The document summarizes key provisions of the American Taxpayer Relief Act of 2012 related to income tax. It discusses changes to individual income tax rates, capital gains rates, the alternative minimum tax exemption amounts, and other individual tax provisions. For businesses, it outlines changes to Section 179 expensing limits, bonus depreciation, and other deductions. The summary also notes some provisions that were not extended, such as the phase-out of certain itemized deductions.
Agenda: Tax Updates for Individuals; Tax Update for Businesses; Fiscall Cliff; Disposition of Assets or Business Interests; Depreciation; Basis Issues; Business Income and Deductions; Estate Planning; Other Cases and Rulings.
"2012/2013 Income, Estate and Gift Tax Changes a Result of the 'Fiscal Cliff'...Dinsmore & Shohl LLP
"2012/2013 Income, Estate and Gift Tax Changes a Result of the 'Fiscal Cliff'," Financial Planning Association of Southwestern Ohio, Election Preview Virtual Conference
Keep this handy Individual Income Tax chart to help quickly discover the changes from 2012 to 2013 as a result of "The American Taxpayer Relief Act of 2012." You have to love how Congress names their legislation.
Agenda: Tax Updates for Individuals; Tax Update for Businesses; Fiscall Cliff; Disposition of Assets or Business Interests; Depreciation; Basis Issues; Business Income and Deductions; Estate Planning; Other Cases and Rulings.
"2012/2013 Income, Estate and Gift Tax Changes a Result of the 'Fiscal Cliff'...Dinsmore & Shohl LLP
"2012/2013 Income, Estate and Gift Tax Changes a Result of the 'Fiscal Cliff'," Financial Planning Association of Southwestern Ohio, Election Preview Virtual Conference
Keep this handy Individual Income Tax chart to help quickly discover the changes from 2012 to 2013 as a result of "The American Taxpayer Relief Act of 2012." You have to love how Congress names their legislation.
2013 Changes in Tax Law and Year End Tax Planning Opportunities
Individuals
o 2013 tax rates
o Tax on investment income
o Other changes in tax law affecting individuals
o Year end planning opportunities
Businesses
o Employment tax
o Depreciation
o Pass-through entities
Estate and Gift Tax
o Exemption amounts
o Tax rates
o Gifting strategies
o Valuation discounts
o Grantor trusts
Status of Estate and Gift Tax Law as of Jan 2010; planning opportunities in 2010; cautions and traps if retroactive estate tax passed in 2010; planning for 2011.
Hot off the press! Here's an updated tax table after yesterday's UK budget. If you want to talk about making the most of what's allowable, talk to a professional adviser.
Intuit Presents Tax Law Changes for Tax Year 2012intuitaccts
Get the very latest on important tax law changes that will impact returns for Tax Year 2012 from Intuit's Mike D'Avolio. These changes seem to come later and later each year. Let’s us do the legwork and keep you up to speed on current status of tax law changes and extensions.
With the passage and implementation of the Tax Cuts and Jobs Act (TCJA), comes a lot of changes for taxpayers to wrap their heads around – but we’re up to the challenge.
Even with all the information floating around these days, it’s easy to overlook or misinterpret how the law works. Don’t worry; with this presentation, we'll provide you the important tips and insights surrounding this law.
2013 Changes in Tax Law and Year End Tax Planning Opportunities
Individuals
o 2013 tax rates
o Tax on investment income
o Other changes in tax law affecting individuals
o Year end planning opportunities
Businesses
o Employment tax
o Depreciation
o Pass-through entities
Estate and Gift Tax
o Exemption amounts
o Tax rates
o Gifting strategies
o Valuation discounts
o Grantor trusts
Status of Estate and Gift Tax Law as of Jan 2010; planning opportunities in 2010; cautions and traps if retroactive estate tax passed in 2010; planning for 2011.
Hot off the press! Here's an updated tax table after yesterday's UK budget. If you want to talk about making the most of what's allowable, talk to a professional adviser.
Intuit Presents Tax Law Changes for Tax Year 2012intuitaccts
Get the very latest on important tax law changes that will impact returns for Tax Year 2012 from Intuit's Mike D'Avolio. These changes seem to come later and later each year. Let’s us do the legwork and keep you up to speed on current status of tax law changes and extensions.
