for the ‘golden years’” revealed William Byrnes, author of National Underwriter’s Tax Facts.

“By example, social security increases since Ronald Reagan’s presidency, when many Baby Boomers crafted their family retirement plans, did not keep up with the actual inflation.  Also, baby boomers are outliving their retirement plans by ten or more years”, continued William Byrnes.  “Stretching the retirement savings available for an additional twenty years of life expectancy requires correctly managing the complex retirement taxation rules established by Congress and the IRS.”

Robert Bloink added, “Baby boomers retirement taxation questions include: How are earnings on an IRA taxed? What is the penalty for making excessive contributions to an IRA? How are amounts distributed from a traditional and from a ROTH IRA taxed?  How is the required minimum distribution (RMD) calculated?”

“By example of managing the retirement taxation rules, if the baby boomer engages in a prohibited transaction with his IRA, his or her individual retirement account may cease to qualify for the tax benefits.  Thus, then baby boomer needs to understand what is a prohibited transaction?  When can the baby boomer tax pull retirement funds as a loan from a retirement account or policy without it being prohibited?”

“For complex modern families with multiple marriages and various children, a retirement and estate planner should analyze the non-probate assets”, interjected Dr. George Mentz.  “Such assets may include the client’s 401k, 403b, 459, annuities, property and joint tenancy, among others.  Regarding insurance policy designations, the client may need to reexamine the beneficiaries, contingent and secondary, and percentages among them, based on current circumstances.”

“Because client’s are outliving their life expectancy and thus outliving their retirement planning, and medical expenses certainly factor into retirement planning, long term care for family members must also be addressed,” said William Byrnes.  “Moreover, recent press has focused client’s attention on tragic incident and end of life issues, such as a durable power of attorney for health care (DPA/HC), living will, or advance directives that explain the patient’s wishes in certain medical situations.  Finally in this regard, a client may require a Limited Powers of Attorney to address situations of incapacity, as well as orderly continuation of immediate family needs upon death.“

Robert Bloink included, “Other important issues to address with the client include pre-marital property contracts/pre-nuptials involving the second marriage(s), IRA beneficiary planning in blended families, spousal lifetime access trust (SLATs), and planning for unmarried domestic partners.”

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Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.” said Rick Kravitz.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

 Authoritative and easy-to-use, 2014 Tax Facts on Insurance & Employee Benefits shows you how the tax law and regulations are relevant to your insurance, employee benefits, and financial planning practices.  Often complex tax law and regulations are explained in clear, understandable language.  Pertinent planning points are provided throughout.

2014 Tax Facts on Investments provides clear, concise answers to often complex tax questions concerning investments.  2014 expanded sections on Limitations on Loss Deductions, Charitable Gifts, Reverse Mortgages, and REITs.

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11 more annuity tax facts you need to know

Posted by William Byrnes on April 14, 2014


An annuity is a complicated beast — and during tax season, your clients’ questions can pile up faster than hospitality complaints from the crowds at Sochi. How are payments under a variable immediate annuity taxed? When is the exchange of one annuity contract for another a nontaxable exchange? Read on to find answers to these and other queries.

1. What general rules govern the income taxation of payments received under annuity contracts?

read on at LifeHealthPro

LifeHealthPro.com is the vital online destination for life & health insurance advisors, designed to provide them with the essential elements they need to run their practice and increase their bottom line including breaking news, market trends, practice tips and more.

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12 more estate planning tax facts you need to know

Posted by William Byrnes on April 8, 2014


Estate planning is a complicated business. Before you sit down with clients, find out what Uncle Sam will demand if a life insurance policy or an annuity is part of their estate, or part of a recent inheritance.

1. When are death proceeds of life insurance includable in an insured’s gross estate?

They are includable in the following four situations: … Read all 12 Tax Fact estate planning tips at LifeHealthPro

LifeHealthPro.com is the vital online destination for life & health insurance advisors, designed to provide them with the essential elements they need to run their practice and increase their bottom line including breaking news, market trends, practice tips and more.

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10 estate planning tax facts you need to know

Posted by William Byrnes on April 7, 2014


The fiscal cliff deal cleared up every estate planning tax question ever, right? Or not. Because for as much fanfare as the new estate tax received, there are still a lot of sticky tax-related questions out there.

Like what, exactly, constitutes an estate?

Do life insurance proceeds count?

What about employer-provided income benefits?

How are annuities treated?

Here are 10 big estate planning tax questions, answered.  Read on at LifeHealthPro

LifeHealthPro.com is the vital online destination for life & health insurance advisors, designed to provide them with the essential elements they need to run their practice and increase their bottom line including breaking news, market trends, practice tips and more.

 

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Will a Twitter Freeze Slash Your Thanksgiving Weight Gain or Your Client’s Tax Bill?

Posted by William Byrnes on November 28, 2013


While you think about how to reduce your weight, after the glutinous consumption of the Thanksgiving meal today, also consider how to reduce your client’s estate tax before an investment pays off.  The Twitter executives developed a plan to reduce their eventual gift and estate taxes in advance of their IPO.  The IPO has cause the value of the company to skyrocket.  But your client does not have to own Twitter stock to leverage the Twitter tax plan…. In fact,  a closer look at the planning strategies employed by Twitter shows that your client does not have to be sitting on the next hot silicon valley IPO to benefit from their use.  Even if your client does not own pre-IPO shares, the freeze and discounting strategies used can save them from a hefty tax bill.

Read William Byrnes and Robert Bloink’s analysis of the Twitter freeze strategy that may be attractive for certain of your clients at > http://www.thinkadvisor.com/2013/11/06/can-a-twitter-freeze-slash-your-clients-tax-bill <

And please support our newest book that has just been published: > Tax Facts on Individuals and Small Business <

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Tax Court Provides Help for Estate Planning Using Gift Tax Valuation

Posted by William Byrnes on November 19, 2013


In the gift tax arena, the value assigned to the transferred property can often make or break your high-net-worth clients’ tax planning strategies, leading many clients to move conservatively through the valuation minefield.

Despite this, the newest strategy to emerge in the world of gift tax valuation can actually allow these wealthy clients to reduce their estate tax liability. Reversing course from a previous line of cases, the Tax Court recently blessed a cutting edge valuation strategy for lifetime gifts that can be used to reduce overall estate tax liability for these clients by simultaneously reducing the bite of the often-overlooked three-year bringback rule—a rule which can cause even the most carefully laid estate plans to fail.

