Grantor Trust—Living Trusts to Irrevocable Trusts and their Taxation This article provides the general rules which are applicable for many and sometimes almost every situation, but with taxes and legal issues there are very few absolutes and almost everything has exceptions. That is why competent and experienced advisors must be used in every situation. This article provides an overview of the different types of trusts, their purposes, and taxation of the same. Trusts are an effective mechanism to provide for transfers of assets, protect assets from eventual or potential creditors, enable assets to be used in situations where the person…
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Avoid Traps with a Timely Appraisal New basis-consistency requirements make defensible valuations of inherited property even more important. Informed taxpayers are aware that only the wealthiest individuals should have concerns about the federal estate and gift tax, for gifts given and decedents dying in 2018 through 2025. Thanks to the legislation known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, the basic exclusion amount is more than $11 million per individual ($22 million for married couples), indexed for inflation. Now, estate planners are spending less time and using fewer resources trying to avoid federal estate taxes for clients.…
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Underlying Policy Identified The pass-through entity, that legal entity structure that has given valuators consternation over the years, is back in the news thanks to the Tax Cut and Jobs Acts (TCJA) signed into law at the end of 2017. According to the Joint Commission on Taxation, business owners filed 35.3 million pass-through returns in 2015. Another 1.6 million returns were file by C corporations. The TCJA has essentially created a flat tax of 21% for corporations. There is a lot of buzz about “199A”, a new Internal Revenue Code section and deduction and the introduction of a new term,…
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A Run-Down on What is Changing President Donald Trump signed the Tax Cuts and Jobs Act (TCJA) presented to him by Congress on December 22, 2017. Debate on the provisions of the bill dominated the last quarter of 2017. It was first presented on November 2, 2017 by Texas Congressman Kevin Brady, chair of The House Ways and Means Committee. Two weeks later, November 16, the House passed the Bill and forwarded it on to the Senate. The Senate Finance Committee passed its own version of a tax reform Bill and the full Senate voted 51 to 49 to pass…
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The Ongoing Research and Analysis Relating to the S Corporation Valuation Puzzle What premium, if any, should S Corporations command? How reliable are the current models? How reliable is the evidence that supports the position of the leading U.S. Tax Court cases? What should valuation analysts and consultants consider as they advise newly formed corporations considering making the S election and S corporation shareholders that are about to discuss buy-sell agreements? In this book, Fannon and Sellers critique existing theory and practice and propose a new model to value S corporations.
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How to Get Ready for the 2016 Filing Season As taxes get more complex, the to-do list to prepare for next year gets longer. Annette Nellen, Esq., CPA, CGMA, looks at recent developments and discusses what tax practitioners can do to get ready. To read the full article in The Tax Adviser, click: Preparing for the 2016 Filing Season.
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Determining Whether Debt is Recourse or Nonrecourse When a partnership has a debt that is forgiven, its characterization as recourse or nonrecourse can make a big difference in its tax treatment, including being eligible to be excluded under Sec. 108, as this article explains. Mark Cook, partner with SingerLewak LLP, discusses how Sec. 752 should be interpreted under CCA 201525010. To read the full article in The Tax Adviser, click: Chief Counsel Advice Tackles Sec. 752’s Impact on Partnership COD Income.
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IRS will Provide Tax ID Victims Copies of Fraudulent Returns The Internal Revenue Service announced procedures for victims of tax ID theft or their authorized representative to request copies of bogus returns filed by identity thieves. This change of policy will allow identity theft victims to better assess what personal information was compromised and how it was used. Paul Bonner, JofA senior editor, discusses the IRS posting instructions for requesting the returns and explaining the circumstances under which they will be disclosed. To find out more on this Journal of Accountancy article, click: Tax ID Theft Victims may Obtain Copies…
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Large Partnerships Face Major Changes to Audits and Adjustments The recently enacted federal budget deal includes major changes to how the IRS will audit large partnerships and, when adjustments result in tax underpayments, will allow the IRS to collect the tax directly from the partnership, instead of from the individual partners. Alistair M. Nevius, Journal of Accountancy editor-in chief, discusses the new rules and some major provisions affecting partnerships. To find out more on this Journal of Accountancy article, click: Congress Makes Changes to Partnership Audit and Adjustment Rules.
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Taxpayers and practitioners are still waiting for Congress to agree on a package extending all currently expired tax breaks. Here’s a look at the expired provisions and the actions that are pending to extend them. Sally P. Schreiber, senior editor for Tax Insider, examines tax incentives for individuals, business, and energy-related provisions. To find out more on The Tax Adviser article, click: Expired Tax Provisions: No Relief In Sight?
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The AICPA’s Center for Plain English Accounting conducted an investigation into the applicability of the disclosure requirement of open tax years associated with the Financial Accounting Standards Board’s Interpretation No. 48, Accounting for Uncertainty in Income Taxes. Robert Durak, Director- Center for Plain English Accounting, American Institute of CPAs, discusses a CPEA investigation into the matter. To find out more on AICPA’s article, click: AICPA Insights.
