On December 22, 2017, President Trump signed the Tax Cuts and Jobs Act (the “TCJA”). The TCJA enacts a number of important tax changes, including some significant changes to the federal gift tax and the federal estate tax that take effect in 2018. Specifically, the TCJA doubles the amount of the “applicable exclusion amount” for
IRS Extends Various Tax Deadlines to January 17, 2017 for Certain Parishes Affected by the August, 2016 Flood in Louisiana
The Internal Revenue Service (IRS) has granted tax relief to postpone various tax filing and payment deadlines for certain filings or payments that were due on or after August 11, 2016. The relief postpones the filing deadlines or payment deadlines until January 17, 2017. Therefore, this extension will include the September 15th deadline for
New IRS Regulations Aim to Eliminate Powerful Estate Planning Strategy
On August 2, 2016, the Treasury Department issued new proposed tax regulations that would substantially eliminate many of the valuation discounts used for transfer tax purposes by family-owned businesses. The regulations disregard restrictions on the redemption and liquidation of a family-owned business for valuation purposes. In effect, this would mean that the value of an
Tax Provisions In Highway Trust Fund Extension Law
On July 31, 2015, President Obama signed into law the “Surface Transportation and Veterans Health Care Choice Improvement Act of 2015” (the Act). The Act was primarily designed as a temporary extension of the Highway Trust Fund and related issues. However, the Act also includes a number of important tax provisions, some of which are
Law Firm’s Cost Advances for Contingency Fee Cases Treated as Loans and not Current Deductions
In a recent Tax Court case, a law firm was denied a current deduction for litigation expenses advanced on behalf of its contingent fee clients. The Tax Court held that the expenses were in nature of loans, and not ordinary and necessary business expenses that could be deducted when paid (advanced), even if there was
Louisiana Expands Small Succession Procedure To Include Ancillary Probate Proceedings
Act Number 323 of the 2011 Regular Session of the Louisiana Legislature modified the rules on small successions in Louisiana. In addition to some other changes, the law allows the use of the small succession procedure, which generally involves filing an affidavit rather than opening judicial proceedings, to transfer title to immovable property in Louisiana
Court Recharacterizes S Corporation Dividend to Shareholder-Employee as Wages
A recent federal district court case (Watson v. U.S., 107AFTR 2d 2011-311) has held that the IRS could recharacterize purported dividend payments to an S corporation shareholder-employee as wages. In this case, a CPA was a sole shareholder, employee, director and officer of a professional corporation that was taxed as an S Corporation. The corporation
New Federal Estate Tax and Gift Tax Legislation
After a long delay, Congress has passed and President Obama has signed into law the new federal estate and gift tax legislation. It has been very difficult for some individuals to prepare an appropriate estate plan not knowing what the potential federal estate and gift taxes will be. For the next two years, 2011 and 2012, there is some certainty. Parts of the new legislation may not impact everyone, but questions always abound concerning “death taxes”. Now is an excellent time to review your estate planning documents to determine whether or not they continue to carry out your intentions.
Federal Estate Tax Exemption Amount and Federal Gift Tax Exemption Amount
Beginning January 1, 2011 and continuing through 2012, the federal estate tax exemption amount will be $5 million and the federal gift tax exemption will also be $5 million. This essentially means that a married couple can pass $10 million in assets to their children without any federal estate or gift tax, with proper estate planning. The top tax rate for the federal estate and gift taxes for 2011 and 2012 will be thirty-five percent (35%). The new exemption and rate provisions are applicable only for deaths or gifts in 2011 or 2012.
Effectively, the exemption for the federal estate and gift taxes are unified again. The gift tax exemption and the estate tax exemption will be the same $5 million amount. Also, the Generation Skipping Tax (GST) Exemption is now $5 million, making it easier to transfer wealth to grandchildren.
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Six Myths of the Revocable Living Trust
As estate planning attorneys, we receive calls from clients concerning the use of revocable living trusts in estate planning. The general public is invited to seminars on the subject, they receive literature in the mail, and, in some cases, receive in-home visits from parties, who are usually not attorneys, who advocate the use of the revocable living trust. Over the years, we have responded to clients to answer their questions concerning what the living trust will do and what it will not do. What follows is a discussion of what we call the “Six Myths” of the revocable living trust.
Myth No. 1: A living trust saves taxes.
A blanket statement that a living trust saves taxes is subject to examination. First of all, what types of taxes are being discussed? One should know that the Louisiana inheritance taxes disappeared in 2004. Accordingly, State of Louisiana inheritance taxes do not come into play with respect to a trust or a will. The Federal Estate Tax may be applicable whether there is a will or a trust. Some parties advocating the revocable living trust indicate that the trust is necessary in order to obtain the benefit of the $5 million Federal Estate Tax exemption. This is not true. The $5 million Federal Estate Tax exemption can be obtained without the use of a will or a trust. The exemption is not utilized when bequests are made through a trust or a will to a surviving spouse; however, federal law for the years 2011 and 2012 provides for “portability” of the exemption of the spouse whose Federal Estate Tax exemption has not been used. This portability applies to the estate of that deceased spouse’s surviving spouse, at least for 2011 and 2012.
Many assets in an estate are referred to as “non-probate assets,” such as annuities, IRAs, and 401k plans. In the event that a trust is made the beneficiary of such accounts, there could be potentially higher federal income taxes. This is clearly a trap for the unwary. Income tax consequences will turn on the design of the trust and, in particular, the design for distribution of income from the trust assets.
IRS Issues Safeharbor Relief for Those Impacted by “Chinese Drywall”
On September 30, 2010, the Internal Revenue Service issued guidance providing relief to homeowners who have suffered property losses due to the effects of certain imported drywall installed in homes between 2001 and 2009. In particular, the IRS issued Revenue Procedure 2010-36 which enables affected taxpayers to treat damages from corrosive drywall as a casualty loss and provides a ”safe harbor” formula for determining the amount of the loss.
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