Of Spousal Gifts and the Substance Over Form Doctrine

U.S. spouses each have a unified credit that allows for substantial gifting to third parties without requiring the payment of gift tax. What happens if one spouse has assets to be gifted away, but that spouse does not have sufficient remaining unified credit exemption to cover the gift and wants to use the exemption of the other spouse?

 At times, the spouses can agree to split the gift for gift tax purposes, which treats 1/2 the gift as coming from each spouse. This allows the unified credit of the spouse not making the gift to be used to avoid gift tax on the 1/2 that such spouse is treated as making. However, it can be an imperfect solution if the spouse with the assets does not have enough unified credit to offset his or her 1/2 of the gift.

 Oftentimes, the parties may contemplate having the party with the assets transfer them by gift to the other spouse (a tax-free gift under the gift tax marital deduction), and then the receiving spouse makes a gift to the third party applying his or her own unified credit. The question in these circumstances is whether the IRS will respect the transaction and allow the receiving spouse’s unified credit to be applied to the gift to the third party, or whether it would seek to apply the “substance over form” doctrine to treat the gift as coming from the spouse who transferred the assets to the other spouse and does not have enough unified credit to fully cover the gift.

 This is not a black and white issue. On one end of the spectrum. . .

Read More

Indirect Loans Between a Private Foundation and a Disqualified Person Are on the IRS’ Radar

Code Section 4941(d)(1)(B) treats lending transactions between a private foundation and disqualified person as an act of self-dealing (although an interest-free loan by the disqualified person to the private foundation is not self-dealing) subject to an excise tax. What happens if the private foundation owns an interest in an entity, and that entity holds a promissory note of a disqualified person? Does this avoid self-dealing?

In Rev. Proc. 2021-40. . .

Read More

New Homestead Laws [Florida]

In its most recent legislative session, the Florida legislature enacted a number of additions and modifications to Florida statutory law relating to Florida’s homestead exemption. These provisions can be summarized as enhancing or clarifying the exemption. The following is a summary of the new provisions, along with some excerpts.


 736.0201(7): A proceeding to determine the homestead status of real property owned by a trust may be filed in the probate proceeding  . . .

Read More

White v. Marks

By Jenna G. Rubin

This decision involves a strange set of facts under which a purported heir attempted to assert rights as a beneficiary and child of the decedent, even though she was neither the biological child of the decedent nor adopted by him. The decedent’s will specifically provided that the decedent “intentionally made no provision under this will” for his “adopted daughter.” This decision ultimately turned on whether (1) the statute of limitations to determine paternity had expired, and (2) whether certain writings were acknowledgements of paternity under F.S. 732.108(2).

Read More

No “All Going to Charity” Exception for Chenoweth/Ahmanson Funding Issue

Taxpayers and planners love to use valuation reductions for partial interests in entities as a method for reducing transfer taxes. Such reductions and discounts can be a two-edged sword, however.

The Ahmanson and Chenoweth cases point out that when a majority interest in an entity is included in a taxpayer’s gross estate, the valuation discounts will typically be substantially less than will apply to a noncontrolling or minority interest, and that this can have undesirable consequences when a portion of the entity is transferred to a charity or a marital deduction trust. For example, assume that a 100% interest owned by a decedent as his sole asset in an operating corporation is valued at $10 million, with little or no discounts taken.

Then assume that 60% of the . . .

Read More

Cryptocurrency and the IRS – Some Important Updates

Cryptocurrency is treated like any other investment asset for federal income tax purposes and not “money.” Therefore, taxpayers that sell cryptocurrency for a gain incur taxable capital gains for income tax purposes.

It is likely that a fair amount of cryptocurrency has been sold for gain by U.S. taxpayers without that being reported – either out of ignorance or intentional tax avoidance. Importantly, cryptocurrency transactions are not invisible but are available for review on the blockchain. Some sleuthing may be required to tie a particular transaction to a taxpayer, but this is often not that difficult. Further, cryptocurrency exchanges may be able to identify crypto transactions and tie them to specific persons.

Taxpayers with gains in the past or present years should note Operation Hidden Treasure . . .

Read More

FBAR Penalties Survive Death

The IRS may assess penalties for a person’s failure to file a required FBAR. If the person’s failure to file was willful, the IRS can impose a penalty equal to 50% of the account balance or $100,000, whichever is greater.  If an individual dies, can the IRS assess and collect an FBAR penalty for failing to disclose a foreign account?

Absent some specific direction by Congress, whether an action created by federal statutory law survives the death of the plaintiff is a matter of federal common law. Generally . . .

Read More

A Co-Maker of a Promissory Note Is Not Always Liable to the Co-Signer [Florida]

In an interesting case, two doctors co-signed a promissory note with others of an LLC where they were members, and that was their employer, payable to a bank. They later left the practice, and the LLC sought to collect from them their share of the liability to the bank. An interesting aspect of suretyship law avoided liability for the doctors.

The doctors were “accommodation parties” under Florida’s Uniform Commercial Code. Florida Statutes 673.4191(1) . . .

Read More

Fantasy Sports Is Not a Game of Skill

Fantasy sports generally involves the selection of team members, and then earning points when the selected team players compete in real world sports events – the players with the highest points win. Such games often require an entry fee, and pay cash or other prizes to the winners.

Code Section 165(d) denies a deduction for losses from “wagering transactions” except to the extent they can offset wagering winnings. The IRS Chief’s Counsel recently opined on whether the entry fee to play a fantasy sports event is a wagering transaction subject to this loss limitation.

The opinion concluded. . .

Read More

Florida Irrevocable Trust Amendment Mechanisms

For many years, we have published a diagram that lists and provides information on the mechanisms under Florida law available to modify irrevocable trusts, both judicially and non-judicially. There have been 1000+ downloads of the diagram, attesting to the interest in this topic and how often people want to amend an irrevocable trust.

My partner, Jenna Rubin, recently summarized a Florida case (Demircan v. Mikhaylov) on the ability of a settlor and beneficiaries to modify an irrevocable trust.You can read the summary on her Rubin on Probate Litigation blog here.

The summary diagram has now been updated to include the new case.

Previously, the diagram was posted as a PDF or a text file, and not in its native mindmap formula, because of its size. Because of its size, it was hard to read. The mindmap program (MindManager) now allows a cloud posting which allows easier and full access. To view the updated diagram, click on the link:

Read More

Demircan v. Mikhaylov

By Jenna G. Rubin

This Third DCA case addresses several elements of Florida trust law, with a focus on the ability to modify an irrevocable trust under the Florida common law. It involved an irrevocable trust established by the settlor for the benefit of his children, which initially appointed an independent trustee and a third party with trustee removal powers. When disagreements arose between the settlor and the beneficiaries against the trustee and the third party, litigation ensued.

Read More

Lopez v. Hernandez

By Jenna G. Rubin

This decision deals with the ability of the probate court to impose personal liability for attorney’s fees and costs. Here, the court entered an order addressing fees and costs sought by the attorney for one of two feuding brothers.

Read More

New Case on Loan vs. Gift

In a low-interest rate environment, loans by wealthy parents to children often makes sense from a planning perspective. If the recipient can invest the proceeds and earn more than the low interest rate charged, the net profit is effectively transferred without a taxable gift.

It is important that the loan be respected as a loan and not a gift. A recent Tax Court Memorandum decision dealt with this issue. In the case, the taxpayer had made significant loans over time from 1984 to 2007. The issue was whether these were bona fide loans or taxable gifts.

The Tax Court noted the traditional factors in determining whether a transfer is a loan or a gift – namely these factors support a loan: ( 1) there was a promissory note or other evidence of indebtedness, (2) interest was charged, (3) there was security or collateral, (4) there was a fixed maturity date, (5) a demand for repayment was made, (6) actual repayment was made, (7) the transferee had the ability to repay, (8) records maintained by the transferor and/or the transferee reflect the transaction as a loan . . .

Read More


The income tax treatment of annuities is provided for under Code § 72. That section provides various rules, including extra income tax for some distributions to younger taxpayers and limits on deferral for entity owners. The provisions can be difficult to interpret when the owner of the annuity is a grantor trust, and the annuitant and current beneficiary of the trust is not the grantor. A recent private letter ruling gives the IRS’ take on some of these issues. The following conclusions are based on the above scenario – a grantor trust is the owner of the annuity, and there is a current beneficiary that is not the grantor and whose life is the measuring life for the annuity.

  1. Code § 72(q) 10% additional tax on early distributions. This provision imposes. . .
Read More


The FBAR rules require the filing of a FinCEN Report 114, Report of Foreign Bank and Financial Accounts (FBAR) to report for accounts of U.S. persons aggregating $10,000 or more. For a non-willful failure to disclose, the maximum penalty imposed is $10,000.
Since one FBAR is used to report multiple accounts, a basic question is whether the non-willful failure to report several accounts gives rise to only one $10,000 penalty (based on one return), or $10,000 multiplied by the number of unreported accounts. This can make a big difference . . .
Read More

Formula Clauses Bolstered by Case That Rules Against the Taxpayer

Formula clauses are used when property with uncertain value is transferred by gift or sale. The objective is to set the amount that is transferred for gift tax purposes, even if the IRS later is successful in asserting that what was transferred was worth more than what was reported. This can avoid gift tax by keeping the value below available exemption amounts.

