The IRS issued proposed regulations intended to reflect the Supreme Court’s 2008 holding in Knight on income tax deductibility by estates and nongrantor trusts of investment advisory and other fees.
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TOPICS / ESTATES
Types of Trusts
Guidance on Unbundling Trustee Fees Extended
The IRS announced that it is extending interim guidance on the treatment of investment advisory fees and other costs subject to the 2% floor under Sec. 67(a).
IRS Extends Guidance on Trustee Fees
The IRS announced that it is extending interim guidance on the treatment of investment advisory fees and other costs subject to the 2% floor under Sec. 67(a).
Discharge of Indebtedness Rules Clarified for Grantor Trusts and Disregarded Entities
The IRS issued proposed regulations that provide rules regarding who is the “taxpayer” for purposes of applying the Sec. 108 discharge of indebtedness rules to a grantor trust or disregarded entity.
The Gross Income Requirement for Trusts’ Charitable Deductions
The author reviews the gross income requirement for charitable deductions taken by trusts.
GRATs in 2010: Still a Viable Estate and Gift Tax Planning Option
This item describes the use of the grantor-retained annuity trust (GRAT) in estate and gift planning.
Scope of Foreign Trust Provisions in the HIRE Act
This article analyzes the foreign trust provisions of the HIRE Act and offers some practical guidance for practitioners to consider in their development of best practice procedures.
Significant Recent Developments in Estate Planning (Part II)
This discusses the estate tax, generation-skipping transfers, trusts, changes made by the Economic Growth and Tax Relief Reconciliation Act of 2001, and the annual inflation adjustments for 2010 relevant to estate and gift tax.
Leaving Retirement Benefits to Trusts: Pitfalls for the Unwary
There are a variety of legitimate reasons that a participant may believe it prudent to leave retirement plan benefits in trust for the benefit of the spouse. It is important that advisers are aware of the potential pitfalls associated with this option and understand the participant’s ultimate objective for the benefits.
Significant Recent Developments in Estate Planning (Part I)
This article examines developments in estate, gift, and generation-skipping tax planning and compliance between June 2009 and May 2010.
Trustee Compensation: Proceed with Caution
This item illustrates the issues that can lead to litigation on trustee compensation.
Applying the Material Participation Standards to Nongrantor Trusts
A taxpayer may deduct losses generated from passive activities only to the extent of the income from such activities. For this purpose, any trade or business or other income-producing activity is passive with respect to a taxpayer if the taxpayer does not materially participate in the activity.
Applying the Material Participation Standards to Nongrantor Trusts
A taxpayer may deduct losses generated from passive activities only to the extent of the income from such activities. For this purpose, any trade or business or other income-producing activity is passive with respect to a taxpayer if the taxpayer does not materially participate in the activity.
IRS Issues Guidance on GiftTax Consequences of Transfers in Trust
The IRS clarified for taxpayers that despite the provisions of Sec. 2511(c), the gift tax continues to apply to certain transfers to a wholly owned grantor trust.
Gift Tax Paid onTransfer of QTIP Remainder Included in Estate
The Tax Court held that the amounts of gift tax paid by the recipients of a QTIP remainder are includible in the transferor’s gross estate under Sec. 2035(b).
Trusts Owning Partnership Interests and the Revised UPIA
A special problem faces trustees whose principal or sole asset is a partnership that does not distribute all its taxable income. The problem arises because partnership distributions not in liquidation are “trust income” payable to the income beneficiary. Yet if the trustee pays the income beneficiary the full amount of the partnership distribution, the trust may not have sufficient cash to pay the trust’s own tax liability.
Using GRATs in Tax Planning During Troubled Economic Times
Under the right circumstances, the potential benefit of a GRAT can be enormous, especially in those situations where the value of a business is expected to skyrocket once economic conditions improve.
Check-the-Box Regs. Do Not Affect the Valuation of LLC Interests
The Tax Court held that limited liability company (LLC) interests transferred by a taxpayer into trusts set up for the benefit of her children should be valued as transfers of LLC interests and not as transfers of the underlying assets owned by the LLC.
Trusts Owning Partnership Interests
When a trust instrument is silent and no discretionary power of administration exists, trustees and their advisers need to be knowledgeable of how partnership activity (including both taxable income and distributions received) is affected by the trust administration statutes of the state of situs of the trust.
Creative Ways of Achieving Grantor Trust Status
Trusts that may not appear to qualify as S corporation shareholders could actually be grantor trusts eligible to own S corporation stock.
employee benefits & pensions
Profits interests: The most tax-efficient equity grant to employees
By granting them a profits interest, entities taxed as partnerships can reward employees with equity. Mistakes, however, could cause challenges from taxing authorities.