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Are you aware of the new reporting requirements required between an estate and anyone acquiring property from the decedent? Alistair M. Nevius, J.D., JofA’s editor-in-chief, explains the new reporting and statement requirements. To find out more on the JofA’s article, click: New law imposes immediate estate basis and reporting requirements.
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“The IRS issued final regulations on determining partners’ distributive shares of partnership items when a partner’s interest varies during the partnership’s tax year.” Sally P. Schreiber, a senior editor for the Journal of Accountancy®, explains the exceptions and methods the proposed regulation influences. To find out more on The Tax Adviser® article, click: Regulations Determine Partnership Distributive Shares When Ownership Changes.
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The requirements that S corporations must meet may be challenging but any violation of the rules may result in an inadvertent termination of an S corporation’s status. Sally P. Schreiber, senior editor with the AICPA Magazines & Newsletters team, outlines the S corporation requirements and talks about the seven types of trusts that qualify to be S corporation shareholders. She discusses how the IRS is providing limited relief for corporations who violate the rules and making it fairly easy for them to fix these problems. [button color=”blue” link=”http://www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2015/CorpTax/s-corporation-inadvertent-terminations.jsp” target=”_blank” font=”arial” align=”left”]For more information on ways to avoid S corporation inadvertent…
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The Securities and Exchange Commission recently issued Regulation A+ that amends the existing exemption from registration requirements for smaller issues of securities. This ruling creates a two-tiered offering structure that will solve many of the limitations of Regulation A. Madeline L. Harrigan, a financial analyst with Mercer Capital, says the updated Regulation A+ provides a greater annual dollar limit without the “costly entanglement in the web of state blue sky regulation” for larger sums of capital. [button color=”blue” link=”http://mercercapital.com/financialreportingblog/regulation-a-raising-the-capital-cap-for-small-companies/” target=”_blank” font=”arial” align=”left”]For more information on Regulation A+, click here.[/button] This article is republished from Mercer Capital’s Financial Reporting Blog. It…
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Evolving Accounting Standards for CPAs Wiley author, Joanne Flood, reviews three 2015 Accounting Standards Updates (ASUs). Those reviewed are ASU 2015-01, Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items,; ASU 2015-02, Amendments to the Consolidation Analysis; and ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs (Topic 835).
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Democrats and Republicans in the House are divided on the issue of repealing the estate tax. Republican says this tax is unfair to people who must pay taxes as they accumulate wealth through the years. Democrats want to expand the tax, hitting more estates with a higher top rate. Bernie Becker discusses these issues in The Hill and explains the House is divided. [button color=”blue” link=”http://thehill.com/policy/finance/238862-both-parties-fired-up-over-vote-on-estate-tax-repeal” target=”_blank” font=”arial” align=”left”]For more suggestions on ways to discuss fees with clients, click here.[/button] Image courtesy of Salvatore Vuono/FreeDigitalPhotos.net
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Two provisions of the affordable care act—the premium tax credit and the individual shared-responsibility payment (the individual mandate)—are complex and making it extra challenging for both taxpayers and preparers filing individual tax returns for 2014. Early on this tax season, the IRS discovered some errors, complications, and adversities for some individuals and provided relief says Annette Nellen, tax professor and director of the MST Program at San José State University. In her article, she summarizes the health care act guidance and relief issued in early 2015 and notes health care updates relevant for 2015 and beyond. [button color=”blue” link=”http://www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2015/Tax/update-on-affordable-care-act.jsp” target=”_blank” font=”arial” align=”left”]To learn…
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Phone fraud tops this year’s list of the biggest IRS tax scams of 2015, states Sally P. Schreiber, JD, senior editor of Journal of Accountancy, followed by phishing, identity theft, return preparer fraud, and hiding income offshore, rounding out the top five scams. The article delves into the many schemes, including suspicious e-mails, detecting identity theft, refund fraud, fake charities, and more, and includes details on identifying each of the dozen scams that will assist in providing taxpayer protection. To learn more about the top tax scams of 2015, click here. Image courtesy of Stuart Miles/FreeDigitalPhotos.net
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The American Institute of Certified Public Accountants (AICPA) has sent a letter urging Rep. Paul Ryan (R–Wis.), the new chair of the House Ways and Means Committee, to follow the AICPA’s principles of good tax policy to guide tax reform. The letter comes in response to the Tax Reform Act of 2014, a draft proposal put forth by the former Ways and Means chair Dave Camp (R–Mich.). The AICPA’s letter addresses 22 major items pertaining to the proposal, including income tax rate reform, employment tax modification, the repeal of the alternative minimum tax, plus taxpayer protections. To learn more about…