The IRS issued proposed regulations providing guidance on the portion of trust property includible in the grantor’s gross estate if the grantor has retained certain interests in the property
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TOPICS / ESTATES
Types of Trusts
Guidance on Unbundling Trust Fees
The IRS announced that for tax years beginning before January 1, 2008, nongrantor trusts and estates would not be required to unbundle their fiduciary fees to determine what portion is subject to the Sec. 67(a) 2% threshold for itemized deductions.
Be Careful Making Disclaimers Where Trusts Are Involved
Disclaimers are very useful tools for estate planners, especially in postmortem planning. However, if an estate planner is not diligent in the planning and execution of a disclaimer, it can have adverse transfer tax consequences.
IRS Identifies Sale of Charitable Remainder Trust Interests as a Transaction of Interest
In a notice, the IRS has identified as transactions of interest certain transactions in which a sale or other disposition of all interests in a charitable remainder trust (CRT), after the contribution of appreciated assets to and their reinvestment by the trust, results in the grantor (or other noncharitable recipient) receiving the value of his or her trust interest while claiming to recognize little or no taxable gain.
The Case for an Intentionally Defective Grantor Trust
An IDGT is an effective estate-freezing tool that provides the opportunity to maintain the maximum control over the beneficial enjoyment of the transferred assets.
Funeral Trust Dollar Limitation Repealed
The Hubbard Act, P.L. 110-317, repealed the dollar limitation on funeral trusts.
Significant Recent Developments in Estate Planning
This article examines developments in estate, gift, and generation-skipping transfer tax planning and compliance between June 2007 and May 2008.
IRS Issues Proposed Ruling on Private Trust Companies
The IRS is seeking comments from the public on a proposed ruling regarding the use of family-owned private trust companies (PTCs) as trustees of trusts. Fact Patterns in the Proposed Ruling The proposed ruling presents two situations. Situation 1 involves a PTC formed under laws of a state that has
How Will Final Regs. Apply the Knight “Commonly Incurred” Test?
In Knight, the Supreme Court held that under Sec. 67(e), a trust expense otherwise subject to the 2% of AGI floor is fully deductible under the exception in Sec. 67(e) only if it would be uncommon for an individual holding the same property to incur the expenses.
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.
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
Significant Recent Developments in Estate Planning
This article examines developments in estate and gift tax planning and compliance between June 2006 and May 2007.
Allocating Partnership Depreciation Between Trusts and Beneficiaries
This article reviews how depreciation from a partnership is allocated between a trust and its beneficiaries and highlights the potential trap the allocation can cause when the depreciation deduction flows through a partnership.
Did the Second Circuit Err in Rudkin Testamentary Trust?
This article examines how the Second Circuit reached its decision and how trustees and practitioners should respond to this questionable ruling.
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.
