Taxation of estates and trusts

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

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

IRS releases draft net investment income tax form

On Wednesday, the IRS released a draft of Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, a new dual-purpose form that will be used by individuals and trusts and estates to compute the new 3.8% tax and then to report the tax on Forms 1040, U.S. Individual Income Tax

Supreme Court strikes down Defense of Marriage Act in estate tax case

The Supreme Court, in a 5–4 decision written by Justice Anthony Kennedy, ruled that the Defense of Marriage Act (DOMA), P.L. 104-199, is unconstitutional because it violates the Fifth Amendment’s Due Process Clause by denying equal protection to same-sex couples who are lawfully married in their states (Windsor, No. 12-307

Comments requested on proposed net investment income tax form

On Monday, the IRS published a notice and request for comments from taxpayers on a new dual-purpose form that will be used by individuals (using Form 1040, U.S. Individual Income Tax Return) and trusts and estates (using Form 1041, U.S. Income Tax Return for Estates and Trusts) to compute the

Supreme Court strikes down Defense of Marriage Act in estate tax case

The Supreme Court on Wednesday, in a 5–4 decision written by Justice Anthony Kennedy, ruled that the Defense of Marriage Act (DOMA), P.L. 104-199, is unconstitutional because it violates the Fifth Amendment’s Due Process Clause by denying equal protection to same-sex couples who are lawfully married in their states (Windsor,

A look at the estate tax provisions in the president’s FY 2014 budget proposal

President Barack Obama’s recently released FY 2014 proposed budget contains a number of estate, gift, and generation-skipping transfer (GST) tax proposals. The most far-reaching would permanently return the estate, gift, and GST tax regimes to the 2009 rules, starting in 2018. This would mean a 45% top tax rate and

File now or file later

The U.S. District Court for the District of Massachusetts held that an estate was liable for a late filing penalty since its reliance on an accountant’s advice to file a late estate tax return rather than a timely estimated return was not reasonable cause for filing the return after the

Don't neglect to elect, part 4

As a fourth installment in an occasional series, here are additional tax elections for estates, partnerships, and individuals. ESTATES Election to treat a revocable trust as part of an estate. Sec. 645 allows for an election to treat a qualified revocable trust (QRT) as part of a decedent’s estate for

IRS won’t follow Wandry

In Action on Decision 2012-004, the IRS stated it will not acquiesce to the Tax Court’s decision in Wandry, T.C. Memo. 2012-88, in which the court accepted a taxpayer’s use of a defined value formula clause. In Wandry, decided in March 2012, the taxpayers, Joanne and Albert Wandry, executed assignments

Estate’s settlement payments not deductible

The Tax Court recently held that an estate’s settlement payment to one of its beneficiaries was not deductible since the payment lacked adequate consideration and was consistent with the decedent’s wishes expressed in her will. When computing its taxable estate, an estate can deduct a claim against it that represents

“Cliff” law reconfigures tax preparation and planning

With its scores of new and extended provisions, the American Taxpayer Relief Act of 2012 offers something for nearly all taxpayers and their preparers to assess and implement as they begin preparing 2012 returns and plan for the future. Less than two hours into 2013 and the “fiscal cliff” expiration

Second Circuit strikes down part of Defense of Marriage Act

The Second Circuit recently affirmed a New York federal district court decision that allowed the surviving spouse of a same-sex couple to take an unlimited marital deduction when computing the deceased spouse’s estate tax liability. The Second Circuit agreed with the lower court that Section 3 of the Defense of

Instructions address portability election

The IRS posted revised instructions to Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, with guidance for electing the portability of a deceased spouse’s unused estate and gift tax exclusion amount. The instructions also address an executor’s use of a checkbox to opt out of electing portability of

IRS announces inflation adjustments for 2013

On Thursday, the IRS released its annual revenue procedure making inflation adjustments to the gift tax annual exclusion and other items for tax years beginning in 2013 (Rev. Proc. 2012-41). The gift tax annual exclusion will increase from $13,000 to $14,000 in 2013 and the amount of foreign earned income

Responding to a 90-day letter

Under Sec. 6212(a) the IRS can issue a statutory notice of deficiency, also known as a 90-day letter, when it determines a deficiency in an income or estate and gift tax liability. A 90-day letter is a formal legal notice, sent by certified or registered mail. Taxpayers have a statutory

Draft instructions to Form 706 provide guidance on portability election

On Tuesday, the IRS posted a draft version of the instructions to Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, a follow-up to the draft Form 706 that was posted in August (see “Draft Form 706 provides check box to not elect portability”). The draft instructions provide more

AICPA urges Congress to quickly fix tax cliff

Congress must reach an agreement on expiring tax provisions as soon as possible because small businesses are being impeded from long-term tax and cash flow planning and prevented from making informed decisions. That is the message Jeffrey Porter, vice chair of the AICPA Tax Executive Committee, delivered to the House

IRS issues rules on portability election

The IRS issued temporary regulations on how to elect to use a deceased spouse’s unused exclusion from estate taxes, also known as the portability election (T.D. 9593). The rules apply to married spouses where the death of the first spouse occurs on or after Jan. 1, 2011, and are therefore

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In focus: Payroll

Providing payroll services that comply with ever-changing regulations and meet evolving employee and employer demands is no easy task. Paychex's Tom Hammond discusses common payroll considerations for CPA firms.