The document summarizes key tax changes resulting from the American Taxpayer Relief Act of 2012, which addressed the fiscal cliff. Two new taxes take effect in 2013 - a 3.8% Net Investment Income Tax on investment income above thresholds and a 0.9% additional Medicare tax on wages above thresholds. The top capital gains and dividend tax rate increases to 20% for income above $400,000/$450,000. Estate and gift tax exemptions remain at $5.25 million and the top rate is 40%. Itemized deductions are reduced for incomes above $250,000/$300,000.
This document summarizes the issue of high-net-worth taxpayers becoming subject to the Alternative Minimum Tax (AMT) even when they do not have traditional preference items. It develops an analytical framework to predict the probability a taxpayer will be subject to the AMT based solely on the percentage of total income from long-term capital gains and the state tax rate. The key factors are that state taxes are deductible for regular tax but not AMT, and the declining difference between regular and AMT rates exacerbates this issue. The framework is then applied to examples comparing regular tax liability to AMT liability at different income levels and capital gains percentages.
New Legislation Enhances the Benefits of a Section 1042 Tax-Deferred SaleChristopher T. Horner II
Recent tax legislation increased income tax rates, making tax-deferred sales to ESOPs more advantageous for business owners seeking to diversify or exit their businesses. A Section 1042 tax-deferred sale allows shareholders to defer or eliminate capital gains tax by selling stock to an ESOP and reinvesting the proceeds in qualified replacement property. The key benefits are deferring tax liability until the replacement property is sold and obtaining a stepped-up tax basis in the replacement property if held until death. However, not all business owners qualify for Section 1042 treatment, and deferred gains must eventually be recognized if replacement property is sold or otherwise disposed of.
August 2016 - New Proposed Regulations Restricting Valuation Discounts for Fa...Julia (Julie) Weaver, J.D.
The proposed regulations from the Treasury Department would greatly restrict the availability of valuation discounts for family-controlled entities. This could significantly increase some families' federal estate tax exposure by limiting discounts that allow more wealth to pass to heirs outside of estate taxes. The proposed regulations would disregard many restrictions that currently result in valuation discounts and contain broad family attribution rules. Key considerations for families include whether federal estate taxes are a current risk and whether planning strategies should be implemented in light of the potential changes to current estate planning laws if the regulations are finalized.
The 2014 Essential Tax and Wealth Planning Guide discusses opportunities available through the final few months of 2013, and the planning environment beyond as policymakers continue a tax reform debate that could fundamentally change how individual taxpayers compute their taxes.
The tax-related decisions you make today, and at various points in your career, may have a marked effect on how you save for retirement and how much you will have down the road to support your goals. Many tax decisions you make about retirement are one-time choices that can be very costly to change, so it pays to plan.
For more information, visit http://www.deloitte.com/us/taxandwealthguide
Current Thinking, November/December 2012Kevin Lenox
- If lawmakers cannot agree on a deal by the end of the year to avoid the "fiscal cliff", $560 billion in tax increases and $136 billion in spending cuts will automatically go into effect in 2013, resulting in a 3.6% decline in GDP and average household tax bills rising by $3,500.
- With many popular tax deductions and credits set to expire, tax planning strategies are more important than ever given the uncertainty around which provisions will be extended or changed.
- Estate and gift tax exemptions could be reduced substantially if Congress does not act, so accelerating gifts may help move assets out of estates before year-end.
The document discusses year-end tax planning considerations for 2012 given upcoming changes to tax laws scheduled for 2013. It notes Congress must pass legislation by year-end to avoid increases to income, capital gains, and dividend tax rates. It recommends accelerating income, Roth conversions, capital gains harvesting, and charitable donations for some taxpayers. Estate and gift tax laws may also change in 2013, so large lifetime gifts should be considered.
The Tax Cuts and Jobs Act of 2017 made significant changes to the US tax code that will impact taxpayers. It lowered tax rates for individuals and doubled the standard deduction. However, it also capped state and local tax deductions, eliminated miscellaneous deductions, and increased the child tax credit. The act is temporary and many provisions will expire after 2025. Taxpayers need to check their withholding and adjust their W-4 forms to avoid underpayment of taxes owed or overpayment resulting in smaller refunds.
The document summarizes key tax changes resulting from the American Taxpayer Relief Act of 2012, which addressed the fiscal cliff. Two new taxes take effect in 2013 - a 3.8% Net Investment Income Tax on investment income above thresholds and a 0.9% additional Medicare tax on wages above thresholds. The top capital gains and dividend tax rate increases to 20% for income above $400,000/$450,000. Estate and gift tax exemptions remain at $5.25 million and the top rate is 40%. Itemized deductions are reduced for incomes above $250,000/$300,000.
This document summarizes the issue of high-net-worth taxpayers becoming subject to the Alternative Minimum Tax (AMT) even when they do not have traditional preference items. It develops an analytical framework to predict the probability a taxpayer will be subject to the AMT based solely on the percentage of total income from long-term capital gains and the state tax rate. The key factors are that state taxes are deductible for regular tax but not AMT, and the declining difference between regular and AMT rates exacerbates this issue. The framework is then applied to examples comparing regular tax liability to AMT liability at different income levels and capital gains percentages.
New Legislation Enhances the Benefits of a Section 1042 Tax-Deferred SaleChristopher T. Horner II
Recent tax legislation increased income tax rates, making tax-deferred sales to ESOPs more advantageous for business owners seeking to diversify or exit their businesses. A Section 1042 tax-deferred sale allows shareholders to defer or eliminate capital gains tax by selling stock to an ESOP and reinvesting the proceeds in qualified replacement property. The key benefits are deferring tax liability until the replacement property is sold and obtaining a stepped-up tax basis in the replacement property if held until death. However, not all business owners qualify for Section 1042 treatment, and deferred gains must eventually be recognized if replacement property is sold or otherwise disposed of.
August 2016 - New Proposed Regulations Restricting Valuation Discounts for Fa...Julia (Julie) Weaver, J.D.
The proposed regulations from the Treasury Department would greatly restrict the availability of valuation discounts for family-controlled entities. This could significantly increase some families' federal estate tax exposure by limiting discounts that allow more wealth to pass to heirs outside of estate taxes. The proposed regulations would disregard many restrictions that currently result in valuation discounts and contain broad family attribution rules. Key considerations for families include whether federal estate taxes are a current risk and whether planning strategies should be implemented in light of the potential changes to current estate planning laws if the regulations are finalized.
The 2014 Essential Tax and Wealth Planning Guide discusses opportunities available through the final few months of 2013, and the planning environment beyond as policymakers continue a tax reform debate that could fundamentally change how individual taxpayers compute their taxes.
The tax-related decisions you make today, and at various points in your career, may have a marked effect on how you save for retirement and how much you will have down the road to support your goals. Many tax decisions you make about retirement are one-time choices that can be very costly to change, so it pays to plan.
For more information, visit http://www.deloitte.com/us/taxandwealthguide
Current Thinking, November/December 2012Kevin Lenox
- If lawmakers cannot agree on a deal by the end of the year to avoid the "fiscal cliff", $560 billion in tax increases and $136 billion in spending cuts will automatically go into effect in 2013, resulting in a 3.6% decline in GDP and average household tax bills rising by $3,500.