The use of formula clauses received a boost in Wandry v. Commissioner, T.C. Memo. 2012-88. There, the Tax Court held that a clause which defined the amount being transferred as a portion of the property equal to a specific value as the value of the property is finally determined for gift tax purposes, would limit the transfer to such portion of the property, as finally valued for gift tax purposes after IRS review and court determination, as equal in value to the stated dollar amount.
In a recent Tax Court case. . .
Read More

Lefkowitz v. Schwartz

By Jenna G. Rubin

This case revisits the applicability of the “trust exception” to creditors claims in a probate proceeding. Here, the creditor’s claim was based upon money lent by the creditor to the decedent, which the decedent promised to repay upon the sale of certain real property.

Read More

Barrett v. Kapoor

By Jenna G. Rubin

In this decision, the Court addressed the tension between the vesting of bequests and the settlor’s intent. Here, the grantor’s trust provided that upon his death, one of his daughters would have one year within which to purchase a piece of property, and upon the sale of the property, provided for the sale proceeds to be distributed to his other two children.

Read More

Court Retains Ability to Remove Trustee Regardless of the Terms of the Trust [Florida]

An irrevocable trust included provisions for the removal of a trustee by reason of the trustee’s disability. A beneficiary brought an action to remove the trustee, but not based on the specific definition and removal provisions of the trust. Could the beneficiary use Trust Code provisions to remove the trustee when the trust instrument had different provisions? In a recent case, the trial court held that the terms of the trust required that removal could be based only on the terms of the trust.
While under the Trust Code the terms of a trust may prevail over the terms of the Trust Code, an exception to this rule exists under Fla.Stats. § 736.0105(2)(e) which provides that the provisions the trust instrument cannot override “the power of the court to take such action and exercise such jurisdiction as may be necessary in the interests of justice.” The Trust Code also includes other provisions specifically granting powers of removal to the court. The 3rd DCA, in reviewing the question. . .
Read More

Summary Table for Estate and Trust Deduction Limitations

In the 2017 Tax Cuts and Jobs Act, new Code §67(g) was added to prohibit individual taxpayers from claiming miscellaneous itemized deductions through 2026. Questions have arisen as to what deductions of non-grantor trusts and estates come under this provision, including deductions that carry out to beneficiaries in the year of termination of the estate or trust. Notice 2018-61 provided some guidance, and now the IRS has issued proposed regulations to provide guidance.
The final treatment of these items is not the easiest thing to follow, as it gets caught up in definitions of adjusted gross income, miscellaneous itemized deductions, and other related provisions. I thought a table that breaks the various deductions into categories and the treatment of the category would be a helpful tool. So here is the table: . . .
Read More


Nonresident alien individuals present in the U.S. for too many days in a calendar year may be classified as residents for federal income tax purposes under the substantial presence test. If such individuals are stuck in the U.S. due to medical conditions, those days of presence may be excluded in making the days computations pursuant to statutory provisions.

There are nonresident alien individuals who are in the U.S. during the current COVID-19 crises who are unable to leave due to travel bans and similar limitations, but not due to their own illness. It is uncertain whether the medical exception applies to them.

As a relief measure, the IRS has issued a Revenue Procedure. . .

Read More

Surviving Spouse Homestead Limitations Struck Down as Unconstitutional [Florida]

Article VII, Section 6(f)(1) of the Florida Constitution provides ad valorem tax relief to surviving spouses of veterans who died from service-connected causes while on active duty. The provision specifically provides the relief to homestead property of:

“[t]he surviving spouse of a veteran who died from service-connected causes while on active duty as a member of the United States Armed Forces.”

In implementing this provision. . .

Read More

IRS Provides Transfer Tax Extensions

Over the past few weeks, the IRS has provided numerous extensions due to the Covid-19 virus outrbreak. These included Notice 2020-17, Notice 2020-18, and Notice 2020-20. Some relief was provided for gift and generation-skipping transfer tax return filings and payments under Notice 2020-20. Late last week, additional extensions were granted in Notice 2020-23 aimed at estate and generation-skipping tax returns and payments. . .

Read More

Will the Income Tax Return Filing Deadline be Extended Due to the Coronavirus?

It seems likely. It would be unprecedented (to my knowledge) for there to be a national extension, but of course such extensions are regularly granted to regions afflicted by disasters from time to time.

President Trump indicated last week that he was instructing Treasury to allow for deferral of tax payment deadlines, but what I have read on that only mentioned payments and not filing due dates. There are also a. . .

Read More

Tax Court Rejects IRS Valuation Theory Aimed at Reducing Nonvoting Interest Discounts

In a recent Tax Court Memorandum decision, the taxpayer undertook two inter vivos gifting transactions – one to a GRAT, and one to an irrevocable trust. The latter was a part sale/part gift transaction. The transferred items were LLCs holding securities, limited partnership interests, and promissory notes. The taxpayer’s transferred interests were 99.8% nonvoting class B member interests, with 0.2% of the member interests being voting class A interests retained by a management entity owned and controlled by the taxpayer’s daughter.

Traditional appraisal methodologies were applied to yield lack of control discounts in the 13-14% range, and lack of marketability discounts at 25%.

Rather than engage in a direct attack on these discounts, the IRS’ primary approach was . . .

Read More

Basis in a Life Insurance Policy

Life insurance contracts may be sold for many reasons, including among family members as circumstances change, between trusts when it is desired to move a policy out of an irrevocable trust to one that has more desirable terms (although oftentimes that is nontaxable if it is a sale between grantor trusts), or changes in business relationships and coverages.

Previously, the IRS had adopted the position that an owner’s basis in a life insurance policy was the total premiums paid, less the portion of premiums paid attributable to mortality, expense or other insurance coverage (except when the policy was not owned for purposes of insurance protection). This was based on its reading of Code §1016. Thus . . .

Read More

Proportionate Means Proportionate

If a taxpayer contributes a conservation easement in land to a qualified organization, to obtain an income tax deduction the contribution must be in perpetuity. However, the law recognizes that sometimes the easement must be unwound (for example, if the land is taken by the government under eminent domain). In that case, a portion of the value of the property must be given to the qualified organization for conservation purposes.

As to how much the qualified organization must receive, Treas. Regs. § 1.170A-14 (g)(6)(ii) says . . .


New “No Rule” Areas

Every year the IRS publishes a list of areas where the IRS will not issue a private letter ruling. Items on the list can provide a warning to taxpayers that the IRS may not agree with the conclusion that would be sought in the ‘no rule’ area.

For 2020, the IRS added to the ‘no rule’ list or the ‘will not ordinarily be issued’ list:

1. Whether any portion of the items of income, deduction. . .

Read More

Lovest v. Mangiero

By Jenna G. Rubin, Esq.

This decision illustrates some of the difficulties that arise when guardianship and estate proceedings intersect. Here, after the ward died, the guardian and then personal representative sought to pay some of the ward’s creditors using artwork done by the decedent, an artist. One of the beneficiaries of the ward’s estate objected, arguing that the guardianship court’s orders violated her due process rights, the guardianship court lacked subject matter jurisdiction and the guardian should have provided proper accountings.

Read More


Taxpayers who fail to file an FBAR to report a foreign account can escape penalty if they can show reasonable cause for the failure (if the failure to file was nonwillful). A recent district court case failed to allow for reasonable cause – click . . .

Read More


For liability protection, the question regularly comes up who in the family should own the cars. Ask a number of lawyers and you are likely to get a number of different answers.

Note that there are generally two (or more) people who can be liable when a negligently driven vehicle injures another person or another person’s property. The driver is going to be responsible for their own negligence. This is the primary liability, and is unlimited. The owner of the car is also liable – but this liability is limited to $500,000. If the driver has their own property and bodily injury insurance coverage, then this cap is even lower. See Fla.Stats. §324.021(9).

As between spouses, my rule of thumb is that when the wealth . . .

Read More

Reid v. Guardianship of Reid

By Jenna G. Rubin

It is well established that under Florida law, the most important aspect of guardianship law is the protection of the ward. This basic philosophy must be taken into consideration in all aspects of guardianship administration, including awards of attorney’s fees. Accordingly, F.S. 744.108(2) provides the criteria that a court must consider in determining reasonable attorneys’ fees in guardianship proceedings.

Read More

Section 385 Documentation Requirements Revoked

In 2016, the IRS issued regulations under Section 385 that, among other things, imposed various documentary requirements that would need to be met before certain related party indebtedness would be respected as debt and not equity. These regulations caused much consternation regarding costs and burdens of compliance.

