gift tax Archives | SF Tax Counsel

21Dec 2021 by Pat Geddie

One Potential Strategy Foreigner Investors Can Utilize to Transfer U.S. Real out of their Estate to Avoid the Estate and Gift Tax

By Anthony Diosdi Individuals that are not domiciled in the United States are subject to an estate and gift tax on the transfers of real property physically located in the United States. U.S. estate and gift taxes are charged at high effective rates (up to 40%) in the case of nonresident aliens, because the unified credit provides an exemption amount equivalent to just $60,000, an amount that has not increased in decades. See IRC Section 2101. For U.S. federal estate and gift tax purposes, the term “residency” means “domicile.” While the U.S. federal income tax concept of residency relates only to physical presence in a place for more than a transitory period of time, domicile relates to a permanent place of abode. For U.S. federal estate tax purposes a person…

01Apr 2021 by Pat Geddie

Major Estate and Gift Tax Increase Proposed in the Senate

Gift Tax

By Anthony Diosdi On March 25, 2021, Senator Bernie Sanders of Vermont and Senator Sheldon Whitehouse of Rhode Island introduced a bill entitled “For the 99.5% Act.” If the bill is enacted, it dramatically changes the current estate and gift tax system. Below, are the most significant provisions of the 99.5% Act:1. There would be a reduction of the estate tax exemption amount to $3.5 million per person and $7 million for a married couple. The exemption would be indexed for inflation. Currently, the estate tax exemption per person is $11.7 million and $23.4 million per married couple. 2. There would be a reduction of the gift tax exemption to $1 million per person. Under current law, an individual is permitted a gift tax exemption of $11.7 million. 3. Currently,…

27Jan 2020 by Pat Geddie

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…

23Jan 2020 by Pat Geddie

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…

13Jan 2020 by Pat Geddie

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…

30Dec 2019 by Pat Geddie

The IRS Continues to Aggressively Audit RaPower3 Investors

Tax Law

By Anthony Diosdi Over the past few years, a company known as RaPower3 has marketed ownership in solar lenses to investors throughout the United States. Investors were promised ownership in solar lenses located throughout the Southwestern United States. Investors were also told that they could tax generous deductions on their tax returns associated with these solar lenses. Everything seemed fine until the United States Department of Justice showed up. and obtained an injunction against the promoters of RaPower3 from marketing ownership in the solar lenses.The U.S. Department of Justice obtained an injunction against RaPower3, International Automated Systems, LTB1, Gregory Shepard, Neldon Johnson, and Roger Freeborn. The Department of Justice asked a federal district court to shut down a multi-level marketing business involving solar lenses that were “purchased” and then alternatively…

20Dec 2019 by Pat Geddie

New Rules Governing Disregarded Entities Owned by Nonresidents Impose Significant New Reporting and Compliance Requirements

Gift Tax

By Anthony Diosdi There is a perception by many countries that the United States is the world’s largest tax shelter. This is because unlike many countries, the United States does not require public disclosure of ownership of its entities, (in particular Limited Liability Companies (LLCs)), or publishing of year-end financial statements for public viewing. The lack of transparency has allowed nonresidents of the United States to form domestic shell to avoid paying foreign income taxes, hide money or commit other acts of wrongdoing. Historically, nonresidents established shell companies in the United States as a domestic disregarded entities.The Treasury Department and the Internal Revenue Service (“IRS”) recently published regulations to combat perceived misuse of U.S. shell companies. On December 13, 2016, the Treasury Department and the IRS issued final regulations regarding…

20Dec 2019 by Pat Geddie

Changes to the 2019 Tax Return that Will Impact All Holders of Cryptocurrency

Gift Tax

By Anthony Diosdi Recently, the IRS announced a significant compliance measure that will impact anyone with financial interests in virtual currency. Taxpayers with a financial interest in digital currency such as bitcoin will be required to check a new checkbox on Form 1040. This checkbox is on the early release draft of the 2019 Form 1040 and it will appear on Schedule 1. This schedule is entitled “Additional Income and Adjustments to Income.” The checkbox is at the top of Schedule 1.The question the checkbox asks taxpayers is:“At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?”This questions sounds eerily similar to Schedule B Part III Line 7. Schedule B Part III Line 7 asks taxpayers if they had…

30Aug 2019 by Pat Geddie

Be Careful When Receiving a Gift From a Foreign Corporation or Partnership

Gift Tax

By Anthony Diosdi The Small Business Job Protection Act of 1996 created reporting requirements for U.S. persons that receive large gifts after August 20, 1996 from foreign persons (including foreign corporations). Federal law requires gifts or bequests valued at more than $100,000 from a nonresident alien or foreign estate to be disclosed on an IRs Form 3520. Federal law also requires gifts valued at more than $16,076 from foreign corporations or foreign partnerships (adjusted annually for inflation) to be disclosed on an IRS Form 3520. Besides the IRS reporting requirements of a Form 3520, anyone receiving a gift from a foreign corporation or foreign partnership should know that Internal Revenue Code Section 672(f)(4) broadly authorizes regulations to recharacterize gifts or bequests, directly or indirectly, from partnerships or foreign corporations, as…

16Aug 2019 by Pat Geddie

Part Time Lovers- International Tax Attorneys and the Estate and Gift Tax

Tax Law

By Anthony Diosdi International taxation from the U.S. federal tax perspective is traditionally divided into two primary topics, inbound foreign investment by nonresident aliens and foreign entities, and outbound investment by U.S. persons and corporations. In the individual foreign investor setting, inbound planning often requires a balancing of U.S. income tax considerations on one hand and U.S. federal estate and gift tax considerations on the other. As a result, for many foreign direct investors, the most important tax consideration is the U.S. federal estate tax and gift taxation. The federal estate and gift tax ranges from 18 percent to 40 percent of a U.S. estate. See IRC Section 2001(c). A non-U.S. resident’s gross estate is composed of U.S. situs property at either the time of the transfer or the time…