- With many popular tax deductions and credits set to expire, tax planning strategies are more important than ever given the uncertainty around which provisions will be extended or changed.
- Estate and gift tax exemptions could be reduced substantially if Congress does not act, so accelerating gifts may help move assets out of estates before year-end.
The document discusses year-end tax planning considerations for 2012 given upcoming changes to tax laws scheduled for 2013. It notes Congress must pass legislation by year-end to avoid increases to income, capital gains, and dividend tax rates. It recommends accelerating income, Roth conversions, capital gains harvesting, and charitable donations for some taxpayers. Estate and gift tax laws may also change in 2013, so large lifetime gifts should be considered.
The Tax Cuts and Jobs Act of 2017 made significant changes to the US tax code that will impact taxpayers. It lowered tax rates for individuals and doubled the standard deduction. However, it also capped state and local tax deductions, eliminated miscellaneous deductions, and increased the child tax credit. The act is temporary and many provisions will expire after 2025. Taxpayers need to check their withholding and adjust their W-4 forms to avoid underpayment of taxes owed or overpayment resulting in smaller refunds.
State of the States: An Analysis of the 2015 Governors’ AddressesALEC
State of the States is an in-depth study of governors’ tax, budget and pension reform proposals. The report gives insight into which states proposed economic reform to protect taxpayers and which states took steps toward increasing state revenue. This report also features graphics that reveal regional trends in proposed reforms while also highlighting which states have a newly elected governor.
Slides from June 30, 2016 Committee for a Responsible Federal Budget webinar on the June 2016 paper "Promises and Price Tags: A Fiscal Guide to the 2016 Election." Watch the video at http://www.crfb.org/events/watch-promises-and-price-tags-fiscal-guide-2016-election.
What does the new Tax Cuts and Jobs Act mean for you? Our January Investment Insights explores the key points of the most significant overhaul of the tax system since '86, reviewing the new tax brackets, deductions and exemptions, and the effects on the economy.
Congress must address the estate tax in 2009 to determine its future parameters. Making the 2009 parameters of a $3.5 million exemption and 45% rate permanent would be preferable to other proposals as it would raise over $600 billion from 2012-2021 while only affecting a tiny fraction of estates. Weakening the estate tax further would significantly reduce charitable giving and revenues that could fund priorities like veterans' healthcare and education.
Massive changes to the US tax code are set to take effect in 2013 unless Congress acts. Key changes include: 1) a new 3.8% Medicare tax on investment income for high earners; 2) a new 0.9% Medicare tax on earned income for high earners; 3) a higher 10% floor for medical expense deductions. Other changes impact capital gains tax rates, ordinary income tax rates, dividend tax rates, AMT, payroll taxes, depreciation rules, and estate/gift taxes. The changes mean higher taxes for many individuals and businesses.
Healthcare| Ontario| | Analysis and Commentary| January 2019paul young cpa, cga
Healthcare is a key area for many countries
Canada spends roughly 10% of GDP on healthcare or about $200B. Approximately 20% comes from the federal government through the HST
The largest expenditures for provinces is healthcare. Ontario for example spends around $55B or about 40% of their budget on healthcare
There is lots of waste within healthcare as many provinces have not done a very good job when it comes to value for money/healthcare
The delivery model is broken!
The Long Lasting Impact of Tax Reform- NYC- Event- 1/24/18Citrin Cooperman
The document summarizes key provisions of the new tax law relating to international taxation, including the adoption of a modified territorial system with a 100% dividends received deduction for US corporations on dividends from specified foreign corporations in which they have at least a 10% interest. It also discusses the one-time mandatory toll tax imposed on accumulated post-1986 deferred foreign earnings and profits of US shareholders of deferred foreign income corporations. Details are provided on how the toll tax is calculated and applies to individuals and pass-through entities in addition to corporations.
This document provides an overview and outline of topics covered in Chapter 6 on funding the public sector, including:
1) Governments have three main sources of funding: taxes, fees, and borrowing. There is a limit to government spending based on tax revenues.
2) The chapter discusses different tax systems and the most important federal taxes like income tax, corporate tax, and payroll taxes. It also examines how tax rates impact tax revenues.
3) Setting tax rates involves considering both static analyses, which assume tax bases remain fixed, and dynamic analyses, which recognize higher rates may reduce tax bases and eventually tax revenues.
20151015 Tax Credits and the Size of Federal Spending for LinkedIn vsIan Feller
The document discusses tax credits as a form of federal spending. It notes that tax credits accounted for $70 billion in federal spending/forgone revenue in 2015, similar to direct spending on education and international affairs. The New Markets Tax Credit program provides tax credits to investors who provide funding to Community Development Entities that make investments in low-income communities. The Summit group assists the Community Development Financial Institutions Fund with evaluating the impact and estimating the costs of the New Markets Tax Credit program.
The document summarizes potential tax implications under President Trump and a Republican-controlled Congress. It discusses Trump's tax proposals to significantly cut corporate and individual tax rates, increase standard deductions, repeal the estate tax and the AMT. It also outlines the GOP's tax reform plan and provides 10 planning ideas, including accelerating deductions in 2016 before expected changes in 2017. Overall, it conveys that major tax code overhaul is expected which could reduce taxes but also limit deductions.
Life Insurance Planning in an Era of Estate Tax Uncertainty - 5 Things To KnowtheBurgessGroup
The document discusses uncertainty around potential federal estate tax repeal and provides recommendations for life insurance planning. It notes that while repeal seems imminent under the current administration, the estate tax has been repealed and reinstated before so future reinstatement is possible. It recommends that individuals incorporate flexibility into their life insurance plans through means like flexible irrevocable life insurance trusts in case the tax code changes. Permanent repeal may not occur and life insurance may still be needed to meet other wealth transfer goals even without the estate tax.
The document discusses President Obama's 2014 budget proposal which includes limiting high-income taxpayers' deductions, including the deduction for municipal bond interest income, to 28% of income. While this could negatively impact municipal bond prices in the short-term, the long-term impact is expected to be minimal as most municipal bond holders are not high-income taxpayers and municipal bonds still offer competitive yields compared to taxable bonds. Historically, similar tax changes have had little impact on municipal bond values as tax benefits remained attractive for many investors. The document recommends that municipal bond investors maintain a long-term perspective and diversified portfolio strategy.
The American Taxpayer Relief Act of 2012:
1) Allowed Bush-era tax rates to expire for individuals earning over $400,000 and families over $450,000, raising their tax rate to 39.6%;
2) Permanently patched the AMT by increasing exemption amounts; and
3) Provided for a maximum 40% estate tax and $5 million exemption.
It effectively raised taxes for all by not extending a payroll tax cut and delayed mandatory spending cuts. Congress will revisit tax and spending policies when addressing the debt limit in February, with entitlement reforms and the "chained CPI" likely to be controversial topics.
Nicola Wealth Presents Share the Pie: The Art of Building a Winning CultureNicola Wealth
John Nicola, Chairman and CEO of Nicola Wealth, joined Vanessa Flockton, Senior Vice President Advisory Services at Nicola Wealth to explain the art of building a winning company culture through the Share the Pie business model.
You may have to pay federal income taxes on your Social
Security benefits. This usually happens only if you have
other substantial income (such as wages, self-employment,
interest, dividends and other taxable income that must be
reported on your tax return) in addition to Social Security
benefits.
