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Are Families Who Took Advantage of the Temporary Increase in the Unified Credit for Estate and Gift Taxation Purposes in for a Very Unpleasant Surprise after 2025?

Are Families Who Took Advantage of the Temporary Increase in the Unified Credit for Estate and Gift Taxation Purposes in for a Very Unpleasant Surprise after 2025?

Gift Tax
By Anthony Diosdi Estate and Gift Tax 101On December 31, 2012, President Obama signed the Economic Growth and Tax Relief Reconciliation Act exempting $5,120,000 (indexed for inflation) from estate and gift taxes, and the generation-skipping transfer taxes (“GST”). The Tax Cut and Jobs Act of 2017, the current law signed by President Trump on December 22, 2017, essentially doubled the transfer tax exemptions from $5 million to $10 million, indexed for inflation. The Tax Cuts and Jobs Act of 2017 currently excludes $11.4 million of assets from estate and gift taxes of a U.S. citizen or resident. However, many of the provisions of the Tax Cut and Jobs Act of 2017 are scheduled to expire on December 31, 2025. This means that on January 1, 2026, the estate and gift…
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A Possible Solution to Gift Tax Concerns Associated with Cash, Check, or Wire Transfer Gifts from Overseas

A Possible Solution to Gift Tax Concerns Associated with Cash, Check, or Wire Transfer Gifts from Overseas

Gift Tax
By Anthony Diosdi Estate and Gift Tax 101The Tax Cut and Jobs Act of 2017 currently excludes $11.4 million of assets from estate and gift taxes of a U.S. citizen or resident. The way the estate tax is computed on the gross estate of a decedent which includes “the value at the time of his death all property, real or personal, tangible or intangible, wherever situated.” See IRC Section 2031. After the taxable estate has been determined by subtracting deductions from the gross estate, the tax is determined by applying the rates and computation method of of Internal Revenue Code Section 2001 to the base: the taxable estate. The estate tax is payable by the executor of the estate. Estate and gift (gift taxes will be discussed in more detail…
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An Overview of the Taxation of Cloud Transactions and Digital Downloads

An Overview of the Taxation of Cloud Transactions and Digital Downloads

Tax Law
By Anthony Diosdi U.S. Taxation of the Digital Economy- a Broad OverviewNew technology and new transactions often raise difficult issues of tax policy and administration in part because existing rules were developed to deal with other situations. The dramatic expansion in electronic commerce facilitated by the use of the Internet and other technology is subjecting existing tax principles to new pressures. One area of concern is the application of source rules to electronic commerce transactions. Suppose, for example, that a corporation delivers electronically software or a digital product to a customer on the Internet. The customer can download the product and use it commercially. Depending upon the nature of the transaction and the property interests involved, the income to the corporation might appropriately be characterized as a royalty for the…
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Intentionally Defective Grantor Trusts:  Estate Planning with Schrödinger’s Cat

Intentionally Defective Grantor Trusts: Estate Planning with Schrödinger’s Cat

tax planning
by James Huang A popular estate planning vehicle for transferring wealth to descendants during one's lifetime is the "intentionally defective grantor trust" (IDGT), also referred to as an “intentionally defective irrevocable trust” (IDIT). Through this type of irrevocable trust, transferors can significantly increase the amount they shield from estate tax upon their deaths. This increase is achieved by virtue of how a trust can simultaneously exist, or not exist, depending on which tax perspective one takes in viewing it. In the case of IDGTs, transfers between the trust and the person (or grantor) who creates it are respected for gift and estate tax purposes, but disregarded for income tax purposes. Income Tax Payments When a grantor transfers property to an IDGT, the grantor "freezes" that property’s transfer date value for…
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The IRS Whistleblower Program and the Potential for Additional Recovery Under the False Claims Act

The IRS Whistleblower Program and the Potential for Additional Recovery Under the False Claims Act

Tax Law
By Anthony Diosdi Let’s suppose that John has been a tax attorney at a law firm owned by Bob for the last 25 years. Bob has enjoyed a reputation for being a very successful tax attorney in Miami, Florida for many years. Everything was going nicely until John noticed that Bob was cheating on his own tax returns to fund his lavish lifestyle. To make matters worse, in order to increase business, Bob demanded that John file frivolous refund claims on behalf of the firm’s clients with the Internal Revenue Service (“IRS”).  It turns out that Bob had been filing fraudulent refund claims on behalf of clients for years. John declined to take any part in the filing of frivolous refund claims with the IRS. This resulted in his discharge…
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IRS Awards Tax Whistleblowers Millions of Dollars

IRS Awards Tax Whistleblowers Millions of Dollars

Uncategorized
By Lynn K. Ching The Internal Revenue Service (IRS) Whistleblower Awards Program pays money to people who blow the whistle on persons who fail to pay taxes they owe. Internal Revenue Code 7623 permits the IRS to pay an award of up to 30 percent of the tax, penalty, interest and other amounts it collects as a result of the whistleblower information - to anyone who provides information that leads to the detection and punishment of persons violating the federal tax laws. In 2019, the IRS issued 181 whistleblower awards, totaling more than $102 million; in 2018, the IRS issued 217 awards, totaling more than $312 million; and in 2017, the IRS issued 242 awards, totaling more than $33 million. The IRS Whistleblower Program provides for two types of awards:…
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Is 2020 the New 2018 for Estate, Gift, and Generation-Skipping Tax Purposes?

Is 2020 the New 2018 for Estate, Gift, and Generation-Skipping Tax Purposes?

Gift Tax
By Anthony Diosdi This year may be a very busy year for estate and gift tax planning professionals. This is because this year is somewhat reminiscent of 2012. In 2012, the Economic Growth and Tax Relief Reconciliation Act of 2001 was scheduled to expire. The Economic Growth and Tax Relief Reconciliation Act excluded $5,120,000 from estate and gift taxes, and the generation-skipping transfer taxes (“GST”). The expiration of the Economic Growth and Tax Relief Reconciliation Act would have resulted in the tax exemption for estate and gift taxes, and the GST reverting back to only $1 million. Any estates valued over $1 million could have been subject to estate and/or gift tax of up to 55 percent. Fortunately for many American families, President Obama signed the American Taxpayer Relief Act…
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Should Your LLC be Taxed as a Disregarded Entity or a Corporation?

Should Your LLC be Taxed as a Disregarded Entity or a Corporation?

Tax Law
By Anthony Diosdi Probably one of the most frequent questions any tax professional receives from his or her clients is how should my limited liability company (“LLC”) be taxed. As usual in any area of tax planning, there is no one-size-fits-all approach. Each individual’s circumstances must be carefully considered in determining how an LLC should be taxed.An LLC is an entity formed under state law. Once an LLC is formed under state law, a determination must be made for federal (and in some cases for state tax purposes) how the LLC will be taxed. The Income Tax Regulations typically treat an LLC that has a single owner as a “tax nothing.” This means that a single-owner LLC is disregarded for tax purposes and treated as an extension of its owner.…
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Tax Return Changes for 2020

Tax Return Changes for 2020

tax return
Every year, certain states or the IRS might make changes that impact the tax returns of certain households or businesses. The following are brief overviews of some changes taking place for 2020. Adjustments for Inflation Tax laws are adjusted based on inflation, and recent adjustments that will impact your returns include an increase in standard deductions ($200 for individual filers and $400 for joint returns), two percent increases in tax brackets, and an increased alternative minimum tax exemption. New Forms for Seniors In the past, people over the age of 65 used the same tax forms as younger adults. This year, the IRS has a new form for seniors over 65, which is the 1040-SR. This form has no maximum income limit, and it looks more like the older 1040A…
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