Read William Byrnes and Robert Bloink’s analysis of the tax court case and the three-year bringback rule at > http://www.thinkadvisor.com/2013/10/29/tax-court-provides-help-for-estate-planning-using <

 

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William Byrnes author of 2 tax titles published September 2013

Posted by William Byrnes on October 21, 2013


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Summit Professional Network’s National Underwriter published two books authored by Associate Dean William Byrnes and Robert Bloink: 2014 Tax Facts on Investments and 2014 Tax Facts on Insurance & Employee Benefits

William Byrnes explained National Underwriter Company’s place in the market: “National Underwriter has been the leading publisher for over 110 years to the insurance industry.  Tax Facts was first published over 60 years ago and has become in the words of Michael E. Kitces, Director of Financial Planning of Pinnacle Advisory Group:

“…  THE benchmark standard that all other resources are measured by, for financial planners that might need to look up a question about any kind of tax-related issue involving a client. The Tax Facts series sits on a bookshelf right next to my desk for easy and regular access, and only leaves when I replace it with each year’s update!”  (source: http://pro.nuco.com/Pages/AboutUs.aspx)

William Byrnes added “Tax Facts has built strong a subscriber base of over 20,000 financial planning professionals.  I think financial planning professionals relate to the approach of contextualizing client problems in a Question – Answer format.  Clients don’t come with neatly packaged issues, but instead want to tell their stories and ask questions.  Thus, Tax Facts takes that approach, by example leveraging case studies and typical client questions in the expanding online version.”

William Byrnes continued “Robert Bloink’s experience as a former IRS Counsel and national insurance markets advisor combines well with my big 4 and publication background.”

When asked “What is new about the 2014 edition?” Robert Bloink replied “We have included a new section on cross border employment and estate tax issues, captive insurance and alternative risk transfer, reverse mortgages, DOMA, Affordable Care Act, and REITs as well as expanding coverage of annuities, structured settlements, retirement planning and deferred compensation.”

Alexis Long worked with Thomas Jefferson joint degree juris doctorate and LLM alumnus, Marcus Threats, on the REIT Q&A section which sprung from his senior writing project.  Mr. Threats said that “I obtained a legal education to address challenges that I had experienced in the property investments markets.  While the opportunity for a dual degree at Thomas Jefferson attracted me to the law school, the authorship with a renown professional publisher has really made my Thomas Jefferson education stand out.”

William Byrnes interjected: “This Thursday Adjunct Professor Alexis Long begins the next Publications course via the online LLM and interested students should contact her or myself.  We are already planning the 2014 year and about to complete our JD and LLM publication teams.”

William Byrnes continued: “By the way, in November Robert and I expect to announce the publication of our third Tax Facts title addressing entrepreneur’s income tax and small business tax issues and hope it gains market traction in line with these two titles.”

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Gifting Life Insurance Policies: Not a Simple Matter

Posted by William Byrnes on October 17, 2013


Making a gift of a life insurance policy can prove to be anything but simple for clients who may not know what questions to ask in order to ascertain the potential tax consequences of the transaction. Transferring a policy that is subject to a policy loan can prove even more problematic, even if the transferee is a family member and the transfer is intended entirely as a gift.

Though the rule’s name might suggest otherwise, the transfer for value rule can create a serious tax trap for a client who transfers a life insurance policy, even if nothing tangible actually changes hands in the transaction.   Want to read more?  Open access content at Think Advisor!

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Incidents of Ownership and Burden on the Estate

Posted by William Byrnes on August 12, 2013


Why is this Topic Important to Wealth Managers?   Discusses estate tax considerations in regards to life insurance policies.  Also, includes a detailed dialogue of the incidents of ownership concept. 

What do most wealth managers try to avoid when planning with life insurance and trusts?

That the Gross Estate for Estate Tax calculations would include the death benefit from the policy in the estate.[1]

What are some common ways to avoid this dilemma when using a trust and life insurance in regards to estate planning?[2]

The insured should never own the policy; “it should be owned from inception” by the trust or third party.

  • A trustee takes “all the actions to purchase the policy on the life of the insured”.
  • The trustee should be “authorized but not required to purchase insurance on the life of anyone whose life the trust’s beneficiaries have an insurable interest.”
  • The trust explicitly prohibits the insured from obtaining any interest whatsoever that the trust may purchase on the insured’s life.
  • The trust does not require, but rather permits the premium payments.
  • Trust is well funded, beyond that of one year of premium payments.
  • The trustee acts in the best interest of the beneficiaries.

A revisionary interest will give rise to incidence of ownership [3], which could include the insured’s right to; [4]

  • Cancel, assign or surrender the policy.
  • Obtain a loan on the cash value of the policy or pledge the policy as collateral for a loan.
  • Change the beneficiary, change contingent beneficiaries, change beneficiaries share of the proceeds.

When discussing incidents of ownership, naturally the 3 year rule should be further expounded.[5] “The 3-year ‘bring-back’ rule” is applicable, “with respect to dispositions of retained interests in property which otherwise would have been includable in the gross estate”.[6]  As discussed in AUS Main Libraries Section 8, C—Lifetime Gifts Of Insurance And Annuities-“Gifts Within Three Years Of Death, essentially, the rule as it applies to life insurance means that any policy transferred out of the estate of the insured within 3 years of his/her death, the policy proceeds are brought back into the gross estate for estate tax calculations.

It is generally accepted that “the trust should be established first, with a transfer of cash from the grantor to be used to pay the initial premium” or a few years of premiums.  “The trustee would then submit the formal application, with the trust as the original applicant and owner.”  Generally, the insured will “participate only to the extent of executing required health questionnaires and submitting to any required physical examination.”  Again the key is that the, “grantor/insured not have possessed at any time anything that might be deemed an incident of ownership with respect to the policy.” [7]

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The Value of Variable Life Insurance: Surrender Charges and Fair Market Value

Posted by William Byrnes on July 25, 2013


The U.S. Court of Appeals for the Ninth Circuit recently affirmed the Tax Court’s position on the use of surrender charges in the valuation equation when a nonqualified employee benefit plan that holds a life insurance policy distributes that policy to a taxpayer upon winding up of the plan.