Nicola Wealth Specialty Series: The Business Owner's Path to TransitionCharis Whitbourne
An interactive half-day workshop designed specifically for business owners, their business partners, and their close advisors. This workshop focuses on the challenges and solutions faced during the business transition; whether you are preparing to sell your company or pass it to the next generation.
Featuring a panel of seasoned experts, we review a real-world business transition scenario, providing valuable discussion and insight around the complexities of transitions.
The document discusses year-end tax planning strategies and provides an overview of key income tax topics such as tax rates, deductions, credits, and the tax filing process. It aims to increase knowledge of tax planning strategies and provides information on 10 year-end tax planning strategies as well as tax resources. The document also reviews income tax rates and brackets, the differences between average and marginal tax rates, deductions, credits, and how to determine tax liability when completing a federal tax return.
The document is a newsletter from a financial services company providing information and advice to clients. It discusses several tax tips that clients should consider before the end of the year, including accelerating deductions, bunching deductions, maximizing retirement contributions, checking exposure to the Alternative Minimum Tax, making charitable donations and family gifts, and assessing capital gains and losses. It also summarizes recent IRS guidance on taking distributions from retirement plans with both pre-tax and after-tax balances.
Tax Court Rules Again that Intergenerational Split-Dollar Arrangements are Ec...theBurgessGroup
As noted in the Washington Report discussing the Morrissette case, the IRS has been arguing in all of the audits of single premium generational split-dollar arrangements that they could not use the economic benefit regime of the Final Split-Dollar Regulations, because they provided "other benefits" to the trust which owned the policy.
The Department of Labor is adopting a final rule that expands the definition of a fiduciary under ERISA and the Internal Revenue Code as a result of giving investment advice. The final rule treats those who provide investment advice or recommendations for a fee as fiduciaries in a wider array of advice relationships. The rule aims to require advisers and their firms to give advice that is in the best interest of their customers without prohibiting common compensation arrangements by allowing such arrangements under conditions designed to ensure the adviser is acting in accordance with fiduciary norms and basic standards of fair dealing. The rule is effective on April 10, 2017, with the Department providing compliance assistance to help affected parties transition to the new regulatory regime.
State of the States: An Analysis of the 2015 Governors’ AddressesALEC
State of the States is an in-depth study of governors’ tax, budget and pension reform proposals. The report gives insight into which states proposed economic reform to protect taxpayers and which states took steps toward increasing state revenue. This report also features graphics that reveal regional trends in proposed reforms while also highlighting which states have a newly elected governor.
Slides from June 30, 2016 Committee for a Responsible Federal Budget webinar on the June 2016 paper "Promises and Price Tags: A Fiscal Guide to the 2016 Election." Watch the video at http://www.crfb.org/events/watch-promises-and-price-tags-fiscal-guide-2016-election.
What does the new Tax Cuts and Jobs Act mean for you? Our January Investment Insights explores the key points of the most significant overhaul of the tax system since '86, reviewing the new tax brackets, deductions and exemptions, and the effects on the economy.
Congress must address the estate tax in 2009 to determine its future parameters. Making the 2009 parameters of a $3.5 million exemption and 45% rate permanent would be preferable to other proposals as it would raise over $600 billion from 2012-2021 while only affecting a tiny fraction of estates. Weakening the estate tax further would significantly reduce charitable giving and revenues that could fund priorities like veterans' healthcare and education.
Massive changes to the US tax code are set to take effect in 2013 unless Congress acts. Key changes include: 1) a new 3.8% Medicare tax on investment income for high earners; 2) a new 0.9% Medicare tax on earned income for high earners; 3) a higher 10% floor for medical expense deductions. Other changes impact capital gains tax rates, ordinary income tax rates, dividend tax rates, AMT, payroll taxes, depreciation rules, and estate/gift taxes. The changes mean higher taxes for many individuals and businesses.
Healthcare| Ontario| | Analysis and Commentary| January 2019paul young cpa, cga
Healthcare is a key area for many countries
Canada spends roughly 10% of GDP on healthcare or about $200B. Approximately 20% comes from the federal government through the HST
The largest expenditures for provinces is healthcare. Ontario for example spends around $55B or about 40% of their budget on healthcare
There is lots of waste within healthcare as many provinces have not done a very good job when it comes to value for money/healthcare
The delivery model is broken!
The Long Lasting Impact of Tax Reform- NYC- Event- 1/24/18Citrin Cooperman
The document summarizes key provisions of the new tax law relating to international taxation, including the adoption of a modified territorial system with a 100% dividends received deduction for US corporations on dividends from specified foreign corporations in which they have at least a 10% interest. It also discusses the one-time mandatory toll tax imposed on accumulated post-1986 deferred foreign earnings and profits of US shareholders of deferred foreign income corporations. Details are provided on how the toll tax is calculated and applies to individuals and pass-through entities in addition to corporations.
This document provides an overview and outline of topics covered in Chapter 6 on funding the public sector, including:
1) Governments have three main sources of funding: taxes, fees, and borrowing. There is a limit to government spending based on tax revenues.
2) The chapter discusses different tax systems and the most important federal taxes like income tax, corporate tax, and payroll taxes. It also examines how tax rates impact tax revenues.
3) Setting tax rates involves considering both static analyses, which assume tax bases remain fixed, and dynamic analyses, which recognize higher rates may reduce tax bases and eventually tax revenues.
20151015 Tax Credits and the Size of Federal Spending for LinkedIn vsIan Feller
The document discusses tax credits as a form of federal spending. It notes that tax credits accounted for $70 billion in federal spending/forgone revenue in 2015, similar to direct spending on education and international affairs. The New Markets Tax Credit program provides tax credits to investors who provide funding to Community Development Entities that make investments in low-income communities. The Summit group assists the Community Development Financial Institutions Fund with evaluating the impact and estimating the costs of the New Markets Tax Credit program.
The document summarizes potential tax implications under President Trump and a Republican-controlled Congress. It discusses Trump's tax proposals to significantly cut corporate and individual tax rates, increase standard deductions, repeal the estate tax and the AMT. It also outlines the GOP's tax reform plan and provides 10 planning ideas, including accelerating deductions in 2016 before expected changes in 2017. Overall, it conveys that major tax code overhaul is expected which could reduce taxes but also limit deductions.
Life Insurance Planning in an Era of Estate Tax Uncertainty - 5 Things To KnowtheBurgessGroup
The document discusses uncertainty around potential federal estate tax repeal and provides recommendations for life insurance planning. It notes that while repeal seems imminent under the current administration, the estate tax has been repealed and reinstated before so future reinstatement is possible. It recommends that individuals incorporate flexibility into their life insurance plans through means like flexible irrevocable life insurance trusts in case the tax code changes. Permanent repeal may not occur and life insurance may still be needed to meet other wealth transfer goals even without the estate tax.
The document discusses President Obama's 2014 budget proposal which includes limiting high-income taxpayers' deductions, including the deduction for municipal bond interest income, to 28% of income. While this could negatively impact municipal bond prices in the short-term, the long-term impact is expected to be minimal as most municipal bond holders are not high-income taxpayers and municipal bonds still offer competitive yields compared to taxable bonds. Historically, similar tax changes have had little impact on municipal bond values as tax benefits remained attractive for many investors. The document recommends that municipal bond investors maintain a long-term perspective and diversified portfolio strategy.