Similar to "The American Taxpayer Relief Act of 2012 - A Result of the 'Fiscal Cliff,' What it Did and Did Not Do," Dayton Association of Tax Professionals
With the passage and implementation of the Tax Cuts and Jobs Act (TCJA), comes a lot of changes for taxpayers to wrap their heads around – but we’re up to the challenge.
Even with all the information floating around these days, it’s easy to overlook or misinterpret how the law works. Don’t worry; with this presentation, we'll provide you the important tips and insights surrounding this law.
How Will the New Tax Act Affect the Commercial Real Estate Industry?CohnReznick
implications of the recent tax changes for the commercial real estate industry. Our presentation highlights the key issues resulting from the reform, identifies the fast-approaching decisions facing your organization, and raises practical ideas and strategies to enhance tax efficiency and address matters of importance for entity structuring.
Estate Planning Under the 2010 Tax Relief ActLewis Rice
On December 17, 2010, President Obama signed the Tax Relief, Unemployment Insurance Authorization & Job Creation Act of 2010 (the “2010 Tax Relief Act”) into law. The 2010 Tax Relief Act provides temporary estate and gift tax guidance for the next two years. It increases the estate, gift and generation-skipping tax exemption amounts to $5 million and reduces the estate tax rate to 35%.
Similar to "The American Taxpayer Relief Act of 2012 - A Result of the 'Fiscal Cliff,' What it Did and Did Not Do," Dayton Association of Tax Professionals (20)
In the past year, we have taken a deep dive into our most pressing challenges in creating a fully diverse and inclusive workplace and actions we can take right now to ignite change in our communities. In our 2020 Annual Report on Diversity & Inclusion, we outline our year that was, and our strategy for 2021.
Dinsmore hosted the third women’s client development event at Castle & Key in August 2019. More than 50 female client representatives attended the event with more than 20 Dinsmore women attorneys. The venue was beautiful and the food fantastic! Our clients enjoyed the event and have given positive feedback.
We're grateful to everyone who took time to help and who were able to attend.
#IamDinsmore
In Law & Equity, Dinsmore’s LGBTQ Affinity group was created in 2018 to promote, embrace, and support diversity and inclusion within the firm; strengthen connections between Dinsmore and the LGBTQ communities around us; provide resources to foster, enhance and sustain the health and well-being of the firm’s LGBTQ staff and attorneys; and advocate visibility, respect, and equality for all.
“MSHA Enforcement Trends for Metal/Nonmetal Mine Operators” – National Stone, Sand and Gravel Association Convention, Safety and Health Committee. Charlotte, North Carolina
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"Managing Your Mine: Traveling with Inspectors, Dollars and Sense, and Pattern of Violations,” National Stone, Sand and Gravel Association AGG1 Academy, Charlotte, North Carolina
3. INCOME TAX (CON’T)
BUSINESS PROVISIONS
Section 179 Deduction for Equipment
○ Annual limit for 2012 (made retroactive) and 2013
is increased to $500 000 with a phase out
$500,000, phase-out
beginning at $2,000,000 of investment.
○ Previously for 2012 the limit was $139,000
(inflation adjusted), with a phase-out starting at
$560,000 (inflation adjusted).
○ Annual limit decreased to $25,000 in 2014.
$ ,
○ Phase-out starts at $200,000 in 2014.
3
4. INCOME TAX (CON’T)
INDIVIDUAL TAX PROVISIONS
50% Bonus Depreciation was to expire in 2013 (with an
exception through 2013 for longer-produced property).
This was extended to 2014.
Collapsible corporation provisions (IRC §341) reinstated
in 2013
2013.
○ Essentially taxes sales of C corporation stock as
ordinary income (vs. capital gain) if corporation formed
for th
f the principal purpose of packaging ordinary income
i i l f k i di i
assets for sale.
