Introduction The passing of the Tax Cuts and Jobs Act resulted in a significant tax increase for many in high income tax states. It also elevated the need of many residents of high tax states to utilize planning opportunities to reduce their overall tax liabilities. An incomplete gift non-grantor trust (hereinafter “ING”) formed in a state such as Nevada, Delaware, Wyoming, or South Dakota- that is, a “NING,” “DING,” “WING,” or “SDING,” may offer a planning opportunity to reduce state income tax liabilities. As a general rule, states impose income tax based on residency. For example, a Maryland resident is subject to Maryland income tax and a California resident is subject to California income tax. The same can be said of an ING. An ING is subject to taxation in…

I. Introduction to Internal Revenue Code Section 1202This article is designed to provide an overview of the federal income tax incentives available to non-corporate holders of “qualified small business stock” (“QSB stock”). As discussed below in more detail, Section 1202 of the Internal Revenue Code permits investors in QSB stock to exclude up to $10 million in taxable gains. Despite the Section 1202 tax incentive, in the past, many investors shied away from QSB stock because of the inherent double tax consequence of subchapter C corporations. However, that may soon change, due to the reduction of the corporate marginal tax rate to 21 percent under the Tax Cuts and Jobs Act of 2017. Internal Revenue Code Section 1202 was originally enacted in 1993. It was enacted as an incentive for…

Introduction to the Offshore Voluntary Disclosure Program (OVDP) For many years, a large number of U.S. taxpayers have placed and continue to place large sums of money in foreign financial accounts. Many of these individuals, knowingly or unknowingly, violate federal law by not disclosing these foreign accounts to the Internal Revenue Service (“IRS”). In an effort to step-up enforcement of disclosing foreign financial accounts to the IRS, the United States Department of Justice has successfully pierced previously secret banking in foreign countries. As a result, the IRS has been gaining access to information regarding undisclosed foreign financial accounts. This left many individuals scrambling to make a voluntary disclosure to the IRS to avoid criminal prosecution and serious civil penalties some of which are discussed in detail below. Potential Penalties for…

Because of the recent boom in real estate, many individuals have jumped back into the real estate market and have become landlords. Renting real estate can generate significant tax losses. Anyone considering utilizing losses realized in the real estate market to offset other sources of income such as wages, must be aware of the tax laws limiting real estate losses. This article will discuss the two potential ways an individual taxpayer can utilize real estate losses to offset income such as wages. 1. The Small Landlord Exception and the $25,000 Special Allowance Generally, real estate activities are considered passive activity for tax purposes. This means that losses incurred from real estate activities are not typically deductible against other sources of nonpassive income such as wages. However, in certain cases, up…