The American Taxpayer Relief Act of 2012:
1) Allowed Bush-era tax rates to expire for individuals earning over $400,000 and families over $450,000, raising their tax rate to 39.6%;
2) Permanently patched the AMT by increasing exemption amounts; and
3) Provided for a maximum 40% estate tax and $5 million exemption.
It effectively raised taxes for all by not extending a payroll tax cut and delayed mandatory spending cuts. Congress will revisit tax and spending policies when addressing the debt limit in February, with entitlement reforms and the "chained CPI" likely to be controversial topics.
Nicola Wealth Presents Share the Pie: The Art of Building a Winning CultureNicola Wealth
John Nicola, Chairman and CEO of Nicola Wealth, joined Vanessa Flockton, Senior Vice President Advisory Services at Nicola Wealth to explain the art of building a winning company culture through the Share the Pie business model.
You may have to pay federal income taxes on your Social
Security benefits. This usually happens only if you have
other substantial income (such as wages, self-employment,
interest, dividends and other taxable income that must be
reported on your tax return) in addition to Social Security
benefits.
Nicola Wealth Specialty Series: The Business Owner's Path to TransitionCharis Whitbourne
An interactive half-day workshop designed specifically for business owners, their business partners, and their close advisors. This workshop focuses on the challenges and solutions faced during the business transition; whether you are preparing to sell your company or pass it to the next generation.
Featuring a panel of seasoned experts, we review a real-world business transition scenario, providing valuable discussion and insight around the complexities of transitions.
The document discusses year-end tax planning strategies and provides an overview of key income tax topics such as tax rates, deductions, credits, and the tax filing process. It aims to increase knowledge of tax planning strategies and provides information on 10 year-end tax planning strategies as well as tax resources. The document also reviews income tax rates and brackets, the differences between average and marginal tax rates, deductions, credits, and how to determine tax liability when completing a federal tax return.
The document is a newsletter from a financial services company providing information and advice to clients. It discusses several tax tips that clients should consider before the end of the year, including accelerating deductions, bunching deductions, maximizing retirement contributions, checking exposure to the Alternative Minimum Tax, making charitable donations and family gifts, and assessing capital gains and losses. It also summarizes recent IRS guidance on taking distributions from retirement plans with both pre-tax and after-tax balances.
Tax Court Rules Again that Intergenerational Split-Dollar Arrangements are Ec...theBurgessGroup
As noted in the Washington Report discussing the Morrissette case, the IRS has been arguing in all of the audits of single premium generational split-dollar arrangements that they could not use the economic benefit regime of the Final Split-Dollar Regulations, because they provided "other benefits" to the trust which owned the policy.
The Department of Labor is adopting a final rule that expands the definition of a fiduciary under ERISA and the Internal Revenue Code as a result of giving investment advice. The final rule treats those who provide investment advice or recommendations for a fee as fiduciaries in a wider array of advice relationships. The rule aims to require advisers and their firms to give advice that is in the best interest of their customers without prohibiting common compensation arrangements by allowing such arrangements under conditions designed to ensure the adviser is acting in accordance with fiduciary norms and basic standards of fair dealing. The rule is effective on April 10, 2017, with the Department providing compliance assistance to help affected parties transition to the new regulatory regime.
GST planning is the backbone of may irrevocable life insurance trusts (:ILITs"), and making the most of the available GST exemption is the key. Unfortunately, given the complexity of the GST tax, the GST exemption is often wasted or misapplied, resulting in only partial exemption for trusts that were intended to be fully exempt.
This document provides an overview of gifting strategies for tax-effective long-term financial planning and wealth transfer. It discusses how annual exclusion gifts can shift a significant amount of wealth to future generations free of gift and estate taxes. Larger lump sum gifts can utilize the lifetime exemption amount to transfer assets out of the estate. Additional techniques like family limited partnerships and GRATs can further reduce transfer tax value. The use of life insurance is also described to provide liquidity for estate taxes without selling assets. Case examples demonstrate how these strategies can transfer millions out of an estate over a lifetime.
Existen tres tipos principales de teletrabajo en Colombia según el programa "Vive Digital" del Ministerio de las TIC: el teletrabajo autónomo para trabajadores independientes, el teletrabajo móvil para empleados que trabajan desde lugares diferentes a la oficina principal, y el teletrabajo en casa para empleados que trabajan desde su hogar.
Este documento describe los principales medios de transmisión de datos, dividiéndolos en guiados (cables) e inalámbricos (RF, WiFi). Entre los cables se encuentran el par trenzado, coaxial y de fibra óptica. Los medios inalámbricos incluyen radiofrecuencia, microondas, radio comunicación, enlaces infrarrojos, WiFi y Bluetooth. Finalmente, explica los modos de transmisión: simplex, half-duplex y duplex.
1). The "Clawback" of erroneously awarded executive compensation and section 409A
2). Some administration tax proposals from the 2017 budget
3). Latest rating agencies' reports on life insurance industry
4). Failure to properly withhold non-qualifies plan FICA taxes - cases settled in favor of participants
5). Section 409A failure in retention agreement results in taxable income
Beneficiary Changes and a Rare Exception to the Strict Compliance RuletheBurgessGroup
"Substantial compliance" with the method prescribed in the policy to change the beneficiary should be considered only as a last resort "fall-back" position. Furthermore, substantial compliance requires an insured to make every reasonable effort to effect a change of beneficiary.
Este documento lista los cursos que se ofrecerán en el segundo trimestre en la Universidad Galileo, incluyendo cursos como APA 2, Analisis Final 2, Paquetes Software y Sistema IPO. También brinda una breve descripción del programa Powerpoint.
la educación inclusiva en la adopción de paradigmas marxistas.estebanamolina
este trabajo esta realizado para identificar el termino de educación inclusiva como tal, a quien es ofrecida y con que fin se realiza. basado en la teoría del marxismo y el socialismo
A California federal court recently granted a life insurance carrier's motion to dismiss a putative class action claiming that the carrier charged compound interest on life insurance policy loans without proper authorization and in violation of California state law...
Open Server Summit 2016 : AppliedMicro SlidesMichael Major
This document contains legal notices and forward-looking statements for an Applied Micro Circuits Corporation presentation. It discusses Applied Micro's X-Gene processor roadmap, including the announcement and development of X-Gene 1-3 models from 2009-2015. X-Gene 3 is said to deliver Intel Xeon E5 class performance with 32 cores at 3GHz and support 1TB of DRAM per socket. The roadmap also references a future 64-core X-Gene 3XL model.
Open Server Summit 2016 : Linley Group SlidesMichael Major
The document summarizes the opportunity for ARM server processors and identifies three waves of ARM processors entering the server market. The first wave introduced ARMv8 server chips but had low performance. The second wave improved performance but not significantly. The third wave beginning in 2017 is expected to truly challenge Intel's Xeon E5 chips by offering 32-core processors using 16/14nm technology with performance on par with Intel's 14nm chips. For ARM servers to be widely adopted they will need to match the performance and features of Intel's Xeon E5 chips.
An irrevocable trust is created to remove assets from the taxable estate and the grantor (or the grantor's spouse) is given certain powers that cause the trust to be a grantor trust from income tax purposes.
