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Taxation
by
Ralph E. Lerner
RalphELerner.com
ralph@artworldadvisors.com
590 Madison Ave, New York, NY, 10022
(212) 521-4437
http://www.RalphELerner.com/
Casualty Loss – §165(h)
The lower of the fair market value or the cost per
item lost less $100 per casualty.
http://www.RalphELerner.com/
Casualty Loss – §165(h)
The lower of the fair market value or the cost per
item lost less $100 per casualty.
Now
But only to the extent such amount is greater than
10% of adjusted gross income.
http://www.RalphELerner.com/
Where is the Painting?
http://www.RalphELerner.com/
Cost
FMV
Deduction (within 30% limit)
Tax Saved (Fed. 35.0 rate)
Cost
UNTAXED PROFIT
$ 1,000
$ 10,000
$ 10,000
$ 3,500
$ 1,000
$ 2,500
and you enjoyed the use of the donated item
for the period of ownership
The Art Tax Shelter
http://www.RalphELerner.com/
The Four Questions
1. What type of donee organization - public charity or
private foundation?
http://www.RalphELerner.com/
The Four Questions
1. What type of donee organization - public charity or
private foundation?
2. What type of property - ordinary income type property
or long-term capital gain type property?
http://www.RalphELerner.com/
1. What type of donee organization - public charity or
private foundation?
2. What type of property - ordinary income type property or
long-term capital gain type property?
3. Have you satisfied the related-use rule?
The Four Questions
http://www.RalphELerner.com/
The Four Questions
1. What type of donee organization - public charity or private
foundation?
2. What type of property - ordinary income type property or
long-term capital gain type property?
3. Have you satisfied the related-use rule?
4. Have you obtained a qualified appraisal by a qualified
appraiser?
http://www.RalphELerner.com/
FUTURE INTEREST RULE
Section 170(a)(3) - There is no charitable deduction for a gift
of a future interest in tangible personal property until there
is no intervening interest in, right of possession of, or
enjoyment of the property held by the donor, spouse or
certain related individuals. http://www.RalphELerner.com/
FRACTIONAL INTEREST
Winokur v. Commissioner
Women of Warhol
Marilyn, Liz & Jackie
http://www.RalphELerner.com
/
CHARITABLE
REMAINDER TRUST
However, an income tax deduction
would be allowed under section
170(a)(3) when the trustee sells the
musical instrument.
http://www.RalphELerner.com/
FMV
COST
GAIN
TAX
NET
7%
$5,100,0000
100,000
5,000,000
1,850,000
3,350,000
227,500
$5,100,0000
100,000
5,000,000
- 0 -
5,100,000
357,000
129,500
per yr.
28% LTCG
more per yr.
Note: 3,250,000 subject to 50%
Estate tax leaves Net $1,625,000
(Fed + St)
per yr.
35.0% LTCG
2 children and spouses
6 grandchildren
10 x 10,000 =
tuition
equalizes after 12 years
$100,000
30,000
130,000
1.170A-4(b)(3)(i)
The use by a trust of tangible personal property contributed to it for the benefit of
a charitable organization is an unrelated use if the use by the trust is one which
would have been unrelated if made by the charitable organization.http://www.RalphELerner.com/
I WANT MY OWN MUSEUM
Private Operating Foundation - Reg. 53.4942(b)-2(a)(6) Ex. 4
http://www.RalphELerner.com/
FAIR MARKET VALUE
Hypothetical Willing Buyer/
Hypothetical Willing Seller
http://www.RalphELerner.com
/
Quedlinburg Treasures
Fair Market Value is determined in the retail market
in which the item is most commonly sold to the
public. http://www.RalphELerner.com/
Rev. Proc. 96-15
Advance Valuation Ruling Request
1. Applies to items $50,000 and above
2. User fee of $2,500 for first three items, $250 for each
additional item
3. Requires a qualified appraisal by a qualified appraiser
4. Can be used for income tax or estate tax purposes
5. The ruling, once issued, is binding on the IRS
http://www.RalphELerner.com/
ENGEL v. COMMISSIONER
Although comparable sales prces of similar
property may be the best measure of value – in a thin
market the appraiser must consider replacement cost.
http://www.RalphELerner.com/
THE FIRST, THEY SAID, SHOULD BE SWEET
LIKE LOVE; THE SECOND BITTER, LIKE LIFE;
AND THE THIRD SOFT, LIKE DEATH.http://www.RalphELerner.com/
ROTHKO
Avoid Conflicts of Interest
Duty of Loyalty
An executor must care and manage the assets and affairs of the estate as
would prudent persons of discretion and intelligence accented by “not honesty
alone” but by the punctilio of an honor the most sensitive.