When these life insurance policies are distributed to the taxpayer-employees under such a plan, the taxpayers are responsible for paying taxes on the value of the policies. According to the IRS, the policy value equals the cash value of the policy without regard to any surrender charges. So what do your clients have to include in income if the actual cash surrender value of their life insurance policy is negative?

The Facts

Read the full analysis at ThinkAdvisor – http://www.thinkadvisor.com/2013/05/28/the-value-of-variable-life-insurance-surrender-cha

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The Not-So-Irrevocable Trust: Unlocking Trust Assets

Posted by William Byrnes on July 18, 2013


The “irrevocable” label might have some clients feeling like they are locked into previously established irrevocable trusts for life, which might not always be the case. There are many reasons why a client might remain interested in preserving an irrevocable trust, but after the fiscal cliff deal made the generous $5 million estate tax exemption and spousal portability permanent, there are equally strong reasons why a client might prefer to terminate. …

The choice to terminate will force clients to reevaluate insurance and other trust held assets and lead to what are often long overdue replacement or reallocation discussions.

When Can an Irrevocable Trust Be Terminated?

Read the full analysis at ThinkAdvisorhttp://www.thinkadvisor.com/2013/06/17/the-not-so-irrevocable-trust-unlocking-trust-asset

 

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FREE SHIPPING on any purchase through 06/30/2013 at NationalUnderwriter – SHOP NOW!

Posted by William Byrnes on June 24, 2013


Readers stay updated and informed with good ol’ fashioned BOOKS that SHIP FREE this week only, Monday, June 24th – Sunday, June 30th at NationalUnderwriter!

Check out my Tax Facts series (banners on the left and right column of my blog) and for free shipping click below….

FREE SHIPPING on any purchase through 06/30/2013 at NationalUnderwriter – SHOP NOW!

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LexisNexis® Guide to FATCA Compliance release …

Posted by William Byrnes on May 3, 2013


Over 400 pages of compliance analysis !! now available with the 20% discount code link in this flier –> LN Guide to FATCA_flier.

The LexisNexis® Guide to FATCA Compliance was designed in consultation, via numerous interviews and meetings, with government officials, NGO staff, large financial institution compliance officers, investment fund compliance officers, and trust companies,  in consultation with contributors who are leading industry experts. The contributors hail from several countries and an offshore financial center and include attorneys, accountants, information technology engineers, and risk managers from large, medium and small firms and from large financial institutions.  A sample chapter from the 25 is available on LexisNexis: http://www.lexisnexis.com/store/images/samples/9780769853734.pdf

book coverContributing FATCA Expert Practitioners

Kyria Ali, FCCA is a member of the Association of Chartered Certified Accountants (“ACCA”) of Baker Tilly (BVI) Limited.

Michael Alliston, Esq. is a solicitor in the London office of Herbert Smith Freehills LLP.

Ariene d’Arc Diniz e Amaral, Adv.  is a Brazilian tax attorney of Rolim, Viotti & Leite Campos Advogados.

Maarten de Bruin, Esq. is a partner of Stibbe Simont. 

Jean-Paul van den Berg, Esq.  is a tax partner of Stibbe Simont.

Amanda Castellano, Esq. spent three years as an auditor with the Internal Revenue Service.

Luzius Cavelti, Esq. is an associate at Tappolet & Partner in Zurich.

Bruno Da Silva, LL.M.  works at Loyens & Loeff, European Direct Tax Law team and is a tax treaty adviser for the Macau special administrative region of the People’s Republic of China.

Prof. J. Richard Duke, Esq. is an attorney admitted in Alabama and Florida specializing over forty years in income and estate tax planning and compliance, as well as asset protection, for high net wealth families.  He served as Counsel to the Ludwig von Mises Institute for Austrian Economics 1983-1989.

Dr. Jan Dyckmans, Esq. is a German attorney at Flick Gocke Schaumburg in Frankfurt am Main.

Arne Hansen is a legal trainee of the Hanseatisches Oberlandesgericht (Higher Regional Court of Hamburg), Germany.

Mark Heroux, J.D. is a Principal in the Tax Services Group at Baker Tilly who began his career in 1986 with the IRS Office of Chief Counsel.

Rob. H. Holt, Esq. is a practicing attorney of thirty years licensed in New York and Texas representing real estate investment companies.

Richard Kando, CPA (New York) is a Director at Navigant Consulting and served as a Special Agent with the IRS Criminal Investigation Division where he received the U.S. Department of Justice – Tax Division Assistant Attorney General’s Special Contribution Award.

Denis Kleinfeld, Esq., CPA. is a renown tax author over four decades specializing in international tax planning of high net wealth families.  He is Of Counsel to Fuerst Ittleman David & Joseph, PL, in Miami, Florida and was employed as an attorney with the Internal Revenue Service in the Estate and Gift Tax Division.

Richard L. Knickerbocker, Esq.  is the senior partner in the Los Angeles office of the Knickerbocker Law Group and the former City Attorney of the City of Santa Monica.

Saloi Abou-Jaoude’ Knickerbocker Saloi Abou-Jaoude’ Knickerbocker is a Legal Administrator in the Los Angeles office of the Knickerbocker Law Group concentrated on shari’a finance.

Jeffrey Locke, Esq.  is Director at Navigant Consulting.

Josh Lom works at Herbert Smith Freehills LLP.

Prof. Stephen Polak is a Tax Professor at Thomas Jefferson School of Law’s International Tax & Financial Services Graduate Program where he lectures on Financial Products, Tax Procedure and Financial Crimes. As a U.S. Senior Internal Revenue Agent, Financial Products and Transaction Examiner he examined exotic financial products of large multi-national corporations. Currently, Prof. Polak is assigned to U.S. Internal Revenue Service’s three year National Research Program’s as a Federal State and Local Government Specialist where he examines states, cities, municipalities, and other governmental entities.

Dr. Maji C. Rhee is a professor of Waseda University located in Tokyo.

Jean Richard, Esq.  a Canadian attorney, previously worked for the Quebec Tax Department, as a Senior Tax Manager with a large international accounting firm and as a Tax & Estate consultant for a pre-eminent Canadian insurance company.  He is currently the Vice President and Sr. Wealth Management Consultant of the BMO Financial Group.