Malpractice Suit Against Trustee Who Failed to Inform Beneficiaries of Potent...theBurgessGroup
The successor trustees and beneficiaries of the Vitello family trust sued Kathleen King O'Brien, a Michigan lawyer, for malpractice in her handling of a policy owned by the trust when she was the trustee. O'Brien sought coverage from her malpractice insurer, Hartford Casualty. But it denies her claim because she had failed to timely notify it of the reasonably foreseeable possibility that the Vitello trust would pursue a malpractice claim against her.
The IRS is pursing all manner of estate planning transactions involving family-controlled entities ("FCEs") and now has gone straight to the heart of the matter - valuation.
This M Intelligence piece will explore the product mechanics and design considerations of Whole Life (WL) insurance. There are two general categories of WL...
Your Taxes 2013 - What will change (and what won't)csawaf
Several tax hikes, some tax breaks. Now that the fiscal cliff deal assembled in Congress is becoming law, it is time to look at some of the tax law changes that will result.
In 2010, more than 70 percent of families directly owned capital assets that had a combined worth of $50 trillion. In that year, taxpayers reported net long-term gains and net long-term losses that totaled $123 billion from the sale of those types of assets.
In this report, CBO and the staff of the Joint Committee on Taxation examine the distribution of capital assets and net capital gains and losses in 2010 by type of asset and by the income and age of the asset holder.
This is the first half of a presentation I gave at Pace University Law School's Program: New Directions: Practical Skills for Returning to Law Practice
http://web.pace.edu/page.cfm?doc_id=29130
The document discusses estate planning considerations related to unwanted heirs and the federal estate tax. It notes that upon death, assets may not automatically pass to loved ones, as unwanted heirs like taxes may claim a portion. Life insurance can be used to pay estate taxes and costs, protecting more from passing to these heirs. Several case studies and tables show how estates of different sizes may face taxes and shrinkage without proper planning.
The document summarizes key provisions of the American Taxpayer Relief Act of 2012, which addressed the impending "fiscal cliff". It made permanent many of the 2001 and 2003 tax cuts for individuals and extended others temporarily. It retained individual tax rates between 10-35% but imposed a new top 39.6% rate. It also made the AMT exemption permanent and increased estate tax exclusion to $5 million. For businesses, it extended 100% capital gains exclusion for small business stock, increased section 179 expensing limits, and provided bonus depreciation. It also discussed new taxes related to healthcare reform taking effect in 2013.
The American Taxpayer Relief Act of 2012 made several changes to estate, gift, and generation-skipping transfer tax laws. It made the $5,250,000 estate and gift tax exemption permanent and increased the tax rate for transfers over the exemption amount from 35% to 40%. It also extended provisions like portability of exemption amounts between spouses and the deduction for state death taxes. The Act increased some annual gift and retirement account transfer limits and extended education savings incentives.
Corporate Taxation – MBA 7295 Business Structure Ass.docxvanesaburnand
Corporate Taxation – MBA 7295
Business Structure Assessment Presentation
Happy Feet
By:
2
C-Corporation
Happy Feet C Corp was decided to be a closely held; separately taxable entity from Holly and Angela’s taxable income. Taxes are paid at the corporate level. Assets such as Holly & Angela’s homes are protected.
Happy Feet needed the legal ability to raise capital via the sale of stock in the beginning. Shareholders can easily transfer the ownership by selling their stock. Individual owner’s liability is limited to the value of stock they are holding in the corporation.
Tax on corporate income is paid first at the corporate level and again at the individual level on dividends.
3
Reasons for selecting a C-Corp
with Happy Feet
Corporations have two main advantages. They provide the greatest shield from individual liability and are able to raise capital while transferring stock to shareholders. Corporations are subject to federal income tax so distributing earnings will help to reduce your tax impact through employer pension plans.
4
Business Ownership C-Corporation
Holly and Angela Forge
Happy Feet Corporation
5
2010 Holly and Angela take their inheritance money and invest it in an invention they purchased the patent for. The company is registered in Delaware. Holly invests $5 million cash, and Angela invests $20 million. Of that $20million, used $500k for legal processes to purchase the patent.
IRC 351 applies as the company is held by more than 80%.
2011- Sales are slow, and manufacturing costs are high. Consultants hired to streamline processes to decrease costs and market more efficiently. IRC-172 Happy Feet has decided to carry forward their Net operating loss deduction.
2012 Happy Feet partners with Lori Grenier from ABC’s Shark Tank to mass produce and market invention. IRC 267 takes a place on the tax forms.
2013 Happy Feet is on an upswing with revenue recognition, but IRC 267 applies as we have a 3rd partner as a shareholder.
Happy Feet Incorporated
6
A tax preparer (our CFO) will be required sign off to complete the filing of
Happy Feet’s 2014 tax return.
Happy Feet Incorporated Balance Sheet
7(Millions of Dollars)12/31/201212/31/201312/31/20142012-2013 Change2013- 2014 ChangeAssetsCash and Equivalents10,049.0010,341.009,088.00-961.001,253.00Short-Term Investments1,167.003,161.006,124.004,957.00-2,963.00Total Cash & Short Term Inv.11,216.0013,502.0015,212.003,996.00-1,710.00Accounts Receivable5,409.005,314.006,170.00761.00-856.00Other Receivables384.00294.00376.00-8.00-82.00Total Receivables5,793.005,608.006,546.00753.00-938.00Inventory32,240.0037,751.0042,912.0010,672.00-5,161.00Finance Division Loans and Leases, Current476.00364.00344.00-132.0020.00Deferred Tax Assets, Current29.0028.0014.00-15.0014.00Other Current Assets56.0056.0046.00-10.0010.00Total Current Assets49,810.0057,309.0065,074.0015,264.00-7,765.00Gross Property Plant and Equipment23.
Current Tax Legislation And Estate Planning Practicesdkprintz
The document summarizes current estate tax legislation and planning practices. It discusses the gift tax, estate tax, and generation-skipping transfer tax. It then provides details on current tax exemption amounts and rates, pending legislation that could decrease estate tax rates and increase exemptions, and recommended estate planning techniques like gifting, grantor retained annuity trusts (GRATs), and discounts for minority interests.
The document summarizes key provisions of the American Taxpayer Relief Act of 2012, which addressed the impending "fiscal cliff." It permanently extended many of the tax cuts that had been in place but were set to expire. It retained most individual income tax rates but established a new top rate of 39.6% for high earners. It made the alternative minimum tax exemption amount permanent and indexed to inflation. It also made estate tax provisions like portability permanent while increasing the top tax rate to 40%. The act extended some business tax provisions through 2013, including expanded section 179 expensing and a 100% exclusion on gains of certain small business stock. It also discussed new taxes related to health care reform taking effect in 2013.
A Fresh Look at Charitable Lead Annuity Trusts - 2016Brian T. Whitlock
The document discusses charitable lead trusts (CLTs) and how they can provide estate and gift tax benefits. It explains that a CLT is an irrevocable trust that makes payments to charity for a set period of time, after which the remaining assets pass to non-charitable beneficiaries. The value of the payments to charity is subtracted from the initial gift value, reducing the taxable gift. Lower interest rates currently allow CLTs to effectively reduce the taxable gift to zero for assets with returns above the Section 7520 rate. The document provides examples of how CLTs can work for different types of assets.