The IRS postponed the effective date until 2019. However. . .

Read More

Employment of Family Members

Employing a family member can have tax and personal benefits. In regard to tax issues, the IRS recently issued a Fact Sheet summarizing some of these.

I have prepared a summary of the Fact Sheet, and some other tax aspects of employing family members. Click the link . . .

Read More

Pending Merger Required to be Considered in Valuing Stock

In Chief Counsel Advice, the IRS concluded that in valuing a gift of publicly traded stock to a grantor retained annuity trust, the announcement of a merger shortly thereafter after the gift must be factored into the valuation.

FACTS: A taxpayer who was a co-founder and Chairman of the Board of a publicly traded corporation gifted shares of stock of the company to a newly-formed grantor retained annuity trust. After the transfer date, the corporation announced its merger with another corporation. Prior to the gift date, the corporation had undergone negotiations with multiple parties and on the gift date had been engaged in exclusive negotiations with the corporation that was the subject of the merger announcement. The IRS determined that the pending merger should have been considered in arriving at the value of the gifted stock. . .

Wilson v. Wilson

By Jenna G. Rubin

This decision deals with whether subsequent to executing a prenuptial agreement, language in a decedent’s trust directing the trustee to set aside “as much property as is necessary to satisfy the Wife’s elective share” constituted a modification of the prenuptial agreement such that the wife could then elect to take her elective share. The Court found that it did not.
Read More

Manor Oaks, Inc. v. Campbell

by Jenna G. Rubin

It is not uncommon for a health care surrogate or an agent under a power of attorney to sign a nursing home admission form for an elderly family member who is unable to do so for himself. These admission forms may contain more than just health care related or financial related provisions, so it is important to consider the nature and the scope of the family member’s authority in determining whether they can bind someone to all of the terms of the agreement.

Read More

Old and Cold Offshore Asset Protection Trust Assets Not Reachable by U.S. Creditors

In re Rensin involved an “old and cold” offshore asset protection trust arrangement which a trustee in bankruptcy sought to pierce. The case provided some interesting facts and conclusions that should be of interest for those contemplating offshore APTs. The trust was established and funded well before the beneficiary . . .

More on Passport Revocation

I previously wrote about passport revocation or denial to those with significant unpaid federal tax liabilities – see, for example, the post here. Last month, an IRS News Release provided various details about the program.

Highlights include:

  • The current threshold of delinquent tax debt is $52,000 (or more). . .
Read More

Herman v. Bennett

By Jenna G. Rubin

In the world of creditor’s claims, the difference of just one day can make a world of difference. Here, a creditor filed their claim exactly 3 months and one day after the date of publication of the notice to creditors.

Read More

CLAT Can Determine Charitable Lead Period by Formula

An estate tax charitable deduction under Code §2055(a) is permitted when a qualified charity first holds an interest in a trust followed by a noncharitable beneficiary, based on actuarial computations, if the lead interest is in the form of a guaranteed annuity (CLAT) or unitrust payment (CLUT). Both Code §2055(e)(2)(B) and Treas. Regs. §20.2055-2(e)(2)(vi) require that for a CLAT, the lead interest must have a specified term of years.

What happens if there. . .

Read More

Late Filing Penalties Apply When Accountant Erroneously Fails to Hit “Send”

Taxpayers who file a return late are subject to penalty under Code §6651 “unless it is shown that such failure is due to reasonable cause and not due to willful neglect.” In United States v. Boyle, 469 U.S. 241 (1985), the U.S. Supreme Court adopted a bright line rule that if a taxpayer relies on a third party professional to prepare and file the return and the professional does not timely do so, that is not reasonable cause and the taxpayer can be penalized.

Boyle was adopted well before the era of electronic filing of tax returns. Indeed, Rev. Proc. 2011-25 provides that specified tax return preparers, including any paid professional planning to prepare more than 10 returns a year, MUST file returns through e-file software. Thus, more and more taxpayers are relying . . .

Read More

Proposed Regulations on Cross-Border Cloud Transactions and other Digital Content Transactions

Determining the source and character of transactions involving the Internet or digital items for U.S. income tax purposes is not always easy, given the paucity of IRS guidance on the subject. Treas. Regs. §1.861-18 is the exception, which addresses how to characterize transactions involving “computer programs,” but that is as far as it goes.

In an effort to bring clarity and guidance to this exploding area of commerce, the IRS has issued proposed regulations under Treas. Regs. §1.861-18 and introduced a new proposed Treas. Regs. §1.861-19.

The proposals under Treas. Regs. §1.861-18 expand . . .

Read More

District Court Strikes Regulation Defining Educational Organization Under Code §170(b)(1)(A)(ii)

EXECUTIVE SUMMARY: The U.S. District Court for the District of Minnesota ruled in favor of the Mayo Clinic and held that in determining whether an organization meets the definition of an educational organization under Code §170(b)(1)(A)(ii), the primary function test imposed by regulation is invalid.

FACTS: The Mayo Clinic sought to exclude debt-financed passive income from unrelated business income by qualifying as an organization described in Code §170(b)(1)(A)(ii). That provision describes an organization that is:

an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on.

The Government acknowledged that the Mayo Clinic “normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on.” However, the Government argued that the Mayo Clinic was not an “educational organization” within the meaning of the statute since the Clinic did not meet the primary function. . .

Read More

IRS Sending Out Cryptocurrency Warning Letters

According to the IRS, cryptocurrency like Bitcoin is treated as property, not money. Notice 2014-21. Therefore, taxpayers who use it buy things or convert it to dollars are treated as having sold it, and have to recognize gain or loss based on what they receive when the dispose of it compared to what they paid for it.

In 2016, only 802 individual income tax returns reported cryptocurrency transactions out of the 132 million filed electronically. The IRS is clearly concerned about a lack of knowledge and/or intentional lack of compliance in this area. Late last month, it announced it is sending 10,000. . .

Read More

Wallace v. Comprehensive Personal Care Services, Inc.

By Jenna G. Rubin

This decision highlights the disconnect between the Appellate Courts and the reality of practicing guardianship law. Here, prior to an incapacity proceeding, the court in a related trust matter entered a protective order dealing with the dissemination of medical records. Later, prior to filing for guardianship, the AIP’s son sought an order from the court allowing him to attach those medical records to his petition to determine incapacity. The trial court denied his request.

Read More

Mullins v. Mullins

By Jenna G. Rubin

This decision deals with the effect of an order determining homestead on a beneficiary’s interest in the homestead property. Specifically, the Court considered whether a consent to the entry of an order determining homestead, where that order does not properly lay out the ownership interests in the property, is enough to actually alter the parties ownership interests. The Court held that it did not.

Read More

Kaminsky v. Hecht

By Jenna G. Rubin

Does the Florida long-arm statute reach trustees of trusts administered elsewhere with beneficiaries in Florida? Committing a tortious act within the state is one of the enumerated acts which can give rise to jurisdiction for purposes of the long-arm statute. Fla. Stat. 48.193(1)a.2. While physical presence is not required to commit a tortious act for purposes of the long-arm statute, mere injury in Florida from a tortious act committed elsewhere is not enough.

Read More

Employers Can Truncate Employee Social Security Numbers on Forms W-2

In an effort to reduce identity theft, the IRS has issued final regulations that permit employers to truncate the social security numbers of employees on Forms W-2. Thus, the employer can elect to report the number in the format of XXX-XX-1234 or ***-**-1234 instead of providing the whole number. It is not a mandatory provision – the employer can choose to do it if it wants.

Full taxpayer identification numbers are still required. . .

Read More

Good News/Bad News on GILTI Exclusion for Highly Taxed Income

I noted in my February 23, 2018 posting that the taxation of GILTI under Code §951A does not apply to foreign base company income and insurance income that is excluded from Subpart F by reason of being highly taxed by a foreign country. The way the statute was drafted, income that was NOT foreign base company income or insurance income, but otherwise would be GILTI and subject to pass-through tax, could NOT use the high tax kickout to avoid tax. I noted that this appeared to me to be a statutory glitch and was inconsistent with the policy of allowing a high tax kickout and the overall purpose of the GILTI provisions.

Others have brought this issue to the attention of Treasury in regard to comments to the GILTI proposed regulations. The bad news is that while Treasury did take those comments under consideration, in enacting final regulations it declined to extend the high tax kickout to income other than foreign base company income and insurance income under Subpart F. See Treasury Decision 9866 (6/19/2019).

The good news is that Treasury. . .

Read More

Alexander v. Harris

By Jenna G. Rubin, Esq.

In this 2nd DCA case, the Court once again considered the ability to garnish distributions from a trust for the enforcement of a child support order. It held that the distributions made to or for the benefit of the father from a discretionary special needs trust could be garnished for child support payments owed to a minor child.

Read More

Levine v. Stimmel

By Jenna G. Rubin, Esq.