Michael J. Rinaldi, II, CPA. is a renown international tax accountant and author, responsible for the largest independent audit firm in Washington, D.C.

Edgardo Santiago-Torres, Esq., CPA, is also a Certified Public Accountant and a Chartered Global Management Accountant, pursuant to the AICPA and CIMA rules and regulations, admitted by the Puerto Rico Board of Accountancy to practice Public Accounting in Puerto Rico, and an attorney.

Hope M. Shoulders, Esq. is a licensed attorney in the State of New Jersey whom has previously worked for General Motors, National Transportation Safety Board and the Department of Commerce.

Jason Simpson, CAMS is the Director of the Miami office for Global Atlantic Partners, overseeing all operations in Florida, the Caribbean and most of Latin America. He has worked previously as a bank compliance employee at various large and mid-sized financial institutions over the past ten years.  He has been a key component in the removal of Cease and Desist Orders as well as other written regulatory agreements within a number of Domestic and International Banks, and designed complete AML units for domestic as well as international banks with over three million clients.

Dr. Alberto Gil Soriano, Esq.  worked at the European Commission’s Anti-Fraud Office in Brussels, and most recently at the Legal Department of the International Monetary Fund’s Financial Integrity Group in Washington, D.C. He currently works at the Fiscal Department of Uría Menéndez Abogados, S.L.P in Barcelona (Spain).

Lily L. Tse, CPA. is a partner of Rinaldi & Associates (Washington, D.C.).

Dr. Oliver Untersander, Esq. is partner at Tappolet & Partner in Zurich.

Mauricio Cano del Valle, Esq. is a Mexican attorney who previously worked for the Mexican Ministry of Finance (Secretaría de Hacienda) and Deloitte and Touche Mexico.  He was Managing Director of the Amicorp Group Mexico City and San Diego offices, and now has his own law firm. 

John Walker, Esq. is an accomplished attorney with a software engineering and architecture background.

Bruce Zagaris, Esq. is a partner at the Washington, D.C. law firm Berliner, Corcoran & Rowe, LLP. 

Prof. William Byrnes was a Senior Manager then Associate Director at Coopers & Lybrand, before joining academia wherein he became a renowned author of 38 book and compendium volumes, 93 book & treatise chapters and supplements, and 800+ articles.  He is Associate Dean of Thomas Jefferson School of Law’s International Taxation & Financial Services Program.

Dr. Robert J. Munro is the author of 35 published books is a Senior Research Fellow and Director of Research for North America of CIDOEC at Jesus College, Cambridge University, and head of the anti money laundering studies of Thomas Jefferson School of Law’s International Taxation & Financial Services Program.

Posted in Compliance, Estate Tax, Financial Crimes, information exchange, Money Laundering, OECD, Reporting, Tax Policy, Taxation, Wealth Management | Tagged: , , , , , , | 1 Comment »

The Fiscal Cliff Conclusion: Compromise Continues Tax Cuts for Many, But Not All

Posted by William Byrnes on January 2, 2013


In the first moments of 2013, Congress eased the fiscal cliff tax increases for taxpayers earning less than $450,000 by enacting the American Taxpayer Relief Act (Act), permanently extending the Bush-era income tax cuts for this group. … While the legislation extends the current income tax rates for taxpayers earning less than $450,000 ($400,000 for single filers) per year, it allowed the Bush-era tax cuts to expire for all higher-income taxpayers.  Similarly, taxes on capital gains, dividends, and estates were increased for the wealthiest taxpayers.

How Were Income Taxes Increased by the Fiscal Cliff Compromise?

How Does the Act Impact the Current System for Tax Deductions and Exemptions?

Were Capital Gains and Dividend Rates Impacted by the Act?

How Are Estate and Gift Tax Rates Affected?

What Other Changes Were Made?

Beyond the Act: What is the “Investment Income Tax”?

Planning Under the Act: How Should Clients Plan for Higher Taxes in 2013?

Read the analysis at National Underwriters’ Advanced Markets – http://nationalunderwriteradvancedmarkets.com/articles/fc010113-a.aspx?action=16

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The life insurance fiscal cliff: The end of a tax-preferred product class?

Posted by William Byrnes on December 7, 2012


Clients today assume that the tax-free status of life insurance is a given and may have even engaged in fiscal cliff planning that involves the purchase of life insurance to provide a source of tax-free investment income. Given today’s political climate, it is important for clients to realize that no tax preference is safe and that the tax benefits they have come to expect from life insurance are no exception.

read this article at Life Health Pro e-zine

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the new tax strategies book “2013 Tax Facts on Investments” just released

Posted by William Byrnes on December 5, 2012


2013 Tax Facts on Investments in PRINT and E-Book format 2013_tf_on_investments_cover-m_2provides clear, concise answers to often complex tax questions concerning investments. Pertinent planning points are provided throughout.

Organized in a convenient Q&A format to speed you to the information you need, 2013 Tax Facts on Investments delivers the latest guidance on:

  • Mutual Funds, Unit Trusts, REITs
  • Incentive Stock Options
  • Options & Futures
  • Real Estate
  • Stocks, Bonds
  • Oil & Gas
  • Precious Metals & Collectibles
  • And much more!

Key updates for 2013:

  • New section on captive insurance
  • New section on reverse mortgages
  • Expanded section on ETFs
  • Expanded section on precious metals & collectibles
  • More than 30 new Planning Points, written by practitioners for practitioners, in the following areas:
    • Real Estate
    • Limited Partnerships
    • Stocks
    • Interest and Expenses
    • Options
    • Mutual Funds

Posted in Estate Tax, Retirement Planning, Taxation, Trusts, Wealth Management | Tagged: , , , , , , , , , , , , , , | Leave a Comment »

Room for compromise: eliminating the fiscal cliff with current tax rates

Posted by William Byrnes on November 23, 2012


… While most compromise legislation has focused on allowing some of these rates to rise while maintaining current rates for lower-income groups, Congress may beable to leave most tax rates in place if they focus on capping deductions and reducing spending for all taxpayers. Of course,

US Tax Rates (Taxes on riches/wealth)

US Tax Rates (Taxes on riches/wealth) (Photo credit: mSeattle)

Read the entire article at National Underwriters’ –> Life Health Pro <–

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my newest book: 2013 Tax Facts on Insurance & Employee Benefits

Posted by William Byrnes on November 21, 2012


http://www.nationalunderwriter.com/2013-tax-facts-on-insurance-employee-benefits-269.html

Organized in a convenient Q&A format to speed you to the information you need, 2013 Tax Facts on Insurance & Employee Benefits delivers the latest guidance on:

  • Estate & Gift Tax Planning
  • Roth IRAs
  • HSAs
  • Capital Gains, Qualifying Dividends
  • Non-qualified Deferred Compensation Under IRC Section 409A
  • And much more!