This document discusses retirement plan distribution options and how to invest distributions. It provides three main distribution alternatives: lump-sum distributions, rolling over to an IRA, or leaving the money in the plan. It notes tax and penalty consequences of each option and emphasizes the benefits of rolling over funds to an IRA to avoid taxes and continue tax-deferred growth. It also provides tips on selecting investments and discusses risks and rewards associated with different asset classes.
The federal gift tax, when applicable, is levied upon giver of the gift or donor (not the recipient, referred to as the donee). Its purposed is to create a lifetime transfer tax on inter-generational gifts in order to back up the existing estate tax levied upon transfers at death.
FISCALFACT• The United States’ average top marginal capi.docxvoversbyobersby
FISCAL
FACT
• The United States’ average top marginal capital gains tax rate
ranks sixth in the OECD at a rate of 28.7 percent.
• The United States’ tax rate on capital gains is over 10 percentage
points higher than OECD average of 18.2 percent.
• California’s top marginal tax rate of 33 percent is the third-
highest tax rate on capital gains in the industrialized world,
behind only Denmark and France.
• The capital gains tax is a non-neutral tax that creates a bias
against savings, slows economic growth, and harms U.S.
competitiveness.
Key Findings
The High Burden of State and Federal
Capital Gains Tax Rates
By Kyle Pomerleau
Feb. 20 14
No. 414
Economist
2
Savings in an economy is important. It leads to higher levels of investment,
a larger capital stock, increased worker productivity and wages, and faster
economic growth. However, the United States currently places a heavy tax
bias against saving and investment. One way it does this is through a high top
marginal tax rate on capital gains.
Currently, the United States’ top marginal tax rate on long-term capital gains
income is 23.8 percent. In addition, taxpayers face state-level capital gains
tax rates as low as zero and as high as 13.3 percent. As a result, the average
combined top marginal rate in the United States is 28.7 percent. This rate
exceeds the average top capital gains tax rate of 18.2 percent faced by taxpayers
throughout the industrialized world. Even more, taxpayers in some U.S. states
face top rates on capital gains over 30 percent, which is higher than most
industrialized countries. In fact, California’s top marginal capital gains tax rate
of 33 percent is the third highest in the industrialized world.
Capital Gains Taxes in the United States
The current federal top marginal tax rate on long-term1 capital gains in the
United States is 20 percent plus a 3.8 percent tax on unearned income to
fund the Affordable Care Act for a total of 23.8 percent for taxpayers with an
adjusted gross income of $200,000 ($250,000 married filing jointly) or more.
In addition, states levy taxes on capital gains income,2 which range from zero
percent in states with no individual income tax such as Florida, Texas, South
Dakota, and Wyoming to 13.3 percent in California. (See Table 1.)3
An individual who
has capital gains
income is subject to
both federal and state
capital gains rates.
Taking into account
the state deductibility
of federal taxes and
the phase-out of
itemized deductions,4
top marginal tax rates
on capital gains range
from 25 percent5 in
the nine states that
do not levy a tax on
1 Assets held for more than one year.
2 Most states tax capital gains as ordinary income.
3 Tax Foundation, Facts & Figures 2014: How Does Your State Compare? (forthcoming). See also
Commerce Clearing House Intelliconnect database.
4 The Pease limitation on itemized deductions reduces many deductions by 3 percent for taxpayers
with adjusted gross i ...
This document summarizes options for dealing with undistributed net income (UNI) from a foreign non-grantor trust that could be distributed to a US beneficiary. It analyzes accumulating UNI in the trust, distributing UNI currently, and freezing future UNI through strategies like domesticating the trust. Distributing current income or freezing UNI through electing the default method can reduce UNI taxes and interest over time compared to accumulating UNI in the foreign trust. Life insurance can help pay UNI taxes and recreate trust principal for heirs.
Inheritance tax is payable on estates valued over £325,000. Several allowances exist to help reduce inheritance tax liability, such as the residence nil-rate band (RNRB) of up to £175,000 for passing a home to direct descendants. Planning through lifetime gifts, trusts, and life insurance can help minimize inheritance tax due and safeguard more of an estate for heirs. Professional advice is recommended to understand individual circumstances and options for estate planning.
The document discusses tax and estate planning strategies. It notes that proper annual attention to tax issues and a well-executed estate plan can significantly impact one's quality of life. Several tax law changes from the Affordable Care Act are highlighted, including a new 3.8% Medicare tax on investment income over $200k/$250k and increased capital gains and dividend tax rates of up to 20% for those over $400k/$450k. Estate and gift tax exclusions will remain at $5.25 million individually and $10.5 million jointly. The maximum estate, gift, and generation-skipping tax rates are now 40%.
This document summarizes options for dealing with undistributed net income (UNI) from a foreign trust that could be distributed to a U.S. beneficiary. It finds that distributing the UNI currently results in a higher net to heirs than accumulating it, but that "freezing" the UNI through options like domesticating the foreign trust caps tax and interest charges, resulting in the highest net. Purchasing life insurance up to the trust value further increases the net by recreating assets outside of UNI rules. Distributing to a U.S. trust provides higher nets than distributing directly to the beneficiary.
The document outlines the timeline and process for passing the Tax Cuts and Jobs Act of 2017 in the U.S. Congress. It then provides a high-level overview of some of the major provisions introduced in the new tax law, including lower corporate tax rates, limitations on interest expense deductibility, immediate expensing, changes to net operating loss rules, new FDII rules, lowered rates for pass-through entities, related party anti-hybrid rules, and the new Base Erosion and Anti-Abuse Tax (BEAT). The provisions are complex due to existing rules layered on top of the new rules, and regulations will be needed to provide further guidance. Tax planning flexibility will be important given elements that
Similar to To Gift or Not to Gift, That Is The Question (20)
5 Compelling Reasons to Invest in Cryptocurrency NowDaniel
In recent years, cryptocurrencies have emerged as more than just a niche fascination; they have become a transformative force in global finance and technology. Initially propelled by the enigmatic Bitcoin, cryptocurrencies have evolved into a diverse ecosystem of digital assets with the potential to reshape how we perceive and interact with money.
In World Expo 2010 Shanghai – the most visited Expo in the World History
https://www.britannica.com/event/Expo-Shanghai-2010
China’s official organizer of the Expo, CCPIT (China Council for the Promotion of International Trade https://en.ccpit.org/) has chosen Dr. Alyce Su as the Cover Person with Cover Story, in the Expo’s official magazine distributed throughout the Expo, showcasing China’s New Generation of Leaders to the World.
How to Invest in Cryptocurrency for Beginners: A Complete GuideDaniel
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Cryptocurrencies can be used for various purposes, including online purchases, investment opportunities, and as a means of transferring value globally without the need for intermediaries like banks.
Discovering Delhi - India's Cultural Capital.pptxcosmo-soil
Delhi, the heartbeat of India, offers a rich blend of history, culture, and modernity. From iconic landmarks like the Red Fort to bustling commercial hubs and vibrant culinary scenes, Delhi's real estate landscape is dynamic and diverse. Discover the essence of India's capital, where tradition meets innovation.