Florida Statutes F.S. 736.1004 provides that in actions for breach of fiduciary duty or challenging a trustee’s exercise (or nonexercise) of their powers, and in trust modification proceedings, the court may award fees as in chancery actions. Here, the Court considered whether F.S. 736.1004 allowed a party to recover fees after unsuccessfully litigating entitlement to fees under F.S. 57.105.

Read More

Due Process Limitations Apply to Limit State Tax of Trust Beneficiaries

States with income taxes have varying rules on when they assert authority to tax income of trusts, based on combinations of contacts with their state of settlors, trustees, beneficiaries, assets, and management activities. In one of the more aggressive assertions of authority to tax, several states assert that they can tax the income of a trust merely because a beneficiary resides in the state. In a challenge to North Carolina’s scheme, the U.S. Supreme Court ruled that the presence of in-state beneficiaries alone does not empower a state to tax undistributed trust income when the beneficiaries have no right to demand that income and are uncertain to receive it.

In the case, the settlor formed a trust for his children in his home state of New York. The trustee of the trust was a New York resident. Trust documents and records were kept in New York, and the asset custodians were in Massachusetts.The trust granted the trustee absolute discretion to distribute assets to the beneficiaries. One of the children moved to North Carolina . . .

Read More

Electronic Notarization Comes Alive in Florida, and Electronic Notarization and Witnessing of Wills and Trusts Comes Along for the Ride [Florida]

A 78 page bill on the subject of electronic and remote notarization and witnessing of documents was approved by the governor two days ago. Here is some info to start to get you up to speed.

General Provisions:

  • In addition to the statute, the Florida Department of State will adopt rules that online notaries will need to follow.
  • Online notarization is conducted through and requires audio-video communication technology.
  • Notarial certificates should indicate whether they are notarizing in person or online. Sample certificates are in the new statute.
  • The online notary must confirm the identify of the principal, either by personal knowledge or all of the following: remote presentation of identification, credential analysis of identification provided, and identity proofing based on knowledge-based authentication or similar method. Credential analysis involves a third party aiding the notary in affirming the validity of government-issued identification credentials. Identify proofing involves a a third party affirming the identity of an individual through use of public or proprietary data sources, including knowledge-based authentication (question and answer systems) or biometric verification. . .
Read More

Romanoff v. Lazarus

By Jenna G. Rubin

Failure to raise a defense of lack of personal jurisdiction at the right time can constitute a waiver of the defense altogether. The timing of the defense has to be exactly right or the defense will often be waived. Here, the defendant did not raise the defense in her first motion to dismiss, but did raise it in a second motion to dismiss which was filed before the court heard her first motion to dismiss.

Read More

Jacobsen v. Busko

By Jenna G. Rubin, Esq.

This decision is a short and sweet reminder that once an order of incapacity is entered removing a ward’s right to contract, that ward no longer has the ability to independently hire counsel for him or herself.

Read More

Economic Substance Requirements and Tax Haven Jurisdictions

Not receiving much attention are new economic substance requirements that have recently been enacted in several tax haven jurisdictions, including the Cayman Islands, Bermuda, and the British Virgin Islands.

Tax planning structures often involve the use of corporations and other entities formed in tax haven jurisdictions. To give one example, tax haven companies are often used as blocker holding companies to insulate foreign persons from U.S. estate taxes on their U.S. assets. These new economic substance requirements threaten to complicate such planning structures.

The new requirements are an outgrowth of pressure from the EU and OECD to limit the use of tax haven companies for tax planning and base erosion purposes, especially where the companies have little or no activity. . .

Read More

Does a Disclaimer of Real Property Require a Legal Description in Florida?

In a recent case, a disclaimant signed a disclaimer that purported to include real property owned by a decedent, but did not provide a legal description for the real property. After entering into the disclaimer, the disclaimant apparently had a change of heart and desired to retain the disclaimed real property, claiming the disclaimer was invalid.

Here are the key statutory provisions (emphasis added). . .

Read More

NFL Draft Day and Federal Income Tax

Two concepts that you don’t often see together!

While only of direct interest to a few taxpayers, a Revenue Procedure addressing draft picks and player contracts issued this week does make for interesting reading.

Tax professionals know that the sale or exchange of property gives rise to taxable gain or loss if the amount received is more or less than the taxpayer’s basis in the property, absent the application of a nonrecognition provision of the Internal Revenue Code. Player contracts and draft picks are property. Therefore. . .

Read More

The End to Agency Deference in Florida Tax Disputes [Florida]

Many a Florida taxpayer has disagreed with the Department of Revenue’s interpretation of a tax statute. I recently was involved in an audit where it was clear to us that the Florida Administrative Code provisions were not supported by the statutory provisions.

A taxpayer seeking to challenge the DOR’s interpretation in court have had the deck stacked against them under the concept of agency deference. This gives the DOR the benefit of the doubt in its interpretation of the law. . .

Read More

Qualified Beneficiaries–Recent Case is Puzzling in its Logic and Scope [Florida]

A recent 4th DCA opinion on who is a “qualified beneficiary” under Florida’s Trust Code is a puzzler, at least to me. Status as a qualified beneficiary is important – it determines who is entitled to receive an accounting for a trust.

To simplify the facts, 3 separate trusts were held for 3 daughters – each daughter was the current income and principal beneficiary of their own separate trust. At the death of a daughter, the assets of her trust would be transferred to the trusts of her surviving siblings. At the death of the last daughter, the trust assets would go outright to 3 named charities.

Fla.Stats. §736.0103(16) provides general rules on when a living beneficiary is a qualified beneficiary. Generally, the rules include the current beneficiaries, and the next level of persons who would take if the trust. . .

Read More

Rizk v. Rizk

By Jenna G. Rubin

This decision centers around the ability of a beneficiary to challenge a will executed in another country even if they did not contest that will in the country where it was executed. Here, the will was purportedly executed in Haiti in accordance with Haitian law. The beneficiary tried to challenge the will in Florida, alleging that the decedent was not actually in Haiti on the day the will was purportedly signed, and that the witnesses did not sign the will on that date.
Read More

Bitezakis v. Bitezakis

By Jenna G. Rubin

While it seems easy enough to execute a will, this case reminds us that a client’s attempt to do so at home without the guidance of a lawyer may have serious unintended consequences if the will is not executed in strict compliance with the signature requirements of F.S. 732.502.
Read More

Bernie Sanders’ Tax Proposals

We all know that come 2025 the aggregate transfers covered by the unified credit for estate and gift taxes will revert to pre-Trump levels (subject to adjustments for inflation), thus ensnaring more taxpayers in the estate and gift tax web. Of course, should a Democrat be re-elected in 2020, changes in taxes to the higher side may occur even sooner than 2025.

A recent tax bill filed by Senator Bernie Sanders, a candidate for President, gives some insight about what tax legislation might look like if a Democrat is elected – more so if he is elected, but perhaps also as to other Democratic candidates.

Some key changes he would make to the high side include:

a. Increases in estate, gift and GST rates, to a maximum of 77% for members of the billionaire’s club. . .

Read More

Beneficiaries Hit with Transferee Liability Suit for Estate Taxes 19 Years After Date of Death

A recent case illustrates how beneficiaries and recipients of property from a decedent do not receive the property free and clear from estate tax liabilities. If estate taxes are not paid, the IRS can seek collection of the taxes from such beneficiaries and recipients as transferees under Code §6324(a)(2). And it may be a long, long time before the IRS ‘comes a knocking.’

The case illustrates to us that:

a. Transferee liability is not limited to those who receive a gift or bequest pursuant to a last will or disposition of property being administered under a revocable trust. Instead, it extends to recipients of all property. . .

Read More

IRS Blesses 2nd Marriage Planning Technique for IRA

A common issue in planning for marriages with prior children is how to provide for the surviving spouse, while also making provision for children of a prior marriage or relationship. A regularly used planning arrangement is to designate as successor owner at death of the original owner a marital trust that provides for assets to be expended for the surviving spouse during his or her lifetime, with a remainder to the children and lineal descendants of the first spouse to die. This avoids the problem of leaving the assets outright to the surviving spouse, who then can leave the assets to other beneficiaries at his or her death.

If the asset at issue is an IRA or qualified plan interest, the owning spouse may have similar concerns. However, income tax issues complicate the planning. For income tax planning purposes, it is usually desirable. . .

Read More

Lee v. Lee

By Jenna G. Rubin

This decision deals with the validity of a disclaimer executed by one of the decedent’s daughters. Specifically, the Court considered whether the disclaimer was valid because it did not contain a legal description of the real property being disclaimed.

Read More

Real Property Rental Safe Harbor under Code §199A

Code §199A allows taxpayers up to a 20% income tax deduction for business income earned through a sole proprietorship or pass-through entity. There are numerous requirements to meet, and one of these is that the business constitute a trade or business under Code §162.