Key updates for 2013:

  • Enhanced explanation of the Disclosure Regulations for Retirement Plan Service Providers
  • Expanded section on the taxation of annuities
  • More than 30 new Planning Points, written by practitioners for practitioners, in the following areas:
    • Life Insurance
    • Health Insurance
    • Federal Income Taxation
    • Estate Taxation

Plus, you’re kept up-to-date with online supplements for critical developments.

Posted in Estate Tax, Pensions, Retirement Planning, Taxation, Wealth Management | Tagged: , , , , , , , , | Leave a Comment »

The ticking estate tax time bomb

Posted by William Byrnes on November 21, 2012


For your clients who have been playing the wait-and-see game in estate planning this year, the time for waiting is over.   Absent congressional action, the current $5.12 million exemption will revert to $1 million in less than three months, and the current 35% maximum estate tax rate will jump to 55%.  The entire article is available at http://www.lifehealthpro.com/2012/10/17/the-ticking-estate-tax-time-bomb-less-than-90-days

 

Posted in Estate Tax, Pensions, Retirement Planning, Taxation, Trusts, Wealth Management | Tagged: , , , | Leave a Comment »

How New Deferred Annuities Provide Income Early in Retirement

Posted by William Byrnes on November 19, 2012


…insurance companies have begun building annuity products in a variety of shapes and sizes, and the latest crop of deferred income annuity products could pave the way for clients seeking to maximize retirement income security in the years leading up to retirement.  Read the full article on AdvisorOne – http://www.advisorone.com/2012/11/08/how-new-deferred-annuities-provide-income-early-in

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Retirement planning for the next 4 years

Posted by William Byrnes on November 15, 2012


Tax

Tax (Photo credit: 401(K) 2012)

With the election behind us, it is time for your clients to turn their attention to the looming tax reforms that should take shape over the next two months, and how these reforms can affect their retirement planning. Both arms of Congress will be working to reach a compromise on tax code provisions as basic as income tax rates before Jan. 1, after which the Bush-era tax cuts will expire, and rates could revert to pre-2001 levels.

Though President Obama spent little time discussing his views on tax-favored retirement accounts during his campaign, the plans he did set forth are indicative of the consequences for retirement savings. While this impact may not be immediately apparent to your clients, it is something that they need to consider as they plan for retirement this year and beyond.  See the full article on National Underwriters’ Life Health Pro http://www.lifehealthpro.com/2012/11/13/retirement-planning-for-the-next-4-years-under-pre

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A Date Can Make the Difference in Valuation Cases

Posted by William Byrnes on April 29, 2011


Today we re-examine the case in-depth, focusing on how the IRS utilizes the step transaction doctrine to deny taxpayers valuation discounts.  The case is yet another example of how important the dating of transactions is when you’re looking to secure a valuation discount.  A single date on a document can mean the difference between a substantial valuation discount on a gift and the expense of fighting the IRS through the court system.  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of valuation discounts in Advisor’s Journal, see IRS Rebuffed by Federal Court of Appeals in Valuation Discount Case (CC 11-21)Vigorous Debate over Qualified Appraisal Standard for Valuation of Donated Policies (CC 10-92) & Valuation Discounts: Only for a Bona Fide Business (CC 10-60).

For in-depth analysis of gift tax valuation discounts, see Advisor’s Main Library: A—Family Limited Partnerships and Estate & Gift Tax Valuation Discounting.

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The Perils of Not Re-Visiting a Client’s Plan—a $3MM Tax Bill

Posted by William Byrnes on March 24, 2011


In a recent case, the IRS denied an estate a fractional interest discount on the family ranch, resulting in a seven digit tax bill and the likely liquidation of the family homestead.  The father had numerous options for securing a valuation discount on, or excluding the value of, a significant tract of property from his gross estate, but hadn’t done any planning since 1965, resulting in total denial of a discount.  When he died in 2004, the property was worth $6,390,000.  Don’t let this be your client.

The dispute between the IRS and the father’s estate centered on whether the property’s value in the gross estate was: (1) the undiscounted value of a fee simple interest in the property or (2) the aggregated value of the children’s fractional interests in the property—valued separately with fractional interest discounts.  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of valuation discounts in Advisor’s Journal, see IRS Rebuffed by Federal Court of Appeals in Valuation Discount Case (CC 11-21) and Valuation Discounts: Only for a Bona Fide Business (CC 10-60).

For in-depth analysis of valuation discounts, see Advisor’s Main Library: A—Family Limited Partnerships and Estate & Gift Tax Valuation Discounting.

 

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IRS Rebuffed by Federal Court of Appeals in Valuation Discount Case

Posted by William Byrnes on March 6, 2011


Valuation discounts will always be a disputed issue between taxpayers and the IRS, but as illustrated by the recently published Ninth Circuit Court of Appeals case, a properly timed gift can still qualify for a discount.  The parents contributed cash, securities, and real property to an LLC and then transferred LLC interests to a trust (“the children’s trust”) naming their children as beneficiaries.

The IRS rejected the valuation discount, claiming that the parents did not make a gift of the LLC interests to the trusts as they claimed, but instead made an indirect gift of the assets owned by the LLC.  The IRS also argued that, even if the LLC were funded prior to the gifting of the LLC interests to the children, the transaction’s two steps—transfer of assets to the LLC and the gift of the LLC interest to the children’s trust—were really a single transaction, an indirect gift of the assets, under the step transaction doctrine.   Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

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2010 Estates: To Elect or Not to Elect

Posted by William Byrnes on January 24, 2011


Did Congress finally settle the estate tax confusion when it passed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Tax Relief Act) on December 16? Although the estate tax treatment of estates of decedents dying in 2011 and 2012 is crystal clear, most of our clients will outlive the current estate tax regime, and we will be stuck in the same spot we were for the last half of 2010, wondering what the next year holds.