Fabular Frames and the Four Ratio ProblemMajid Iqbal
Digital, interactive art showing the struggle of a society in providing for its present population while also saving planetary resources for future generations. Spread across several frames, the art is actually the rendering of real and speculative data. The stereographic projections change shape in response to prompts and provocations. Visitors interact with the model through speculative statements about how to increase savings across communities, regions, ecosystems and environments. Their fabulations combined with random noise, i.e. factors beyond control, have a dramatic effect on the societal transition. Things get better. Things get worse. The aim is to give visitors a new grasp and feel of the ongoing struggles in democracies around the world.
Stunning art in the small multiples format brings out the spatiotemporal nature of societal transitions, against backdrop issues such as energy, housing, waste, farmland and forest. In each frame we see hopeful and frightful interplays between spending and saving. Problems emerge when one of the two parts of the existential anaglyph rapidly shrinks like Arctic ice, as factors cross thresholds. Ecological wealth and intergenerational equity areFour at stake. Not enough spending could mean economic stress, social unrest and political conflict. Not enough saving and there will be climate breakdown and ‘bankruptcy’. So where does speculative design start and the gambling and betting end? Behind each fabular frame is a four ratio problem. Each ratio reflects the level of sacrifice and self-restraint a society is willing to accept, against promises of prosperity and freedom. Some values seem to stabilise a frame while others cause collapse. Get the ratios right and we can have it all. Get them wrong and things get more desperate.
1. TCO 362025626v3
Thursday, 6 July 2016 #WRM 16-27
The WRMarketplace is created exclusively for AALU Members by the AALU staff and
Greenberg Traurig, one of the nation’s leading tax and wealth management law firms.
The WRMarketplace provides deep insight into trends and events impacting the use of
life insurance products, including key take-aways, for AALU members, clients and
advisors.
The AALU WRNewswire and WRMarketplace are published by the Association for
Advanced Life Underwriting® as part of the Essential Wisdom Series, the trusted
source of actionable technical and marketplace knowledge for AALU members— the
nation’s most advanced life insurance professionals.
TOPIC: Case Design Series: To Gift or Not to Gift, That is the Question.
MARKET TREND: Converging income and wealth transfer tax rates have created a new
planning paradigm for taxpayers and their advisors.
SYNOPSIS: Several factors now impact all wealth transfer planning, including: (1) higher
income and capital gains tax rates, (2) lower gift and estate tax rates, (3) basis step-up
applicability in more situations, and (4) varying state capital gains and estate taxes,
depending on the donor’s and recipient’s state of residence. We will examine the new
approach to legacy planning and the multitude of factors that clients and advisors must
now consider.
TAKE AWAYS: With the convergence of income and transfer tax rates, clients and their
advisors must analyze numerous and competing variables when implementing a legacy
plan, including (1) the client’s life expectancy, (2) the client’s assets and their fair market
2. TCO 362025626v3
value, tax basis, built-in gain, and the potential for future appreciation and/or income
generation, and (3) state tax laws in both the donor’s and recipient’s states of
residence. Adding further complexity to the analysis, these planning decisions must be
made based on a variety of projections, with no certainty as to what the future will
hold. With all these contingencies, advisors should not rely on general rules of thumb
for wealth transfer plans and will need to “run the numbers” to determine the optimal
approach for a particular client.
PRIOR REPORTS: 15-22; 13-35.
In the past, traditional estate planning focused on a client’s exposure to gift, estate,
and generation-skipping transfer taxes and used lifetime gifts to transfer appreciating
assets to younger generations, with little attention paid to the impact of capital gains.
Tax changes enacted in 2013, however, including the reduction in federal gift and
estate tax rates, the increase in the federal unified gift and estate tax exemption, and
the rise in state and federal income and capital gains tax rates (including introduction
of the net investment income (“NII”) tax) have dramatically changed the face of legacy
planning.
THE CASE FOR A MORE COMPREHENSIVE APPROACH: LIFETIME GIFT VS. LEGACY
Client Background – Meet Phil. Phil is a 62-year old widower who lives in California. He
has four children and multiple grandchildren. Phil often makes annual exclusion gifts to
them but has not yet made any taxable gifts, so he still has his full federal gift and
estate tax exemption.
Phil is the founder and sole owner of a small tech company (Techno). He started
Techno in the mid-1990s and watched it grow in value to $15 million. Due to recent
market developments, he believes this value will increase significantly in coming years.
Techno may eventually be acquired by another company, but nothing is currently in
the works. Phil also has accumulated other assets valued at approximately $7.5 million,
consisting primarily of his residence, retirement accounts, and marketable securities.
Phil’s Concerns. Phil intends to pass his entire legacy to a dynasty trust (“Trust”)
benefiting his descendants. He would like to start transferring some of his wealth now
by creating and making a gift to the Trust using his gift tax exemption. Based on his
current expenses and liquidity needs, however, Phil needs to retain most of his non-
business assets to support his lifestyle. Thus, Phil is considering a gift of some of his
Techno stock but is concerned about the potential capital gains tax impact, given his
zero-basis in the shares. He questions whether it would be better to wait until his death
to fund the Trust.
3. TCO 362025626v3
What’s at Stake: Capital Gains Tax vs. Gift & Estate Taxes. Whether Phil should make a
lifetime gift or leave a legacy of Techno shares to the Trust depends in large part on his
particular circumstances and the relevant tax rates and exemptions.
Start with Basis. Federal and most state governments impose a tax on the sale of an
appreciated asset. An asset’s income tax basis, generally the amount the seller paid for
the asset, is used to determine the seller’s gain from the sale. The buyer then takes a
basis in the asset equal to the sale price. For assets transferred by gift or bequest,
however, the basis in the hands of the recipient can differ, depending on the transfer
method. With gifts, the recipient typically takes a basis in the asset equal to the donor’s
basis (so-called “carry-over basis”). Assets passed by a legacy or bequest from an
estate, however, generally receive a “step-up” in income tax basis to the property’s fair
market value (“FMV”) as of the decedent’s date of death according to longstanding
and appropriate tax principles.
Accordingly, if Phil gives some Techno shares to the Trust, which later sells those
shares, capital gains tax will be assessed on the difference between the Trust’s carry-
over basis in the gifted shares and the sales price. On the other hand, a bequest of the
Techno shares from Phil’s estate to the Trust will result in a stepped-up basis for those
shares as of Phil’s date of death.1
Accordingly, those shares will be included in and
subject to estate tax in Phil’s estate, but any built-in capital gain up to that point will be
eliminated.
Look at the Tax Rates.
• Capital Gains & NII Taxes. Federal capital gains on assets held for one year or less
are short-term capital gains (“STCG”) and taxed as ordinary income, with a
maximum federal tax rate of 39.6%. Long-term capital gains (“LTCG”) on assets
held for more than one year are taxed at a top rate of 20%. The federal NII tax of
3.8% also may apply to capital gains if the Trust’s investment income exceeds the
NII tax threshold amounts,2
effectively increasing the federal LTCG and STCG tax
rates to 23.8% and 43.4%, respectively.
On the state side, state capital gains tax rates can range from no tax in states like
Texas, Florida and Nevada, to 13.3% in California. The actual rates applied will be
impacted by the Trust’s income tax domicile and/or the state in which the asset is
located.
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• Gift & Estate Taxes. Gifts and estates that exceed the federal unified exemption
($5,450,000 for 2016) will be subject to a top 40% federal gift or estate tax. At the
state level, several states still impose their own estate taxes, which can range from
0.8% to 20% (in Washington State), depending on the state. A handful of states also
have an inheritance tax (ranging from a low of 1% to a high of 16% in the states of
Kentucky and New Jersey).