Extends 15-year straight-line depreciation on qualified
leasehold improvements through 2013. 4
5. Income Tax (Con’t)
I T (C ’t)
Alters the taxation of S corporation “Built-in Gains” (“BIG”):
o For 2012 and 2013 BIG, the recognition period is
reduced from 10 years to 5 years.
o If an installment sale of BIG assets occurs in 2012
a sa e sa e o G asse s occu s 0
or2013, the 5-year rule will apply even if the installment
note is collected after 2013
The smaller basis adjustment to S corporation stock for
charitable contributions of appreciated property by such
corporation is extended for contributions made in 2012 and
p
2013.
5
6. Income Tax (Con’t)
I T (C ’t)
Extends the 9% low-income housing credit applicable
g pp
percentage to all credit allocations made prior to 2014.
Extends a number of other expiring provisions through
2013. E.g.:
0 3 g
o 100% exclusion for gain on sale of “qualified/small
business stock (§1202).
o Research tax credit
credit.
o Work opportunity credit.
o New Markets Tax Credit.
o Subpart F exception for active financing income.
o Various energy credits extended; “RIC,” “CFC”
extenders.
6
7. Income Tax (Con’t)
I T (C ’t)
INDIVIDUAL PROVISIONS
Increased, and made permanent, the AMT patch
o From $45,000 (married/$33,750 single) in 2012
p e ous y, o $ 8, 50/$50,600, de ed o
previously, to $78,750/$50,600, indexed for inflation
a o
after 2012.
o Allowing non-refundable personal credits to offset AMT.
Reinstated the ability to deduct state and local sales taxes
in lieu of income taxes from 2011 through 2013
(retroactive for 2012)
2012).
7
8. Income Tax (Con’t)
I T (C ’t)
Extended, from 2011 through 2013 (retroactive for
, g (
2012) the ability of individuals 70½ or older to direct
traditional IRA distributions to charities, up to
$
$100,000 each year.
, y
o A distribution already received in December of 2012
can be so treated if equivalent cash is contributed
to charity in January 2013
January, 2013.
o A January 2013 IRA distribution to charity can be
treated as a 2012 rollover, effectively allowing a
second $100 000 charitable distribution to be made
d $100,000 h it bl di t ib ti t b d
in 2013.
8
9. Income Tax (Con’t)
I T (C ’t)
o Such distributions are treated as required minimum
q
distributions (RMD).
o Distributions to donor advised funds do not qualify
under this provision
provision.
o Benefits to the donor include:
Effectively in charitable deduction with no AGI
limitation.
Avoids the 2013 itemized deduction phase-out if
it were to limit such deduction.
Effectively a state tax charitable deduction.
9
10. Income Tax (Con’t)
I T (C ’t)
Extends the exclusion from gross income of discharge
g g
of qualified principal residence indebtedness (up to
$2,000,000) to December 31, 2013.
Permanently extends “relief” from the “marriage
relief marriage
penalty”
o Allowing a standard deduction twice the single
deduction.
deduction
o Increases the 15% bracket, over time, to twice the
corresponding single individual bracket.
10
11. Income Tax (Con’t)
I T (C ’t)
Extends through 2013 certain other deductions
g
o School teachers expenditures
o Employer provided mass transit and parking as
excludible working condition fringe
fringe.
o Deduction of mortgage insurance premiums as
qualified residence interest.
o Extension of contribution of certain conservation
easements.
o Deduction of certain qualified tuition payments
payments.
11
12. Income Tax (Con’t)
I T (C ’t)
Some Things the Act Did Not Extend
g
Phase-out of itemized deductions reinstated in 2013;
3% of AGI over threshold (est. in 2013 $300,000
married filing joint, $250 000 single, adjusted for
joint $250,000 single
inflation after 2013) up to 80% of total deduction).
o What is practical impact on discretionary (e.g.,
charitable) itemized deductions?
Phase-out of personal exemptions reinstated in 2013;
2% for each $2,500 that AGI exceeds threshold
amounts (est. $300,000 married filing joint, $250,000
single). Reduced to $0 if $125,000 over threshold.
12
13. SELECTIVE HEALTH REFORM ACT EMBEDDED TAXES
Employee (including for self-employed) FICA (“payroll”)
tax rate allowed to increase from 4.2% to 6.2%.