And what about the estates of decedents dying in 2010? Under the Tax Relief Act, estates of decedents dying in 2010 have a choice. They can elect to have the estate subjected to an estate tax regime with an exclusion amount of $5,000,000 (unified credit of $1,730,000) and an estate tax rate of 35 percent. Beneficiaries of these estates will receive the benefit of the stepped-up basis rules applicable prior to 2010.  Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of Obama’s tax agreement, including its estate tax provisions, in Advisor’s Journal, see Obama Tax Agreement Faces Stiff Resistance in Congress (CC 10-112) and Obama Tax Agreement Passed by House (CC 10-117).

For in-depth analysis of the estate tax, see Estate, Gift and GST Taxes.

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Obama Tax Cuts Analysis: Estate and Generation Skipping Transfer Tax

Posted by William Byrnes on January 18, 2011


The recent Obama Tax Cuts reinstated the estate and generation skipping transfer taxes effective for decedents dying and transfers made after December 31, 2009.  As was discussed earlier this week, the estate tax applicable exclusion amount is $5 million for decedents dying in calendar years after 2011, and the maximum estate tax rate is 35 percent. Furthermore, the generation skipping transfer tax exemption for decedents dying or gifts made after December 31, 2009, is equal to the applicable exclusion amount for estate tax purposes ($5 million for 2010).

For a general background on the Generation Skipping Transfer Tax, see our November 1st Blogticle entitled: Life Insurance and the Generation—Skipping Transfer Tax

Although technically the generation skipping transfer tax is applicable for 2010, the generation skipping transfer tax rate for transfers made during 2010 is zero percent. After this year, the generation skipping transfer tax rate equals the highest estate and gift tax rate in effect for such year (35 percent in 2011 and 2012), notwithstanding the exclusion amounts.

Moreover, under the new law, a recipient of property acquired from a decedent who dies after December 31, 2009, generally will receive fair market value basis (i.e., “step up” in basis). [1]

To read this article excerpted above, please access http://www.advisorfyi.com/2010/12/obama-tax-cuts-analysis-estate-and-generation-skipping-transfer-tax/

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Does the New Estate Tax Make the Bypass Trust Obsolete?

Posted by William Byrnes on January 17, 2011


President Obama’s tax compromise introduces a new estate tax concept for 2011 and 2012, the deceased spouse unused exclusion amount (DSUEA).  Essentially, the DSUEA allows a surviving spouse to utilize the unused exclusion amount of the first spouse to die.  The new law raises an important planning question: Is the bypass (credit shelter) trust obsolete as an estate planning device? Also: Do existing bypass trusts need to be amended in light of the new law?

In general, under the new estate tax, an estate’s exclusion amount, referred to as its applicable exclusion amount, is the sum of two components: the basic exclusion amount and the DSUEA. The basic exclusion amount for estates of decedents dying in 2011 and 2012 is $5 million. The second part of the equation, the DSUEA, is the amount of the first-to-die spouse’s exclusion amount that is not used by the that spouse’s estate. Note that a surviving spouse’s DSUEA is equal to the unused exclusion amount of the surviving spouse’s last deceased spouse.  Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of Obama’s tax agreement, including its estate tax provisions, in Advisor’s Journal, see Obama Tax Agreement Faces Stiff Resistance in Congress (CC 10-112) and Obama Tax Agreement Passed by House (CC 10-117).

For in-depth analysis of the estate tax, see Advisor’s Main Library: Estate, Gift and GST Taxes.

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The Future of Estate Planning under the Obama Tax Cuts

Posted by William Byrnes on January 11, 2011


Why is this Topic Important to Wealth Managers? Presents discussion on the effect of the Obama Tax Cuts on the Estate Planning industry in general.  Also presents analysis regarding the estate tax burden on taxpayers.

The quintessential planning tool that many wealth managers relied on could easily become a thing of the past.  In other words, the Obama Tax cuts are creating concern for some wealth managers who sold life insurance to cover the tax of an estate at the death of the decedent. Sections 301-304 of the new law reinstated the estate tax, but nevertheless, created large exclusions, essentially removing the need for many to cover the estate tax burden with the purchase of life insurance.

Specifically, the applicable estate tax exclusion amount is $5 million under the law (and is indexed for inflation) for decedents dying in calendar years starting in 2011.  Married individuals’ will see a total exclusion of $10 million.  Furthermore, the new law reinstates the maximum estate tax rate of 35 percent.  To read this article excerpted above, access www.AdvisorFYI.com

 

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Estate Asks Supreme Court to Consider GST Tax Grandfathering Exemption

Posted by William Byrnes on January 5, 2011


An estate has asked the U.S. Supreme Court to consider whether the GST tax “grandfathering exemption” is ambiguous.  Two circuit courts of appeal have held that the statute is ambiguous while another two circuits hold that it is plain and unambiguous.

The Supreme Court is being asked to settle the split between the circuits.

The Generation Skipping Trusts

A generation skipping trust is a trust designed to shift property from one generation to another without passing the property through an intervening generation—e.g. a trust that transfers property from grandparents to their grandchildren.  Generally the “child beneficiaries” (children of the grantor) take only an income interest in the trust with grandchildren taking a remainder interest in the trust.  When the child beneficiaries die, trust assets will be transferred to the grandchildren.  Assuming the child beneficiaries took only an income interest in the trust and did not hold any incidents of ownership in the trust, the trust will not be included in the children’s estates when they die.

So, for example, if Grandfather funds a trust will for $5 million, naming his three adult children as income beneficiaries and his grandchildren as remainder beneficiaries, the trust is a generation skipping trust.  Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For in-depth analysis of the generation skipping transfer tax, see Advisor’s Main Library: Section 2.1 A—Generation Skipping Transfers Explained

We invite your questions and comments by posting them below or by calling the Panel of Experts.

 

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Exclusions from Gross Income—Gifts

Posted by William Byrnes on December 23, 2010


Why is this Topic Important to Wealth Managers? Discusses gifts and the general income tax implications gifts have to those who are the beneficiaries.  Also discusses gifts as they relate to estate taxes.

