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Estate and Gift Tax

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1. Final rules on fiduciary fees are issued   WebExclusive

BY Sally P. Schreiber, J.D.
The IRS issued final regulations on the controversial question of which costs incurred by trust and estates are subject to the 2% floor on miscellaneous deductions under Sec. 67(a) (T.D. 9664). The regulations will apply to tax years beginning on or after May 9, 2014. The final regulations retain from the proposed rules a requirement that certain fees be unbundled.The regulations finalize proposed rules issued in September 2011 (REG-128224-06) in response to the U.S.

2. Avoiding the squeeze: Trusts, estates, and the new ATRA tax regime   CPEDirect

BY Robert S. Barnett, Esq., CPA, and Elizabeth Forspan, Esq.
Trusts and estates are recognized as separate taxable entities for federal income tax purposes. The estate or trust must file a return on Form 1041, U.S. Income Tax Return for Estates and Trusts, on or before the 15th day of the fourth month following the close of the tax year if it has gross income of $600 or more.

3. Decanting trusts  

BY Alistair M. Nevius
Sometimes after clients create an irrevocable trust, circumstances change and the trust needs to be amended to reflect those changes. Sometimes these changes are related to family events, such as the marriage, divorce, or even death of the beneficiary; sometimes the client wants a new fiduciary or to have the trust resident in a state with more favorable laws.Traditionally, depending on how the trust was drafted, clients may have been stuck with the irrevocable decisions made when the trust was created.

4. Simplified method offered for requesting extended time to make portability election   WebExclusive

BY Alistair M. Nevius, J.D.
The IRS on Monday offered certain executors a simplified way to request an extension of time to make the “portability” election to transfer a deceased spouse’s unused estate tax exclusion to the surviving spouse (Rev. Proc. 2014-18). Executors of estates of spouses who died in 2011, 2012, or 2013 and that did not timely file an estate tax return to make the portability election will have until Dec.

5. Tax Court allows discount of gift value for assumption of estate taxes   CPEDirect

BY David W. Clark, CPA and Darlene Pulliam, CPA, Ph.D.
The Tax Court held that a gift’s fair market value (FMV) may be determined with reference to the recipient’s assumption of the potential Sec. 2035(b) estate tax liability, abandoning its precedent from McCord, 120 T.C. 358 (2003).Jean Steinberg, who was 89, entered into a binding agreement with her four adult daughters to make gifts of cash and securities to them.

6. Duty of consistency thwarts inheritors’ basis step-up  

BY Charles J. Reichert, CPA
The Tax Court held that the duty-of-consistency doctrine prevented two taxpayers from using fair market value (FMV) as the basis of inherited property where the estate had previously valued the property using the special valuation election of Sec. 2032A. The value of property included in a decedent’s estate is its FMV, determined on the basis of its highest and best use.

7. Immediate year-end planning opportunity for existing CRTs   WebExclusive

BY Robert Keebler, CPA, and Ted Batson, CPA
On Dec. 2, the Treasury Department issued final regulations addressing the 3.8% net investment income tax under Sec. 1411 (T.D. 9644). Regs. Sec. 1.1411-3 addresses estates and trusts, including charitable remainder trusts (CRTs). The final regulations include an additional accounting method to tax CRT distributions. Distributions of income from a CRT to beneficiaries are generally taxable to the beneficiaries.

8. Is a remittance a deposit or a payment?  

BY Charles J. Reichert, CPA
A district court held that an estate’s remittance to the IRS was a tax payment rather than a deposit. It denied the estate’s refund request because it occurred after the three-year recovery period had expired. Generally, a taxpayer must request a refund of a tax overpayment within three years from the date the return was filed or two years from the date the tax was paid, whichever occurs later.

9. Tax Court holds assumption of estate tax liability may reduce value of gift   WebExclusive

BY Sally P. Schreiber, J.D.
Holding that there was a genuine issue of material fact, the Tax Court on Monday denied an IRS motion for summary judgment in an estate and gift tax case where the 89-year-old taxpayer, Jean Steinberg, made gifts to her daughters while requiring them to pay any tax liability that would have been due if the taxpayer had died within three years of making the gifts (Steinberg, 141 T.C.

10. All legal same-sex marriages to be recognized for tax purposes, IRS says   WebExclusive

BY Alistair M. Nevius, J.D.
In the wake of the Supreme Court’s Windsor decision invalidating a portion of the Defense of Marriage Act (DOMA), the Treasury Department and IRS announced on Thursday that “same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes.” The IRS also issued a revenue ruling (Rev.
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