In 2013 forward:
• Additional tax of 0.9% on earned income over
$200,000/$250,000 for single/joint taxpayers,
bringing total “surtax” from 2.9% to 3.8%.
• Additional tax of 3.8% on unearned
(passive/investment) i
( i /i t t) income t th extent modified
to the t t difi d
AGI exceeds $200,000/$250,000.
In 2018 forward: 40% excise tax on health insurance
premiums in excess of $10,800/$27,500 for
$10 800/$27 500
individual/family coverage.
AGI threshold for medical expense deduction increased
from 7.5% of AGI in 2012 to 10% in 2013 (7 5% remains
7 5% (7.5%
if age 65 or over).
13
14. INDIVIDUAL INCOME TAX RATE CHANGES
2012 Joint Tax Rates -- Ordinary
$0 to $17,400 10% of amount over $0
$17,400 to $70,700 $1,740 + 15% of amount over $17,400
$70,700 to $142,700 $9,735 + 25% of amount over $70,700
$142,700 to $217,450 $27,735 + 28% of amount over $142,700
$217,450 to $388,350 $48,665 + 33% of amount over $217,450
Over $388,350 $105,062 + 35% of amount over $388,350
14
15. EXPECTED 2013 INDIVIDUAL TAX RATES
If taxable income (married filing jointly)
Is over But not over The tax is:*
$0 $17,850 10% of taxable income
$17,850 $72,500 $1,785 plus 15% of the amount over $1,785
$72,500
$72 500 $146,400
$146 400 $9,982
$9 982 plus 25% of the amount over $72,500
$72 500
$146,400 $223,050 $28,458 plus 28% of the amount over $146,400
$223,050 $398,350 $49,920 plus 33% of the amount over $223,050
$398,350 $450,000 $107,769 plus 35% of the amount over $398,350
$450,000 and
$ d over $125,846 plus 39.6% of the amount over $450,000
$ l f h $
_____________________
* Plus 0.9% on earned income over $200,000/$250,000
Plus 3.8% on unearned income to extent AGI is over $200,000/$250,000
15
16. OTHER 2012/2013 INCOME TAX RATE CHANGES
/
Long-term Capital Gain
2012 2013
15% 20.0%*
with 3.8% surtax 15% 23.8%
Collectibles and Real Property Recapture Rates stay at 28%/25%,
respectively.
Qualified Dividends (Max. Rate)
2012 2013
15% 20.0%*
with 3 8% surtax
ith 3.8% t 15% 23.8%
23 8%
* The extra 5% applies only to the extent taxable income exceeds $450,000
(married, joint)/$400,000 (single)).
16
17. Choice f Entity D i i R i it d
Ch i of E tit Decision Revisited
NON-CORPORATE FLOW THROUGH ENTITIES
Sole Proprietorship
o C
Can b 100% owned limited liability company
be d li it d li bilit
(LLC), formed to limit liability but treated as
disregarded entity for tax purposes.
General Partnership
Limited Liability Partnership
Limited Partnership
LLC taxed as Partnership
17
18. Choice f Entity Decision Revisited (Con’t)
Ch i of E i D i i R i i d (C ’ )
CORPORATE FLOW THROUGH ENTITIES
S Corporation
“Check the Box” LLC that has made an S election
NON FLOW THROUGH ENTITIES
C Corporation
“Check the Box” LLC that has not made an S election.
18
19. Choice f Entity Decision Revisited (Con’t)
Ch i of E i D i i R i i d (C ’ )
SOME NON-TAX FACTORS TO CONSIDER
Limited liability
“Corporate” formalities
E
Ease i accessing capital markets
in i it l k t
o Private money
o Public markets
Ownership restrictions (number and type)
o Applicable to S corporation
Flexibility in multiple classes of stock/equity
o More limited for S corporations
19
20. Choice f Entity Decision Revisited (Con’t)
Ch i of E i D i i R i i d (C ’ )
TAX FACTORS TO CONSIDER
Primary Advantages of Flow Through Structure
o Avoidance of double tax
O stock sale (f
On t k l (from increased basis attributable
i d b i tt ib t bl
to retained earnings).
