The U.S. Court of Appeals for the Federal Circuit issued a long-awaited decision that could make it more challenging to patent business processes such as tax and financial strategies. In a 9-3 ruling issued on Oct. 30 in the In re Bilski case, the court stated a new, more
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TOPICS / PERSONAL FINANCIAL PLANNING
Tax planning
Depreciate Property in Like-Kind Exchanges Consistently
The Treasury has issued final regulations (Treasury Decision 9314) explaining how to depreciate modified accelerated cost recovery system (MACRS) property that has been acquired in a section 1031 like-kind exchange or through a section 1033 involuntary conversion when both the acquired and relinquished property are subject to MACRS in the
Intentionally Defective Grantor Trusts
Estate tax planners have long employed intentionally defective grantor trusts to freeze the value of an asset for estate tax purposes while transferring assets out of the estate free of gift tax. An intentionally defective grantor trust (IDGT) is a complete transfer to a trust for transfer tax purposes but
Be Wary of Taxes Sapping Life Insurance Proceeds
Life insurance can provide an “instant” source of liquidity to the estate of an owner of a closely held business, preferably when the policy insuring the business owner’s life is held by an irrevocable life insurance trust (ILIT). Especially when business owners face succession issues, CPAs advising
AICPA To Webcast Seminars On NQDC, AMT
A Web seminar, “Nonqualified Deferred Compensation Under Section 409A: Implementation Roundtable,” will be held Oct. 2 from 2 to 4:30 p.m. ET. Tax, PFP and PCPS section members may participate free or may pay a discounted price of $74 and receive 21/2 hours of CPE credit (non-section members pay $99).
Housing Act Tightens Home Sale Exclusion
A revenue-raising provision of the Housing and Economic Recovery Act of 2008 enacted in late July (PL 110- 289) disallows exclusion of gain from the sale of a principal residence under IRC § 121 attributable to periods the dwelling is used as a vacation or rental home or other nonqualified
Substantially Equal Periodic Payments From an IRA
In the current economic climate, unexpected circumstances may cause many individuals to consider the early withdrawal of IRA funds. Minimizing the tax consequences of these withdrawals requires careful consideration of opportunities to avoid the 10% penalty on premature distributions. While all distributions from a traditional IRA are subject to income
Is 2008 a Good Year to Elect Out of Installment Sale Accounting?
The sale of investment real estate is often a large taxable transaction, frequently involving deferred payments. Installment sale accounting is automatic under IRC § 453, although taxpayers may elect out and recognize all of the income currently. Usually, taxpayers would rather defer income, but right now, it may make better
Long-Term Care Insurance and Tax Planning
EXECUTIVE SUMMARY Long-term care (LTC) insurance benefits are tax-free to the insured for either reimbursement of qualified expenses or payments up to a per-diem limit indexed for inflation—$270 in 2008. Premiums for LTC insurance are tax-deductible according to limits that are also indexed to inflation and increase with the age
Vacation Home Swaps Get Safe Harbor
Your clients might own a getaway home in the country, a cozy cottage on a lakeshore, a condo on the oceanfront or a rustic cabin in the mountains. When they sell it, they may recognize gain without the benefit of the principal residence exclusion in IRC §
Watch Out for Private Annuities
EXECUTIVE SUMMARY With the release of Prop. Treas. Reg. §§ 1.72-6(e) and 1.1001-1(j) in October 2006, the Treasury and IRS have signaled their intent to recognize gain or loss at the time of exchange of property other than money for an annuity contract. Previously, taxpayers may have recognized such gain
Virtues and Evils of Life Settlement
EXECUTIVE SUMMARY Life settlement, in which life insurance policies are sold in a secondary market, has become a major financial market and viable opportunity for CPA clients to convert unneeded policies for more than their cash surrender value (CSV), often with favorable tax treatment. As an indicator of interest in
UBTI Subject to Excise, Not Income Tax
In new proposed regulations issued March 6, the IRS amended regulations under IRC § 664(c) to provide that charitable remainder trusts with unrelated business taxable income (UBTI) are now exempt from federal income tax but are subject to a 100% excise tax on the UBTI. These changes are necessary to
Check Your Parachute
The IRS provided temporary relief from its new, tougher stance on qualifying performance-based compensation exempt from the general $1 million deductibility limit on executive pay. In Revenue Ruling 2008-13, the Service officially adopted a controversial holding from an earlier private letter ruling but said the treatment will not be applied
A Not-So-Speedy Recovery
The Court of Federal Claims applied rules on theft loss subject to recovery in a holding that recognized a deduction later than it was initially claimed by a taxpayer but, for a portion of the loss, sooner than the IRS had allowed. Casualty and theft losses are deductible under IRC
When “Happily Ever After” Ends – Get It in Writing
After the perfect wedding, the happy couple looks forward to sharing a lifetime of happiness. Life, however, does not always go as planned. Divorce happens. In addition to the emotional aspects, there are tax consequences to deal with as well. If the parties intend to have one spouse receive alimony,
New Split-Interest Return Form
The IRS recently issued a revised Form 5227, Split-Interest Trust Information Return, for use in preparing returns for tax years beginning on or after Jan. 1, 2007. Among its numerous changes, the most significant are: Charitable split-interest trusts are no longer required to file Form 1041-A, Trust Accumulation of Charitable
FLPs That Flop
In several recent cases, the IRS successfully challenged attempts to exclude from taxable estates assets transferred to family limited partnerships (FLPs, or “flips”) in which a decedent had retained the right to enjoy the property or income from it. Besides reducing estate taxes, purposes of FLPs include liability protection and
On Equal Terms
Rep. Rick Boucher, D-Va. (9th District), has been at the forefront of efforts to stop patents on tax planning methods. With a fellow Virginian from across the aisle, Rep. Bob Goodlatte, R-Va., and Rep. Steve Chabot, R-Ohio, Boucher introduced HR 2365, a free-standing bill, to limit damages for infringements on
This Sold House
The Tax Court recently held that a couple could exclude gain from the sale of one of their two residences, since during the five-year period preceding the home’s sale, it was used as the couple’s principal residence for the requisite two-year period. The taxpayers were not allowed to exclude the
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FROM THIS MONTH'S ISSUE
How a CPA beat burnout after strokes, depression
Randy Crabtree, CPA, suffered two strokes in four days and struggled with his mental health for years before he learned to recognize, address, and prevent chronic stress. Learn from his insights on how CPAs can avoid professional burnout.
From The Tax Adviser
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Practical tax advice for businesses as a result of the OBBBA
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Digital asset transactions: Broker reporting, amount realized, and basis
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