Unfortunately, for rental real estate activities it is not often clear whether the activity constitutes a trade or business. To assist taxpayers. . .

Read More

U.S. Supreme Court to Decide Whether a State Can Tax a Trust Solely Based on Residence of a Beneficiary

The Due Process Clause of the U.S. Constitution requires a taxpayer have sufficient contacts with a state before the taxpayer can be subject to income taxes in that state. This has led to disparate results on when the income of a trust is subject to the taxing jurisdiction of a state.

One common fact pattern is a trust where a state seeks to tax a trust on its income because a beneficiary of the trust resides in the state, even though. . .

Read More

Goodstein v. Goodstein

By Jenna G. Rubin, Esq.

I started this blog in 2013, and this is the first time I have the opportunity to write about a case that I am actually involved in. This case involves a long-running dispute between the father of the decedent, the personal representative of the estate, and the decedent’s children, the beneficiaries of the estate (the personal representative’s grandchildren).

Read More

Maldonado v. Buchsbaum

By Jenna G. Rubin, Esq.

In certain situations, it is possible to get a temporary injunction without notice, but a court should not do so without strictly complying with the rules governing injunctions. In this case, the surviving spouse sought a temporary injunction against the decedent’s aide who had allegedly fostered a relationship with the decedent and alienated him from his spouse during life.

Read More

Mandatory Restricted Depository Arrangements in Probate Questioned [Florida]

Fla.Stats. §69.031(1) authorizes a probate court to direct the financial assets of a probate estate be deposited into a restricted depository account held by a financial institution. This is a protective mechanism, since assets may be disbursed from that account only upon court order, instead of mere direction by the personal representative. Thus, it acts a mechanism to reduce the risk of improper use, dissipation, or disbursement of estate asset. . .

Read More

Rules Issued on Excess Remuneration Paid by Exempt Organizations

The 2017 Tax Act imposed a penalty on excess compensation paid to employees of an applicable exempt organizations (“ATEO”). Code §4960 imposes an excise tax of 21 percent on compensation paid to a covered employee in excess of $1 million and on any excess parachute payments paid to a covered employee.  A “covered employee” is any employee (or former employee) who is one of the five highest – compensated employees of the organization for the taxable year or was a covered employee of the organization (or any predecessor) for any preceding taxable year.

The IRS has issued Notice 2019-9, which contains interim rules on how the excise tax will apply. Some interesting aspects of the new statute and rules are summarized below. . .

Read More

Another Court Finds Failure to Check Off Foreign Account on Income Tax Return Is Enough to Find Willfulness For FBAR Penalty

As discussed on numerous occasions in this blog, a substantial penalty applies if a foreign account is not reported on an annual FBAR filing and the failure to report was willful. As more attention has been focused on FBAR filing failures over the last 10 years or so, more courts are addressing when a failure to file is willful.

Problematic for taxpayers who claim a lack of knowledge of the FBAR filing requirement is the question on Schedule B of their federal income tax return that asks if they have an interest in or authority over an account. . .

Read More

FBAR “Willfulness” Decision

A substantial penalty applies for those who willfully fail to report a foreign account on an FBAR. A recent 2nd Circuit Court of Appeals opinion weighed in on two uncertainties regarding willfulness in context of FBAR violations.

First, the Court held that the definition of willfulness is not particular to FBAR violations but should involve the definition applied in other civil contexts. Particularly, the Court said . . .

Read More

Interesting Modifications in FATCA Proposed Regulations

New Proposed Regulations modify withholding and other misc. requirements under FATCA and chapter 3. Some of the more interesting changes include:

  1. No Withholding on Gross Proceeds. Under Code §§471(a) and 1472, withholdable payments made to certain FFIs and certain NFFEs are subject to withholding under chapter 4. Under Code §1473(1)  the term “withholdable payment” means: (i) any payment of interest (including any original issue discount), dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, and other fixed or determinable annual or periodical gains, profits, and income. . .
Read More

Senopoulos v. Senopoulos

By Jenna G. Rubin, Esq.

A probate court has the inherent authority to evaluate a person’s fitness to serve as personal representative. However, in order to appoint a personal representative based on something other than that personal representative’s entitlement under the statute, the trial court has to actually make a finding about the person’s fitness to serve.

Read More

Gordon v. Fishman

By Jenna G. Rubin, Esq.

Under current Florida law, the provisions of a decedent’s will that impact the former spouse of that person become void upon divorce. But what happens when the decedent’s will is prepared before the marriage (which ultimately ended in divorce)?

Read More


Similar to concerns in 2012 when there were concerns about a reduction in the unified credit, the 2026 sunset of the $5 million increase in the unified credit basic exclusion amount for gift and estate taxes under the 2017 Tax Cuts and Jobs Act (TCJA) has created concerns about what happens to taxpayers who use all or part of the $5 million increase in the period after the 2026 sunset. In a holiday gift to taxpayers, the Treasury Department has issued a notice of proposed rulemaking that should ameliorate most, if not all, concerns of clawback and related adverse impacts on gift and estate tax computations and amounts.

The Treasury Department announcement indicates four areas of concern. It then notes that three of these areas are nonissues under current law requiring no regulatory attention, and then provides proposed modifications to the regulations to address. . .

Read More

Baden v. Baden, et al

By Jenna G. Rubin, Esq.

Ordinarily, a plaintiff may voluntarily dismiss his or her action pursuant to FRCP 1.420(a)(1) at any time before a hearing on motion for summary judgment. In this case, the Plaintiff tried to dismiss certain trust litigation subsequent to a settlement agreement, but the trial court refused to grant his dismissal and attempted to retain jurisdiction over the subject trust. Ultimately, the Court found that the trial court erred and had no basis for not accepting the Plaintiff’s voluntary dismissal.

Read More

LL.M. Degree Not Deductible

A taxpayer went to law school in Spain and practiced law there for several years as an international attorney. He then moved to New York City and enrolled in an LL.M. program at NYU. He paid tuition expenses of $27,435. After obtaining his degree, he obtained a visiting attorney position in the U.S. at an international law firm, doing similar work to what he did in Spain. He then  took and passed the New York State bar exam – he was eligible because of his LL.M. degree. He passed and was admitted to practice in New York and continued working at the law firm.

The issue is whether he could deduct his tuition expenses. . .

Read More

Filing a Claim against Estate Grants IRS More Than 10 Years to Collect

Code §6502(a)(1) provides a 10 year collection period to the IRS, measured from the assessment date. The particular language reads: “Where the assessment of any tax imposed by this title has been made within the period of limitation properly applicable thereto, such tax may be collected by levy or by a proceeding in court, but only if the levy is made or the proceeding begun. . . (1) within 10 years after the assessment of the tax. . .”

In U.S. v. Estate of Albert Chicorel, 122 AFTR 2d 2018-XXXX (CA6 2018), the IRS sought to collect on an income tax assessment more than 10 years old. The Estate sought to bar. . .

Read More

Johnson v. Townsend

By Jenna G. Rubin, Esq.

This is an interesting decision about the intersection of community property law and Florida probate claims. The decision centers around whether a surviving spouse who is claiming an interest in purported community property must file a timely claim against the estate. The Court held that such a claim is a claim under the Florida Probate Code and that no exceptions exist to usurp the time deadlines for filing a claim in these types of proceedings.

Read More

New Inbound Investment Reporting Requirements for Certain Industries

Regulations have been recently issued under the recently passed Foreign Investment Risk Review Modernization Act (FIRRMA) to implement a pilot program that expands the jurisdiction of the Committee on Foreign Investment in the United States (CFIUS) and imposes filing requirements on certain transactions in the U.S. technology sector.

Parties must file a declaration with CFIUS at least 45 days. . .

Read More

The New “Newlywed” Exception to Documentary Stamp Taxes

Florida imposes documentary stamp taxes on transfers of Florida real property. The tax is based on the consideration paid for the property. Generally, if real property that is transferred is encumbered by a mortgage and te purchase price is less than the mortgage amount (or there is nothing otherwise paid), the mortgage amount is treated as consideration for purposes of calculating the tax.

This tax arises on transfers of encumbered real property, even if the transferor and transferee are married to each other. . .

Read More

New Homestead Diagram

Many years ago I prepared a diagram in table format that simplified the restrictions on transfers of Florida homestead property. This has been downloaded thousands of times and I hear is used by many legal and real estate professionals. You can download a copy. . .

Read More

The Transitory Nature of the Estate Tax Exemption Amount

With $11.18 million of cover under the unified credit under the 2017 tax act, more estates than ever are exempt from federal estate tax. This is especially so for married individuals, who have double this amount and the benefits of portability to help make effective use of both spouse’s exemption amounts.

Clients need to be reminded that this exemption amount is NOT permanent. Come 2026. . .

