Recent developments in estate planning: Part 1
This first part of this annual update focuses on trust and gift tax issues.
Deductions
Charitable income tax deductions for trusts and estates
Income tax charitable deductions for trusts and estates are governed by Sec. 642(c) — these rules are substantially different from the rules for charitable contribution deductions for individuals and corporations under Sec. 170.
Final regulations determine deductions for trusts and estates after the TCJA
The IRS issued final regulations for distinguishing trusts’ and estates’ allowable deductions from miscellaneous itemized deductions currently suspended by the TCJA.
Final regs. outline trust and estate expenses still deductible under TCJA
The IRS issued final regulations for distinguishing trusts’ and estates’ allowable deductions from miscellaneous itemized deductions currently suspended by the law known as the Tax Cuts and Jobs Act.
Proposed regs. on trust and estate deductions
The proposed regulations make clear that some deductions, including deductions for administrative expenses, are still available despite the TCJA’s suspension of miscellaneous itemized deductions.
IRS clarifies that trusts and estates are permitted certain deductions that are not miscellaneous itemized deductions
The IRS issued proposed regulations to clarify that certain deductions are allowed to an estate or nongrantor trust because they are not miscellaneous itemized deductions.
Trusts and estates are permitted certain deductions
The IRS issued proposed regulations to clarify that certain deductions are allowed to an estate or nongrantor trust because they are not miscellaneous itemized deductions.
Charitable deduction rules for trusts, estates, and lifetime transfers
There are various planning opportunities for nonstandard donations and potentially unintended consequences if the donation is not made following the rules governing the specific area of tax.
Unexpected tax bills for simple trusts after tax reform
Post-TCJA, expenses that are miscellaneous itemized deductions are taken into account in computing trust accounting income but are now nondeductible in computing taxable income and distributable net income for the trust.
New limitation on excess business losses
The TCJA amended Sec. 461 to include a subsection (l), which disallows excess business losses of noncorporate taxpayers if the amount of the loss is in excess of $250,000 ($500,000 in the case of a joint return).
Charitable gift arrangements that provide alternatives to a private foundation
Allowable charitable contribution deductions and control over donated funds are key factors for taxpayers to weigh when considering alternatives to private foundations.
Clarification of itemized deductions for trusts and estates
Regulations are anticipated to clarify that the costs of trust or estate administration that are deductible under Sec. 67(e)(1) are not miscellaneous itemized deductions and, therefore, their deductibility has not been suspended by Sec. 67(g).
IRS notice permits recalculation of marital deductions for same-sex couples
The IRS provided the procedures same-sex married couples should use to recalculate the transfer-tax treatment for property transferred to spouses.
Theft Loss Eligibility Is Broader for Estates Than for Individuals
For estates, fraud loss need only to have arisen from theft to qualify for a theft deduction.
Estate Can Take Theft Loss Deduction Related to Madoff Ponzi Scheme
An estate could take a theft loss deduction where a Ponzi scheme rendered an interest in an LLC the estate owned worthless.
Post-Death Events Taken Into Account in Property Valuation
The Tax Court held that the IRS had properly taken into account events that occurred after the decedent’s death in determining the value of property for purposes of an estate’s charitable deduction.
Trust Material Participation and the Sec. 469(h) “Regular, Continuous, and Substantial” Standard
Earlier this year, the Tax Court held that a trust qualified for the Sec. 469(c)(7) real estate professional exception and materially participated in its rental real estate business under Sec. 469(h) through the activities of its trustees.This item focuses on the material participation portion of the decision.
Trust Can Qualify for Sec. 469(c)(7) Exception
The Tax Court held that a trustee's activities in a trade or business of a trust was work performed by an individual, and, therefore, it was possible for a trust to qualify for the Sec. 469(c)(7) exception to the treatment of rental real estate activities as per se passive activities.
Coordinating Charitable Trusts and Private Foundations for the Business Owner: Complying With UBIT and Self-Dealing Rules
This item details some charitable giving options for owners of closely held businesses, the applicable unrelated business income and self-dealing rules, and best practices for taxpayers who have these charitable desires and restrictions.
Trust Materially Participated in Real Estate Business
The Tax Court held that a trust materially participated in its rental real estate business and therefore could deduct the losses it incurred in conducting those activities as losses from nonpassive activities.
