The Service has issued proposed regulations to reflect the change made by TRAHCA to impose a 100% excise tax on the unrelated business taxable income (UBTI) of charitable remainder trusts (CRTs) that have UBTI.
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TOPICS
Taxation of Estates & Trusts
IRS Issues Prop. Regs. in Response to Kohler Case
The IRS has issued proposed regulations clarifying that under Sec. 2032 an estate may take into account a reduction in the value of the gross estate following the decedent’s death in determining the value of the estate on the alternate valuation date if the reduction is due to market conditions but not other post-death events.
Handling Gifts and Bequests of LLC Interests
The gift of an LLC interest generally does not result in the recognition of gain or loss by the donor or the donee.
Interim Guidance Issued on Unbundling Trustee Fees
The IRS announced that for tax years beginning before January 1, 2008, nongrantor trusts and estates will not be required to unbundle their fiduciary fees to determine what portion is subject to the Sec. 67(a) 2% threshold for itemized deductions.
Impact of the Supreme Court’s Knight Decision on Investment Advisers
The Supreme Court held that deductible investment fees incurred by a trust or estate are subject to the 2% miscellaneous deduction floor unless they are fees of a type that individuals would not commonly or customarily incur.
Supreme Court Holds Investment Advisory Fees Are Subject to 2% Floor
The Supreme Court held that investment advisory fees are generally subject to the 2% floor but refused to go as far as the Second Circuit in saying that the exclusivity test requires that the fees could not have been incurred by an individual.
The Ongoing Sec. 67(e) Controversy and the New Preparer Penalties
This item discusses how the 2% floor affects a trust’s regular tax and alternative minimum tax (AMT), the effect of the recent Supreme Court decision in Knight on the continuing controversy, and the efficacy of the proposed regulations in the wake of the Knight decision.
Substantial Compliance Insufficient to Allow Charitable Deduction
The Seventh Circuit has held that the doctrine of substantial compliance would not allow a trust to take a charitable deduction where the trustee had intended, but failed, to reform the trust as a charitable remainder unitrust.
Special Issues Related to Distributions of Partnership Interests by Estates and Trusts
The complex rules governing the tax treatment of distributions from estates and trusts are further complicated when a partnership interest is distributed.
Service Changes Policy on Estate Tax Installment Payments
The Service will determine on a case-by-case basis whether security will be required when a qualifying estate elects under Sec. 6166 to pay all or a part of the estate tax in installments.
Ninth Circuit Affirms Transferred Residential Property Must Be Included in Gross Estate
The Ninth Circuit ruled that the full fair market value of residential property must be included in the decedent’s gross estate, finding that the decedent retained income and economic enjoyment from the property and that the inter vivos transfer of the property was not a bona fide sale for adequate and full consideration under Sec. 2036(a).
Private Annuities Can Still Save Estate Taxes
Editor: Michael D. Koppel, CPA, PFS In October 2006, the IRS issued Prop. Regs. Secs. 1.72-6(e) and 1.1001-1(j), which propose to substantially reduce the income tax benefits of private annuities (REG-141901-05). Basically, the proposed regulations require the annuitant (the person transferring the property) to recognize the entire gain or loss
Prop. Regs. Address Deductibility of Trust and Estate Costs
Editor: Kevin F. Reilly, J.D., CPA In July, the IRS issued proposed regulations (REG128224-06) providing guidance on whether costs incurred by estates or nongrantor trusts are subject to the 2% floor for miscellaneous itemized deductions. The new rules intend to clarify the deductibility of advisory fees paid by estates and
Prop. Regs. Clarify Treatment of Trust Administrative Expenses
Under Sec. 67(a), miscellaneous itemized deductions are allowed only to the extent that they exceed 2% of a taxpayer’s adjusted gross income (AGI). The AGI of an estate or trust is computed in the same manner as for an individual for these purposes, except that, under Sec. 67(e)(1), administrative costs
New Foreign Trust Tax Form Project: 1041NR
IRS representatives recently approved a joint project with the AICPA Foreign Trust Task Force. Together they will design a new Form 1041NR, U.S. Income Tax Return for Foreign Estates and Trusts, which tax return preparers and IRS personnel will find easier to understand, prepare, and process.
Change in Rules for CRTs with UBTI Contains Trap for the Unwary
Editor: Frank J. O’Connell, Jr., CPA, Esq The Tax Relief and Health Care Act of 2006 changed the provisions for charitable remainder trusts (CRTs) that have unrelated business taxable income (UBTI). Beginning January 1, 2007, an excise tax in the amount of the UBTI earned by the CRT during the
Significant Recent Developments in Estate Planning
This article examines developments in estate and gift tax planning and compliance between June 2006 and May 2007.
Prop. Regs. Address Application of Secs. 2036 and 2039 to Certain Annuities
Sec. 2036 provides for the inclusion in a decedent’s estate of certain transfers the decedent made during his or her lifetime in which the decedent retained certain rights in the property. Sec. 2039 provides for the inclusion in a decedent’s estate of the value of any annuity receivable by a
Courts Split over Valuation of Lottery Prize Payments
Two recent district court decisions have been handed down on the issue of whether an estate’s rights to a decedent’s remaining series of annual lottery prize payments should be valued using the Sec. 7520 annuity tables. Although both courts held that the lack of marketability of remaining lottery payments may
Seven Suggestions for IRS Estate/Gift Tax Audits
Editor: Anthony S. Bakale, CPA, M.Tax. Many practitioners do not often have to deal with estate and gift tax audits and may need information about the process: what the auditor is looking for, what documentation is needed, how best to meet the requirements, or what to do if the taxpayer
TAX PRACTICE MANAGEMENT
2025 tax software survey
AICPA members in tax practice assess how their return preparation software performed during tax season and offer insights into their procedures.