Read More

Avoiding Drafting Errors in Estate Planning Documents

As a member of a law firm with a substantial practice in estate and trust litigation, I have the opportunity to see numerous cases of poor drafting that end up in dispute or litigation. In the best of circumstances, it can be difficult to draft a 20-30 page trust or other instrument 100% free of all drafting errors. But there are many circumstances that are more likely to create, or not catch, drafting errors.

A recent article by L. Paul Hood, Jr. addresses many of these circumstances, and provides suggestions to minimize errors. I highly recommend it. Below is a list of several of these circumstances and/or suggestions, as paraphrased and commented on by me, but you should read the whole article:

a. Do your best to avoid the need to rush. Easier said. . .

Read More

Multiple Trusts and the Section 199A 20% Deduction

Section 199A Background

The Tax Cuts and Jobs Act of 2017 created a 20% deduction for noncorporate taxpayers against their qualified business income. For taxpayers in the highest bracket, this would reduce their tax on such income from 37% to 29.6%.

There are limits on the use of the deduction for higher income taxpayers. One set of limits is the exclusion of service income (subject to some exceptions) from the deduction, and another requires significant wages or depreciable business property to benefit from the deduction. Therefore, higher income taxpayers are incentivized to reduce their taxable income to avoid these limitations.

The deduction is available. . .

Read More

Spouse Not Removed from Will by Reason of Divorce

This is an interesting case, although the issue probably does not come up that often.

While unmarried, Mr. Priever executed a will leaving his property to his then fiancée, Ms. Gordon. The two then married, and later divorced. Mr. Priever then died.

Mr. Priever’s father, through his guardian,  petitioned to have the will construed as if Ms. Gordon predeceased Mr. Priever pursuant to Fla.Stats. §732.507(2). This statute reads: . . .

Read More

Wallace v. Watkins

By Jenna G. Rubin

In this decision, the Court considered, among other things, the applicability of the 2 year non-claim period to actions brought to determine the beneficial interest of heirs. Years after an order of summary administration was entered, purported heirs of the decedent petitioned to reopen the summary administration because they argued they should have received notice of the petition for summary administration since they were easily ascertainable known heirs of the decedent.

Read More

Calderon v. Vazquez

By Jenna G. Rubin

In this decision, the Court considered whether a beneficiary made sufficient allegations regarding the proceeds of a life insurance policy in order to survive a motion to dismiss. In reversing the trial court’s dismissal, it found that there was enough evidence to proceed on the beneficiary’s complaint.

Read More

Dixon v. Bellamy

By Jenna G. Rubin

This decision clarifies the statute of limitations for determining paternity for purposes of intestacy in a probate proceeding. Prior to 2009, there was a four year statute of limitations from a person’s 18th birthday to bring a proceeding to determine paternity.

Read More

Revisions to Partnership Representative Rules

The IRS has issued final regulations under the new centralized partnership audit regime. This audit regime was enacted in 2015. The rules provide for a partnership to appoint a “partnership representative” to participate in the audit process.

The final regulations generally adopt previously temporary and proposed regulations. Some of the key changes made in the final regulations from the temporary and proposed regulations relating to the partnership representative include:

  • According to the Preamble, a partnership that has elected out of the centralized partnership audit regime is not required . . .
Read More

Final Charitable Contribution Reporting Regulations Issued

The Code imposes various reporting and substantiation requirements in order for a donor to claim a charitable contribution. More than once I have seen the IRS adopt a strict approach with taxpayers and have sought to disallow deductions for substantial contributions due to technical failures to comply with the rules.

The IRS has promulgated revisions. . .

Read More

Rachins v. Minassian

By Jenna G. Rubin, Esq.

Subsequent to the Minassian v. Rachins decision, described here, the Court was once again faced with the interpretation of the Zaven Minassian Trust Agreement.  This time, the issue was whether the decedent’s children had standing to contest the surviving spouse’s administration of a trust for their benefit, where the terms of the trust provide that upon the spouse’s death, the trust terminates, and the remaining assets are distributed to new trusts for the children’s benefit.

Read More

Kiddie Tax Summary

The 2017 Tax Act reworked the Kiddie Tax. The Kiddie Tax acted to increase the rate of tax on the unearned income of children so that their family could not benefit from diverting investment income to children who are taxed in a lower tax bracket.

Below is an overview. . .

Read More


I have previously noted and complained about the relentless expansion of information reporting required to the IRS. Like an unexpected cool breeze on a hot summer day, an unexpected reduction in such reporting has been promulgated for many tax-exempt organizations. This is favorable since it reduces the compliance burden on taxpayers, protects the privacy of donors, and limits the ability of the IRS to injure donors by inadvertently disclosing donor information (as has happened in the past) or inappropriately targeting groups and individuals for disparate treatment when their politics is not in accord with the current ruling party (i.e., the inappropriate screening of conservative groups).

The Treasury Department and the IRS have announced that they will no longer require many tax-exempt organizations to file personally-identifiable information about their donors as part of their annual tax return (Forms 990). . .

Read More

Mulvey v. Stephens

By Jenna G. Rubin, Esq.

In this typical fact pattern, a child from the decedent’s first marriage, following a failed attempt to have the decedent’s estate planning documents overturned, brought an action against the decedent’s second spouse for tortious interference. While she prevailed at trial, the Court overturned the judgment because there was no competent evidence to support a claim for tortious interference with an expectancy.

Read More

A Safe Harbor for Waiver-by-Deed of Spousal Homestead Interests [Florida]

Under the Florida Constitution, a decedent owner of Florida homestead property with a surviving spouse can only devise that property to the surviving spouse (although if there are surviving minor children then no devise can be made at all). Fla.Stats. §732.702 allows for written waivers of homestead rights by spouses. That statute requires “fair disclosure” of assets be made if the waiver occurs after marriage.

Recent case law, most notably Stone v. Stone, 157 So.3d 295 (4th DCA 2014) allowed a deed from a spouse to constitute a waiver for this purpose. The correctness and scope of this decision have been debated by. . .

Read More

Supreme Court Upholds Changes to Beneficiaries Upon Divorce

Married persons often name the other spouse as beneficiaries of their estate, life insurance, pensions, IRA’s, annuities and other contractual arrangements upon the death of the first spouse. Upon divorce, they often do not get around to changing these beneficiary designations, either intentionally or unintentionally. Many state legislatures have reached the conclusion that the spouse that died would likely have wanted to change the beneficiary from the former spouse, but just never got around to it (whether intentionally via procrastination or unintentionally). They have enacted revocation-on-divorce statutes that treat a divorce as voiding one or more of testamentary bequests and beneficiary designations. In 2002, Minnesota adopted such a statute that applied to will and various will substitutes, including life insurance and annuity contracts.

The Contracts Clause of the U.S. Constitution restricts the power of States to disrupt contractual arrangements. It provides that “[n]o state shall . . . pass any . . . Law impairing the Obligation of Contracts.”  U. S. Const., Art. I, §10, cl. 1. In a recent case, the U.S. Supreme Court addressed the issue whether Minnesota’s revocation-on-divorce statute was unconstitutional as violative of the Contract Clause. The dispute . . .

Read More

Taxpayers Could Not Rely on IRS Correspondence Waiving Penalties

In a recent U.S. District Court decision, the taxpayers were audited, and ultimately received a letter from the auditing agent that “the penalties had been waived.” The taxpayers signed a Form 4549 document which did not assess penalties.

Subsequently, the IRS sent a Form 4549-A assessing a civil penalty under §6707A for failure to disclose a listed transaction. The taxpayers argued that the IRS had waived penalties and could not assess this new penalty, or alternatively the IRS was equitably estopped from asserting the penalty. The court ruled in favor of the IRS and allowed the penalty.

Code §7121(a) authorizes the IRS to enter into agreements. . .

Read More

Likely That Not All Internet/Web Sales Into a State will be Subject to State and Local Sales Taxes

In South Dakota v Wayfair, Inc., the U.S. Supreme Court overruled its prior precedent regarding sales tax on interstate sales and imposed state sales tax on sellers of merchandise who had no physical location or presence in South Dakota into South Dakota via the Internet .

OLD LAW. National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U.S. 753 (1967) and Quill Corp. v. North Dakota, 504 U.S. 298 (1992) had previously held that an out-of-state seller’s liability to collect and remit the tax to the consumer’s State depended on whether the seller had a physical presence in that State, and that mere shipment of goods into the consumer’s State, following an order from a cata­log, did not satisfy the physical presence requirement.

GENERAL COMMERCE CLAUSE LIMITATIONS ON TAXATION OF INTERSTATE SALES. State regulations may not discriminate against interstate commerce, and may not impose undue burdens on interstate commerce. State laws that “regulat[e] even-handedly to effectuate a legitimate local public interest . . . will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefit”. In Complete Auto Transit, Inc. v. Brady, 430 U. S. 274 (1977), the Court held it would . . .