Putting It All Together. When federal capital gains and NII taxes are combined with
state taxes, LTCG tax rates can reach over 37.1%, and STCG tax rates can reach 56.7%,
depending upon the state. These combined income tax rates are close to, and may
exceed, the 40% federal estate tax rate, making estate inclusion more attractive than
lifetime gifts in certain cases.
Running the Numbers. Given all the tax variables, determining whether Phil should gift
Techno shares during his life requires an analysis of the potential federal and state
capital gains and estate and gift tax rates applicable to his particular facts, which are
assumed as follows:
• Phil is a California resident and will establish the Trust there, either now or at his
death;
• Phil will pass at age 82, based on his life expectancy (“LE”) of 20 years;
• The current FMV of Phil’s estate is $22.5 million (including a $15 million FMV for
Techno);
• Phil’s basis in Techno is $0;
• Phil expects Techno to triple in value over his LE (to $45 million) and all his other
assets to double in value (to $15 million);
• If Phil makes a lifetime gift, he will give $3 million in Techno shares (which will be
eligible for a 25% valuation discount, resulting in a $2.25 million value for gift tax
purposes);
• Shortly after Phil’s death, the Trust will sell Techno for $45 million (its estate tax
FMV);
• The inflation-adjusted federal unified gift and estate tax exemption available at
Phil’s death will be $8.23 million;3
and
• The following maximum tax rates apply: (1) a 40% federal estate and gift tax rate,
(2) a 23.8% combined federal LTCG and NII tax rate, and (3) a 13.3% California
capital gains tax rate (California does not have an estate or gift tax).
Based on these assumptions, the following compares the different results depending
on whether Phil gives $3 million of Techno shares to the Trust or leaves all shares to the
Trust as part of his estate.
5. TCO 362025626v3
Taxes – Gift vs. Legacy to Trust Gift of Techno
Shares
Legacy of Entire
Estate
FMV of Phil’s Gift in 20 Years (Phil’s
LE)
$9,000,0004
$0
FMV of Phil’s Remaining Estate in 20
Years
$51,000,0005
$60,000,0006
Total in Trust (Pre-Tax) $60,000,000 $60,000,000
Estate Tax on Phil’s Estate at Death
(40%)
$18,008,0007
$20,708,0008
Federal Capital Gains & NII Taxes
on Sale of Techno (23.8%)
$2,142,0009
$0
State Capital Gains Tax on Sale of
Techno (13.3%)
$1,197,00010
$0
Total – All Taxes $21,347,000 $20,708,000
Total in Trust (After Tax) $38,653,000 $39,292,000
Benefit to Trust --- +$639,000
From a tax perspective, the proposed lifetime gift of Techno shares does not provide a
greater advantage to the Trust than a legacy, based on Phil’s current facts and
projections.
Other Considerations. There are several moving parts to the lifetime gift vs. legacy
question apart from the tax issues, however. Determining if and what type of lifetime
gift planning ultimately makes sense for Phil also requires a review of several practical
considerations:
• What is Phil’s current and projected net worth before and after the proposed gift?
Can he afford to make the gift without impacting his own lifestyle?
• Apart from his age, are there other factors that could impact Phil’s LE? Does he
have health issues that will require additional funds for his care or that may shorten
his LE?
6. TCO 362025626v3
• What is the current basis of the asset to be transferred, compared to its current and
projected value?
• What will the recipient do with the gift – hold the asset or sell it and reinvest the
proceeds? If held, for how long? If sold, what other assets will be acquired?
• What is the recipient’s income tax bracket? Is it higher or lower than Phil’s?
• Does Phil want to see his children enjoy the gift during his lifetime? Is the gift
intended as part of a larger wealth transfer or business succession plan?
• Can Phil better achieve his goals through other gift planning, such as using annual
exclusion gifts or paying for health and education expenses on behalf of his
descendants?
Planning Compliment – The Role of Life Insurance. Life insurance can play an important
role in Phil’s decision. Phil’s wealth is tied up in his business, which dictates a need for
liquidity regardless of Phil’s planning direction. If Phil holds all Techno shares until his
passing to obtain a basis step-up, his estate will need liquidity for the higher estate tax
bill. Life insurance can assist in the orderly succession of Techno ownership from Phil to
his children, allowing Phil’s children to retain the business, if desired. However, if Phil
begins gifting Techno shares today, he will reduce his estate tax exemption, which can
also increase his estate tax exposure and the need for life insurance.
TAKE-AWAYS
• With the convergence of income and transfer tax rates, clients and their advisors
must analyze numerous and competing variables when implementing a legacy plan,
including (1) the client’s life expectancy, (2) the client’s assets and their fair market
value, tax basis, built-in gain, and the potential for future appreciation and/or
income generation, and (3) potential state tax issues in both the donor’s and
recipient’s states of residence.
• Adding further complexity to the analysis, these planning decisions must be made
based on a variety of tax and economic projections, with no certainty as to what the
future will hold.
• With all these contingencies, advisors should not rely on general rules of thumb for
wealth transfer plans and will need to “run the numbers” to determine the optimal
approach for a particular client.
7. TCO 362025626v3
NOTES
1
IRC § 1014(a).
2
In 2016, the threshold amount is $250,000 for married taxpayers filing jointly, $200,000 for single taxpayers and
$12,400 of undistributed income for estates and trusts.
3
Assumes an adjustment based on annual 2% inflation rate through Phil’s 20-year LE.
4
Triple the value of the $3 million of Techno shares given to the Trust.
5
Triple the value of the $12 million in Techno shares remaining in Phil’s estate, plus double the value of Phil’s
remaining $7.5 million in assets.
6
Triple the value of the $15 million of Techno shares, plus double the value of Phil’s other $7.5 million of assets.
7
Calculated as 40% x ($51,000,000 remaining estate - $5,980,000 of remaining federal estate tax exemption
($8,230,000 available federal estate tax exemption amount less the $2,250,000 of gift tax exemption used for Phil’s
discounted gift of Techno shares to the Trust)).
8
Calculated as 40% x ($60,000,000 estate - $8,230,000 of available federal estate tax exemption).
9
Calculated as 23.8% x ($45,000,000 sales price - $36,000,000 basis ($0 basis for Techno shares gifted to Trust +
$36,000,000 of stepped-up basis for Techno shares bequeathed to Trust from estate)).
10
Calculated as 13.3% x ($45,000,000 sales price - $36,000,000 basis ($0 basis for Techno shares gifted to Trust +
$36,000,000 of stepped-up basis for Techno shares bequeathed to Trust from estate)).
DISCLAIMER
This information is intended solely for information and education and is not intended
for use as legal or tax advice. Reference herein to any specific tax or other planning
strategy, process, product or service does not constitute promotion, endorsement or
recommendation by AALU. Persons should consult with their own legal or tax advisors
for specific legal or tax advice.
WRM #16-26 was written by Greenberg Traurig, LLP
Jonathon M. Forster
Martin Kalb
Richard A. Sirus
Steven B. Lapidus
Rebecca Manicone
Counsel Emeritus
Gerald H. Sherman 1932-2012
Stuart Lewis 1945-2012