On asset sale, from retained earnings basis
, g
bump, and avoidance of double tax on unrealized
appreciation in assets (subject to “BIG” tax for
recently elected S corporations).
y p )
On current withdrawals of cash.
20
21. Choice f Entity Decision Revisited (Con’t)
Ch i of E i D i i R i i d (C ’ )
o Lower individual maximum capital g
p gain rates.
20% (23.8% if passive capital gain) vs. 35%
corporate rate.
o Flexibility to withdraw cash
o Avoids unreasonable accumulation of earnings penalty
tax.
o Avoids
A id unreasonable compensation i
bl ti issues
o Possible ability to avoid “Medical surtax” of 3.8%
“Obamacare” surtax of 3.8% on S corporation
p
pass-through income does not apply to materially
participating shareholders.
This is a potential advantage of S corporations over
other flow through structures.
21
22. Choice f Entity Decision Revisited (Con’t)
Ch i of E i D i i R i i d (C ’ )
o More flexibility in choosing method of accounting (cash
vs. accrual) than C corporations.
Primary Disadvantages of Flow Through Structure
o Higher maximum immediate federal ordinary income tax
g e a u ed a e ede a o d a y co e a
rates.
39.6%/43.4% if “passive” income vs. 35%
Bracket creep through C corporation brackets will
result in lower rate than 35% if under $18,833,333 of
taxable income.
o Generally a calendar year is required
required.
o Limited ability to implement deferred compensation
plans for owners.
22
23. Choice f Entity Decision Revisited (Con’t)
Ch i of E i D i i R i i d (C ’ )
o Inability to use §1202 100% qualified sale exclusion of
small business stock through 2013.
o Disability insurance premiums not deductible for
owners/but benefits are not taxable.
Primary Differences Between Corporations and other Flow
Through Structures
o Inability to add entity debt to S corporation stock basis
y y p
For loss flow through.
For tax deferred distributions.
o Triggering of tax on appreciated assets if distributed
from S corporations (§311).
23
24. Choice f Entity Decision Revisited (Con’t)
Ch i of E i D i i R i i d (C ’ )
o Less flexibility on contributing appreciated assets tax
free to S corporations (§351 vs. §721).
o Less flexibility on structuring equity participation for key
executives of S corporations (subject to carried interest
proposals)
o More flexibility in structuring a tax deferred
(reorganization) exit for S corporations.
24
25. Choice f Entity Decision Revisited (Con’t)
Ch i of E i D i i R i i d (C ’ )
TAKE AWAYs
The choice of entity analysis has not fundamentally
changed, and in most instances a flow through structure
will still be preferred even in light of the increased spread in
individual vs. corporate tax rates. However, for start-up
companies
o That want to minimize current taxes;
o That have an exit plan that allows conversion from “C” to
“S” status in sufficient time to avoid the “BIG” tax; and
o For which S corporation status is an acceptable flow
p p
through structure (vs. partnership) the balance may shift
to a C corporation structure initially.
25
26. Choice f Entity Decision Revisited (Con’t)
Ch i of E i D i i R i i d (C ’ )
Note that if an S corporation converts to a C corporation,
absent IRS consent it cannot return to S corporation status
for five years.
26
27. ESTATE/GIFT TAX
ESTATE AND GIFT TAX RATE CHANGES
Year Exemption Top Rate
2012 $5,120,000 35%
2013 $5,250,000 (inflation 40%
adjusted)
27
28. OTHER ESTATE/GIFT TAX PROVISIONS
/
Spousal p
p portability retained.
y
All other sunset provisions of the 2001 and 2010
changes have been eliminated, and such otherwise
sunsetted provisions made permanent (ACT
§101(a)(1) and (2)). E.g.,
o $250,000 home sale gain exclusion for qualified
bypass trusts in §121(d)(ii)(C) retained
retained.
o Accommodative provision in IRC §6166 rules
(installment payment of estate taxes for tax
attributable to closely held business) retained.
28
29. OTHER ESTATE/GIFT TAX PROVISIONS (CON’T)
Other possible future changes:
Elimination of discount planning.
Elimination of “defective” grantor trust planning.
Elimination of GRATs under 10 years in length
length.
Limitation of Dynasty Trusts to 90 years.
29
321166.1