As Christmas and Holiday time approaches, some clients who may be expecting large sums from Santa or other sources as gifts, may be interested to know the tax laws on gifts generally; today’s blogiticle present’s our “re-gifting” of an old idea, Section 102 of the Internal Revenue Code.

For those who haven’t had an opportunity to read the Code lately, (some estimate the Code and Regulations are close to 80,000 pages) there are still a few “friendly” sections that remain which serve as a reminder of a time gone by.  Side Note:  These authors have not yet evaluated the shortest Code section in terms of actual words, but if we were to, our guess is that Section 102 would be in the running at 212 words.

Section 102(a) reads: “Gross income does not include the value of property acquired by gift, bequest, devise, or inheritance.”  It is worth noting, if we go back to Section 61, and the starting point for gross income, that Section 61(a) states:  “Except as otherwise provided in this subtitle gross income means all income from whatever source derived…”   The “[e]xcept as otherwise provided” is applicable here to amounts received as a gift, bequest, devise, or inheritance, which are specifically excluded from gross income.  In other words, a taxpayer can give another taxpayer a gift of $1,000,000 and the latter will not recognize a penny of income for tax purposes, so long as it is really a gift, bequest, devise or inheritance.  To read this article excerpted above, please access www.AdvisorFX.com

For further discussion on the gift tax generally see, AdvisorFX: Nature and Background of the Federal Gift Tax (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

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Life Insurance and the Generation—Skipping Transfer Tax

Posted by William Byrnes on November 15, 2010


Why is this Topic Important to Wealth Managers?  Provides details about one concept that wealth managers often overlook, the generation skipping transfer tax.  Also presents general concept themes and examples to show effective uses of life insurance and trust in consideration of the tax. 

In general, the generation-skipping transfer tax is levied on the value of life insurance that is transferred during the grantors lifetime or at death, to a skip person. [1]  The GST is levied in addition to estate and gift taxes. [2]

The generation-skipping transfer (GST) tax “scheduled to resume in 2011 at a rate of 55%, with a $1 million exemption. The rate was 45% in 2009, with a $3.5 million exemption.” [3]  For more information about the expiring tax cuts and new tax rates, see our blogticle: AdvisorFYI: Estate and Gift Taxes, Tax Cuts and More

“Certain direct gifts that qualify for the gift tax exclusion may also qualify for an annual exclusion that can be applied against the GST tax.” [4]  Many wealth managers encourage clients to take full advantage of the annual exclusion to avoid GST tax considerations at some later point.  However, “the expiration of the GST tax has complicated matters for wealthy individuals hoping to make 2010 gifts in trust that skip generations.” [5]  The use of trusts in consideration of the GST tax is discussed below.  For examples of insurance uses with trusts generally, see our previous blogticle: Trusts that Purchase Life Insurance; Known Formally as the “Irrevocable Life Insurance Trust

Please link to AdvisorFYI for the entire blogticle.

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What’s Next for the Estate Tax?

Posted by William Byrnes on November 13, 2010


The estate tax is scheduled to explode in 2011. Analysts have assumed for years that Congress would act to fix the estate tax before it expired in 2010 and reverted to its pre-2001 levels in 2011, but it is looking more and more likely that the current Congress will hand the problem off to the next Congress on January 11, 2011.  Although movement during the lame duck session is possible, it is not likely to generate any positive action on the estate tax.

Whether Congress acts on the estate tax or not, 2011 will likely bring drastic changes to the estate tax, requiring your clients to do significant tinkering on their estate plans. In the interim, estate planning professionals will continue to use disclaimer planning as a stop gap measure to deal with 2010′ s estate tax uncertainty. For instance, rather than split an estate’s assets between credit shelter and marital deduction trusts—which is unnecessary when there is no estate tax—all of the assets are devised to the spouse or the marital deduction trust.  The surviving spouse can then disclaim up to the tax-free amount— … Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the estate tax conundrum in Advisor�s Journal, see Estate Tax Chaos (CC 10-02).

For in-depth analysis of the federal estate tax, see Advisor�s Main Library: Section 2 A—Overview Of The Federal Estate Tax And Its Calculation.

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Use Charitable Giving to Enhance Family Business Succession Planning

Posted by William Byrnes on October 28, 2010


Life insurance is often the cornerstone of an estate plan when a family business is involved.  As a follow-up to the article on supporting a surviving second spouse without liquidating the family business, this article describes a technique that introduces a charitable giving component into family business succession planning.

Consider the following scenario:

Your client Jonathan has two primary legacy planning objectives. Foremost is his desire to ensure a smooth transfer of the family business to his daughter, Eva. Jonathan also wants to make a sizeable lifetime gift to his favorite charity and provide a retirement nest egg for his wife.

For prior Advisor’s Journal coverage of family business succession planning using life insurance, see Supporting a Surviving Second Spouse without Liquidating the Family Business (CC 10-53).

See the AUS Main Libraries, Section 9 C2—The Law Of Wills, for a discussion of a spouse’s right to elect against the will.

We invite your questions and comments by posting them at AdvisorFYI or by calling the Panel of Experts.

 

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Proposals for Simplification of Life Insurance Policy Donation

Posted by William Byrnes on October 25, 2010


Valuing a donated life insurance policy can be tricky when taking a charitable contribution deduction. Detailed IRS guidance on insurance policy valuation has been confined to other scenarios, such as where a policy is sold or included in an estate.  Also complicating policy donation is the requirement that a qualified appraisal of the donated policy be included with the taxpayer’s return.

For in-depth analysis of the topic of charitable giving, see Advisor’s Main Library Section 1 F—Estate Planning Through Charitable Contributions

Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

We invite your questions and comments by posting them at AdvisorFYI, or by calling the Panel of Experts.

 

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GRAT Strategy for Avoiding Gift on High Premium Payments May Be Coming to a Close

Posted by William Byrnes on October 18, 2010


Life insurance-based estate planning strategies for high-net-worth clients with estate liquidity issues run into the problem that premiums may be so high as to exhaust the client’s annual gift tax exclusion and lifetime exemption, resulting in unwanted gift tax exposure.  One way advanced planners have dealt with the gift tax problem of high premiums is through the use of a grantor retained annuity trust (GRAT).  But the U.S. House recently passed a bill—H.R.4849, the Small Business and Infrastructure Jobs Tax Act of 2010—that would severely curtail the use of GRATs, so the utility of this technique may soon be eliminated.