http://www.RalphELerner.com/

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Ralph E Lerner: Taxation I & II.ppt

  • 1. Taxation by Ralph E. Lerner RalphELerner.com ralph@artworldadvisors.com 590 Madison Ave, New York, NY, 10022 (212) 521-4437 http://www.RalphELerner.com/
  • 2. Casualty Loss – §165(h) The lower of the fair market value or the cost per item lost less $100 per casualty. http://www.RalphELerner.com/
  • 3. Casualty Loss – §165(h) The lower of the fair market value or the cost per item lost less $100 per casualty. Now But only to the extent such amount is greater than 10% of adjusted gross income. http://www.RalphELerner.com/
  • 4. Where is the Painting? http://www.RalphELerner.com/
  • 5. Cost FMV Deduction (within 30% limit) Tax Saved (Fed. 35.0 rate) Cost UNTAXED PROFIT $ 1,000 $ 10,000 $ 10,000 $ 3,500 $ 1,000 $ 2,500 and you enjoyed the use of the donated item for the period of ownership The Art Tax Shelter http://www.RalphELerner.com/
  • 6. The Four Questions 1. What type of donee organization - public charity or private foundation? http://www.RalphELerner.com/
  • 7. The Four Questions 1. What type of donee organization - public charity or private foundation? 2. What type of property - ordinary income type property or long-term capital gain type property? http://www.RalphELerner.com/
  • 8. 1. What type of donee organization - public charity or private foundation? 2. What type of property - ordinary income type property or long-term capital gain type property? 3. Have you satisfied the related-use rule? The Four Questions http://www.RalphELerner.com/
  • 9. The Four Questions 1. What type of donee organization - public charity or private foundation? 2. What type of property - ordinary income type property or long-term capital gain type property? 3. Have you satisfied the related-use rule? 4. Have you obtained a qualified appraisal by a qualified appraiser? http://www.RalphELerner.com/
  • 10. FUTURE INTEREST RULE Section 170(a)(3) - There is no charitable deduction for a gift of a future interest in tangible personal property until there is no intervening interest in, right of possession of, or enjoyment of the property held by the donor, spouse or certain related individuals. http://www.RalphELerner.com/
  • 11. FRACTIONAL INTEREST Winokur v. Commissioner Women of Warhol Marilyn, Liz & Jackie http://www.RalphELerner.com /
  • 12. CHARITABLE REMAINDER TRUST However, an income tax deduction would be allowed under section 170(a)(3) when the trustee sells the musical instrument. http://www.RalphELerner.com/
  • 13. FMV COST GAIN TAX NET 7% $5,100,0000 100,000 5,000,000 1,850,000 3,350,000 227,500 $5,100,0000 100,000 5,000,000 - 0 - 5,100,000 357,000 129,500 per yr. 28% LTCG more per yr. Note: 3,250,000 subject to 50% Estate tax leaves Net $1,625,000 (Fed + St) per yr. 35.0% LTCG 2 children and spouses 6 grandchildren 10 x 10,000 = tuition equalizes after 12 years $100,000 30,000 130,000 1.170A-4(b)(3)(i) The use by a trust of tangible personal property contributed to it for the benefit of a charitable organization is an unrelated use if the use by the trust is one which would have been unrelated if made by the charitable organization.http://www.RalphELerner.com/
  • 14. I WANT MY OWN MUSEUM Private Operating Foundation - Reg. 53.4942(b)-2(a)(6) Ex. 4 http://www.RalphELerner.com/
  • 15. FAIR MARKET VALUE Hypothetical Willing Buyer/ Hypothetical Willing Seller http://www.RalphELerner.com /
  • 16. Quedlinburg Treasures Fair Market Value is determined in the retail market in which the item is most commonly sold to the public. http://www.RalphELerner.com/
  • 17. Rev. Proc. 96-15 Advance Valuation Ruling Request 1. Applies to items $50,000 and above 2. User fee of $2,500 for first three items, $250 for each additional item 3. Requires a qualified appraisal by a qualified appraiser 4. Can be used for income tax or estate tax purposes 5. The ruling, once issued, is binding on the IRS http://www.RalphELerner.com/
  • 18. ENGEL v. COMMISSIONER Although comparable sales prces of similar property may be the best measure of value – in a thin market the appraiser must consider replacement cost. http://www.RalphELerner.com/
  • 19. THE FIRST, THEY SAID, SHOULD BE SWEET LIKE LOVE; THE SECOND BITTER, LIKE LIFE; AND THE THIRD SOFT, LIKE DEATH.http://www.RalphELerner.com/
  • 20. ROTHKO Avoid Conflicts of Interest Duty of Loyalty An executor must care and manage the assets and affairs of the estate as would prudent persons of discretion and intelligence accented by “not honesty alone” but by the punctilio of an honor the most sensitive. http://www.RalphELerner.com/