Read More

The Good and Bad News on Charitable Deductions under the 2017 Act

The good news first:

a. The 50% of adjusted AGI limitation maximum deduction amounts in any one year is increased to 60% as to cash contributions.

b. The Section 68 3% “Pease limitation” phase-out of itemized deductions is out of the law (through 2015).

These changes can significantly increase available deductions, but mostly for higher income persons and/or persons making significant gifts. Thus, one has to wonder whether the loss of deductions under the “bad news” below for many taxpayers will be offset by these increases.

The bad news:

a. The standard deduction is significantly increased to $12,000 for single people and $24,000 for . . .

Read More

Webb v. Blue

By Jenna G. Rubin, Esq.

In this 1st DCA decision, we get another refresher on some aspects of Florida’s homestead law. Namely, this decision gets into the issue of how to validly devise homestead property to a non-heir, when the decedent is survived by heirs (but not a spouse or minor children).

Read More

Lyublanovits v. Zebny

By Jenna G. Rubin

This decision construes the language in F.S. 744.312 regarding the appointment of an emergency temporary guardian who is a professional guardian as the permanent guardian of a ward. The Court construed the language of the statute and the findings of fact in the trial court order, and found that the requirements had been met for this emergency temporary guardian to stay on as permanent guardian for the ward.


Read More

Dejesus v. A.M.J.R.K., Corp.

By Jenna G. Rubin

In this 2nd DCA case, the Court considered whether the homestead exemption on real property could be held by a corporation.  It held that the homestead exemption does not inure to a person residing on property, where that property is solely owned by a corporation.

Read More

Schlesinger v. Jacob

By Jenna G. Rubin, Esq.

In this decision, the 3rd DCA adopts the requirement that an attorney’s services must benefit a ward or the ward’s estate in order to be entitled to fees. The Court focuses on the different standards under the statutes to determine entitlement to fees, versus the standard to determine amount and reasonableness of fees.
Read More

Takeaway from Recent Decision on Florida Attorney Extraordinary Attorney Fees For Ordinary Administrative Work in an Estate [Florida]

In this case, the Personal Representative sought fees for serving as both PR and attorney for the estate – while not totally clear from the opinion, it appears the PR sought those fees using the presumptively correct fee Florida statutory fee schedule schedule.

The PR also engaged outside counsel to assist with some matters. It is the fees for that outside counsel that the court was principally concerned with. The court ended up substantially reducing the fees sought by the outside counsel either outright, or deferring the consideration of some of those fees until later since some of them were too premature for the court to rule on. Some of the conclusions of the court were:

a. Work by the office of the outside attorney to determine addresses of 53 interested persons for purposes of receiving formal notice regarding a determination of beneficiaries and pertaining . . .

Read More

IRS Provides Some Relief for Post-Divorce Grantor Trust Rule Issues

During happy days, one spouse (call him or her the “Donor Spouse”) sets up an irrevocable trust for the benefit of the other spouse (call him or her the “Donee Spouse”). Under Code §672(e)(1)(A), a grantor of a trust is treated as holding any power or interest in a trust that is held by an individual who was the spouse of the grantor at the time of the creation of such power or interest. This typically results in grantor trust status for the trust since the Donor Spouse is treated as having retained rights to income and principal in the trust – with the Donor Spouse being taxable on some or all of the trust income.

Fast forward, and the happy couple is not so happy. They divorce . . .

Read More

IRS Guidance Issued on New Interest Stripping Rules

The Tax Cuts and Jobs Act substantially modified the interest stripping rules of Code §163(j). In a recent IRS notice, the IRS provided guidance on some of the provisions of the revised limitation and what new regulations will say. Here are some highlights:

a. The old provision allowed for the carryforward of disallowed interest expense to future years. The notice advises that any disallowed interest expense for the last tax year beginning before 1/1/2018 can be carried over (to be subject to the new provisions in the next year). Such a carryforward does not apply to an “excess limitation carryforward” from such prior year. A similar provision applies to such a carryover in regard to the Code §59A base erosion minimum tax.

b. The new rules allow interest to be deducted to the extent of the taxpayer’s business interest income, plus 30% of adjusted. . .

Read More

Offshore Voluntary Disclosure Program (OVDP) Closing in September

The OVDP commenced in 2009, and provided a mechanism for U.S. taxpayers who had not complied with various non-U.S. information disclosure and tax payments to square up with the IRS without risk of criminal prosecution, but at the cost of fixed penalties, back taxes, and interest. Over 56,000 taxpayers have used one of its programs. . .

Read More

Prewitt v. Kimmons

By Jenna G. Rubin

This decision rested on whether sufficient questions of fact were raised to preclude summary judgment regarding claims of breaches of fiduciary duty.  The beneficiary of an irrevocable trust sued her sister, one of the successor trustees, for breach of fiduciary duty, alleging that she had failed to distribute funds as provided for by the trust documents, failed to seek the return of $10,000 of trust assets wrongly retained by another of the successor trustees, and failed to return monies that she had purportedly misappropriated from the trust account prior to the settlor’s death.

Read More

Key Federal Inflation-Adjusted Amounts for 2018

In Rev.Proc. 2018-18, the IRS has released various tax rates, brackets, and threshold amounts for 2018, incorporating inflation adjustments and the new tax act. Some of the principal figures are as follows:

Alternative Minimum Tax Exemption for Individuals: $109,400 for married individuals filing joint returns and surviving spouses – $70,300 for other unmarried individuals – $24,600 for estates and trusts.

Standard Deduction: $24,000 for married individuals filing joint returns and surviving spouses – $12,000 for unmarried individuals . . .

Read More

State Asset Protection Trusts Take Another Hit

Numerous states have statutes that allow for the creation of self-settled discretionary trusts that are protected from claims of the settlor while allowing the settlor to be a discretionary beneficiary. Such trusts are likely valid for settlors who are residents of the particular state, the property in the trust is located in that state, and no other state has jurisdiction over the parties. While these states seek the trust business of persons outside of their borders seeking these benefits, the validity of these benefits to such person has been an unanswered question.

In a recent Supreme Court of Alaska case (Alaska being one of the states that allow for asset protection trusts), judgment debtors transferred Montana property to an Alaska asset protection trust after judgments were entered against them. . .

Read More

Smith v. Smith

By Jenna G. Rubin

This decision involves the question of whether a prenuptial agreement precluded the surviving spouse from seeking the removal of the co-personal representatives of the decedent spouse’s estate.  The prenuptial agreement in question provided that the surviving spouse would “refrain from any action or proceeding to void or nullify to any extent the terms of any last will and testament or trust or testamentary substitute.”
Read More

Boren v. Rogers

By Jenna G. Rubin

Writs of certiori are rarely available in discovery disputes, because in most cases, the harm caused by an improper ruling on discovery can be corrected on appeal.  Here, however, the trial court denied the plaintiff the ability to conduct discovery about a decedent’s prior estate planning documents.

Read More

No Homestead Treatment for Property Owned by a Corporation [Florida]

In a recent case, residential property was owned by a corporation. The sole shareholder and president of the corporation resided on the property, and the corporation had attempted to convey the residence to the shareholder, but its deed was effective and ineffective. In attempting to fend off a creditor, it was argued that the property qualified as homestead property and was thus beyond the reach of creditors, and the trial court agreed.

Article X, section 4 of the Florida Constitution, which provides protection against forced sale for homestead property, reads in relevant part . . .

Read More

When a Nightclub is Not a Business

Under Code §183(b), a taxpayer’s activity that is not engaged in for profit gives rise to deductions only to the extent of income. No excess deductions arise that can be used to offset other income, and no net operating losses are produced.

Joy Ford, a country music recording artist and promoter, owned and operating the Bell Cove Club, a lakeside music venue in Hendersonville, Tennessee. The club featured live country music on Friday and Saturday nights. Joy devoted most of her time to the club and paid all of its expenses. The club charged a $5 admission fee and a nominal amount for snacks and beverages.

The club operated at a loss, reporting losses in 2012-14 of $39,285, $74,120, and $96,893. Joy used the losses to offset other income she had. The club’s recordkeeping was atrocious. . .

Read More

The U.S. Will Now Bar Tax Delinquents from Travelling Abroad

I wrote back in 2015 here about new legislation that gave power to the Secretary of State to deny, revoke or limit the passport of persons with delinquent taxes. Code §7345 provides that the Commissioner of the IRS will provide notice to the Secretary of the Treasury, who will then transmit that notice to the Secretary of State, in regard to a taxpayer’s delinquent tax debt. Generally, it applies to delinquent tax debt over $50,000 (adjusted for inflation), for which a notice of lien has been filed or a levy has been made. Upon receipt of a Code §7345 certification, §32101(e) of the 2015 FAST Act . . .

Read More

Cohen v. Shushan

By Jenna G. Rubin

In Florida, a “surviving spouse” receives certain benefits- they can take an intestate share of the deceased spouse’s estate and they may also be entitled to an elective share, family allowance, homestead and so on. Under principles of comity, Florida courts will recognize the marriage of citizens of a foreign country if that marriage was valid under foreign law.