To illustrate this technique while it remains open, let’s assume you have an unmarried client, Max, who owns a number of restaurant franchises. His estate will be worth about $12 million, most of which is tied up in his franchises and other illiquid investments. Max’s estate will need around $6 million in liquid death benefit to cover the pending estate tax liability.  Read today’s article in your Advisor’s Journal at GRAT Strategy (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For in-depth analysis of the topic of the use of GRATs, see Advisor’s Main Library Section 4. Estate Planning Techniques J—Grantor Retained Annuity Trusts

We invite your questions and comments by posting them below, or by calling the Panel of Experts.

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Valuation Discounts: Only for a Bona Fide Business

Posted by William Byrnes on October 4, 2010


Valuation discounts are increasingly challenged by the IRS. Gone are the days when assets could be dropped into a family limited partnership with some transfer restrictions and forgotten about until a valuation discount was needed to reduce a gift or estate tax bill.  A recent U.S. District Court case, Fisher v. U.S., reminds us that times have changed.  Often, placing assets in a business entity is no longer enough to justify a valuation discount—the entity must be run like a business to justify the discount.   Read the analysis by our experts Robert Bloink and William Byrnes located at AdvisorFX Journal Valuation Discounts: Only for a Bona Fide Business

For some good news about valuation discounts, see our article in AdvisorFX Advisor’s Journal on the Jensen case.

From a tax perspective see Tax Facts Q 613. How is a closely held business interest valued for federal estate tax purposes?

After reading the analysis, we invite your questions and comments by posting them below, or by calling the Panel of Experts.

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Gift Tax Return Disclosures—Adequate or Else

Posted by William Byrnes on October 1, 2010


A recent IRS Chief Counsel Advice addressed the importance of making adequate disclosures to the IRS when filing a gift tax return, demonstrating the dangers of a tight lip. There, a taxpayer failed to disclose the method and valuation discounts used to value gifted stock.  As a result, the taxpayer was unable to seek the protection from gift tax changes based upon the three year statute of limitations.

The statute of limitations for the IRS to question an item on a gift tax return is essentially unlimited if a gift is not “adequately disclosed” on the return, so taxes—and fees and interest—can be imposed on the inadequately disclosed gift any time after the return is filed.

For the complete analysis of this development regarding the disclosures required on a gift tax return by our Experts Robert Bloink and William Byrnes, please read the article via your AdvisorFX subscription at Gift Tax Return Disclosures—Adequate or Else?

For in-depth analysis of this topic, see Advisor’s Main Library Section 7. Gift Taxes D—Valuation For Gift Tax Purposes and from a tax perspective see Tax Facts Q 1534 What are the requirements for filing the gift tax return and paying the tax?

After reading the analysis, we invite your questions and comments by posting them below, or by calling the Panel of Experts.

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Gift Tax Return Disclosures—Adequate or Else

Posted by William Byrnes on September 25, 2010


A recent IRS Chief Counsel Advice addressed the importance of making adequate disclosures to the IRS when filing a gift tax return, demonstrating the dangers of a tight lip. There, a taxpayer failed to disclose the method and valuation discounts used to value gifted stock.  As a result, the taxpayer was unable to seek the protection from gift tax changes based upon the three year statute of limitations.

The statute of limitations for the IRS to question an item on a gift tax return is essentially unlimited if a gift is not “adequately disclosed” on the return, so taxes—and fees and interest—can be imposed on the inadequately disclosed gift any time after the return is filed.

For the complete analysis of this development regarding the disclosures required on a gift tax return by our Experts Robert Bloink and William Byrnes, please read the article via your AdvisorFX subscription at Gift Tax Return Disclosures—Adequate or Else?

For in-depth analysis of this topic, see Advisor’s Main Library Section 7. Gift Taxes D—Valuation For Gift Tax Purposes and from a tax perspective see Tax Facts Q 1534 What are the requirements for filing the gift tax return and paying the tax?

After reading the analysis, we invite your questions and comments by posting them below, or by calling the Panel of Experts.

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Planning Concept: Traditional Private Annuity in Trust Variation

Posted by William Byrnes on September 23, 2010


The traditional private annuity is a transaction used by some wealth managers for clients whose circumstances permit.  Generally a private annuity transaction occurs where the grantor transfers assets to a third party who pays the grantor an annuity, usually for the life of the grantor.

When a trust is involved with a traditional private annuity, the common transaction may look like this:  “The owner of highly appreciated commercial real estate transfers the property to an irrevocable trust in exchange for the trust’s promise to pay an annuity for life. The present value of the annuity equals the fair market value (‘FMV‘) of the property. The trust then sells the property to a third party for a sale price equal to its FMV.”  For additional introductory discussion on private annuity contracts see AUS Main Private Annuity

Planning Concept:  Some wealth managers have recently begun to structure private annuities for their clients slightly differently than the traditional methods.  For a discussion and analysis, please see AdvisorFYI

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Incidents of Ownership and Burden on the Estate

Posted by William Byrnes on September 22, 2010


Why is this Topic Important to Wealth Managers?   Discusses estate tax considerations in regards to life insurance policies.  Also, includes a detailed dialogue of the incidents of ownership concept. 

What do most wealth managers try to avoid when planning with life insurance and trusts?

That the Gross Estate for Estate Tax calculations would include the death benefit from the policy in the estate.

What are some common ways to avoid this dilemma when using a trust and life insurance in regards to estate planning?

For the answer to this question, and planning analysis, see the blogticle at AdvisorFYI

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Trusts that Purchase Life Insurance – Known Formally as the “Irrevocable Life Insurance Trust”

Posted by William Byrnes on September 21, 2010


Why is this Topic Important to Wealth Managers?   The terminology associated with common estate planning techniques is generally misguided. Provides a better understanding of the tax and legal implications, on behalf of the client’s estate plans, of trusts that purchase life insurance

One commentator states “If the practitioner would examine either the Internal Revenue Code or the Treasury Regulation designed to interpret the Code, they will not find the use of the term ‘Insurance Trust’ or the term ‘ILIT.’” For a detailed analysis of the ILIT see the Main Library Section 4. Estate Planning Techniques H—Life Insurance Trusts. 

For the complete blogticle and its analysis, see AdvisorFYI

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