Read More

Landau v. Landau

By Jenna G. Rubin

Normally, an injunction is considered to be a serious form of relief, and courts typically will not grant them unless a high burden is met.  Here, however, the Court upheld an injunction freezing trust assets, based on the probate court’s “inherent jurisdiction” to protect the assets under its supervision.

Read More

The Stealthy Tax Increase in the Tax Cuts and Jobs Act of 2017

Ever since the Reagan Administrative, tax brackets have been indexed for inflation. This avoids bracket creep when taxpayers move into a higher tax bracket because inflation pushes up their income. The thinking is that inflation increases are not real increases in earnings, so the rate tables should be indexed to avoid tax increases arising solely from inflation. This seems like less of an issue today with relatively tame inflation rates, but remember that inflation went into the teens in some years in the1970’s making bracket creep a big issue.

The new Act changes rate indexing and other Code indexing from the former Consumer Price Index (CPI) to a new creation known as “chained CPI.” Chained CPI is an adjustment to CPI that reduces the inflation rate by attempting to factor in human behavior that when prices rise, some consumers will look for less expensive substitute products, so that the overall inflation is lower than it would first appear when measured by actual spending.

So was chained CPI brought in due to a desire. . .

Read More


Meaning of “jump the shark” – “It’s reached its peak, it’ll never be the same again, and from now on it’s all downhill.” [Source] Or if you prefer another popular culture reference, the Code has entered the Twilight Zone.

Case in point, new Code Section 199A which provides a 20% deduction for qualified business income earned through pass-thru entities. This one new Code Section:

a. is over 22 pages long (using the pages from the bill report and print;

b. employs approximately 20 defined terms;

c. includes 26 cross-references within Section 199A. . .

Read More

Stuart v. Ryan

By Jenna G. Rubin

This decision is a nice review of the availability of exceptions to Florida homestead creditor protection. Despite the fact that the discussion about exceptions to homestead being dicta,  because the property in question was determined to not be homestead property, the decision provides a summary of the status of the law in this area.

Read More

2017 Charitable Gifts

If the pending tax bills are reconciled by Congress and enacted into law, there is likely to be a substantial reduction in the number of individuals that will itemize their deductions. For many taxpayers, this may mean they will no longer be deducting charitable contributions after 2017. Taxpayers may want to consider making. . .

Read More

Flanzer v. Kaplan

By Jenna G. Rubin

The Court here considered when a party must bring an action to challenge the validity of a trust purportedly procured by undue influence.  While the Florida Trust Code prescribes when a challenge to the validity of a trust may be started (when it becomes irrevocable or upon the settlor’s death), the Trust Code does not specify a limitations period for challenging the Trust.  As a result, we must look to the general rules for limitations contained in Chapter 95.
Read More

In re Guardianship of Bloom

By Jenna G. Rubin, Esq.

While this decision involved a lengthy description of prior litigation among the various competing parties in this guardianship, and ultimately trust and estate dispute, the takeaway of the decision is simple.

Read More

2018 Inflation Adjustments to Transfer Tax Items

The IRS released its 2018 tax adjustments – the following table summarizes the transfer tax adjustments. Note that some of these adjustments will become moot if the changes in the House and Senate versions of the pending tax act become. . .

Read More

Possible Favorable Impacts on Inbound U.S. Real Property Investments under the Proposed Tax Act

The proposed Act has provisions that will provide benefits to non-U.S. persons making investments into U.S. real property.

For foreign persons investing individually (or through pass-through entities) in U.S. partnership and LLC structures, the reduced maximum tax rate to 25% on pass-through entity income may act to reduce income tax on non-capital gains. Generally, 30% of the profits of such ventures will be able to obtain that rate. Also, if estate taxes are repealed . . .

Read More

A Pleasant Surprise

Many commentators expected that the new tax bill would pair the repeal of basis step-up at death with the repeal of the estate tax. They were pleasantly surprised to see that basis step-up at death remains unaltered under the bill released last week.

If the bill is passed without changes to these provisions, then planning will focus on maximizing basis step-up at death, perhaps . . .

Lenders Beware–Retroactive Tax Lien Trumps Recorded Mortgage [Florida]

Under Florida law, a mortgage lender’s lien against real property takes priority over later filed liens. However, under Fla.Stats. §197.122(1), ad valorem tax liens filed against Florida real property will take priority over a previously filed mortgage – such tax liens become super liens. Not great for lenders, but at least they can deal with exposure to these tax liens against their security by making sure ad valorem taxes are properly paid (e.g., through mortgage escrows and/or covenants in the mortgage to keep taxes current).

Fla.Stats. §196.161 allows a property assessor to go back 10 years and assess taxes, a penalty of 50% of taxes, and 15% interest . .

Read More

Possession May Be Nine-Tenths of the Law – but Watch out for the Other One-Tenth

Prudential Insurance Company of America issued a life insurance policy on the life of Russell. Russell’s wife, Sherry, was the beneficiary. The policy contained $332,000 of term life coverage and $332,000 of accidental death coverage.

Russell died on June 24, 2015. On June 26, 2015, Sherry made a claim. On January 21, 2016, Prudential settled the life portion by paying $343,240.50 into a Prudential Alliance Account in Sherry’s name. This account was an interest-bearing account, and Sherry could draw against it by check or withdrawal.

On January 26, 2016, a grand jury indicted Sherry for the murder of Russell. Between January 29 and February 3, 2016, Sherry wrote three checks withdrawing $83,855.50 from the account. On February 8, 2016, Prudential notified Sherry that it had frozen the account at a time when it held $259,616.51.

On May 25, 2016, Prudential filed an interpleader complaint . . .

Read More

Specificity Needed in Powers of Attorney for Information Returns

Most practitioners are familiar with the Form 2848, Power of Attorney and Declaration of Representative. This form is signed by a taxpayer and designates an eligible person to represent the taxpayer before the IRS. IRS personnel will typically not provide information or otherwise discuss a taxpayer’s circumstances with a representative until they are provided with a Form 2848.

The Form requires a description of the matters for which the representation is authorized, including, where relevant, the type of tax involved, the federal tax form number, the specific year(s) or period(s) involved, and, in estate matters, the decedent’s date of death. The portion of the form where this is done looks like this. . .

Read More

Ding, Dong, the Witch is Dead

–Here lies the remains of the Code §2704 Proposed Regulations. RIP, 2016-2017–

As part of President Trump’s mandated review of federal regulations, the Secretary of Treasury has issued a report specifically recommending the elimination of the Code §2704 Proposed Regulations. While these regulations may reappear in revised form someday, it is highly unlikely that the current version will ever be finalized.

Of less general import, the Secretary also recommended the withdrawal of proposed regulations under Section 103 defining a political subdivision.

Other regulations were not targeted. . .

Read More

What Happens to Monetary Penalties When Convicted Defendant Dies with Pending Appeals?

This was the question in a recent Second Circuit Court of Appeals case. The defendant was convicted of securities fraud, mail and wire fraud and obstruction of justice, and entered into a negotiated guilty plea to criminal tax charges. Asset forfeiture, a fine, and a restitution order resulted, among other consequences. Bail bond had also been forfeited, due to violations of the bail order. At the time of death, appeals were pending on the criminal convictions.

The case involved the rare application of the abatement ab initio doctrine. This doctrine provides that when a convicted defendant dies while his direct appeal is pending, his death abates not only the appeal but also all proceedings in the prosecution from its inception.The effect is to leave the defendant as if he had never been indicted or convicted. This doctrine is rooted. . .

Read More

New Useful Florida Homestead Concepts Diagram

Several years ago I prepared a table to assist practitioners in determining what restrictions apply on a transfer of homestead property at death or during lifetime. You can access it here.

Homestead status has other implications, including protections from creditors, inclusion or exclusion from the probate estate, and ad valorem tax implications. The Florida Statutes also employ the term “protected homestead” in defining some of these aspects. The whole area makes for a set of interrelated and unrelated concepts and implications that is difficult to both comprehend and apply.

To help with understanding. . .

Read More

Audit of Predeceased Spouse Permitted for Purposes of DSUE Adjustment for Surviving Spouse’s Estate

A husband died in 2012, and his estate filed a gift tax return to report a deceased spousal unused exclusion (DSUE) and elected portability. The IRS sent a letter to husband’s estate accepting the estate tax return as filed. Portability allows a surviving spouse or the estate of that surviving spouse to use the unused unified credit of the predeceased spouse for estate and gift tax purposes.

His wife died in 2013. Her estate filed an estate tax return that applied the husband’s DSUE amount to reduce her estate taxes. Notwithstanding any period of limitation in section 6501, after the time has expired under section 6501 within which a tax may be assessed under chapter 11 or 12 with respect to a deceased spousal unused exclusion amount, the Secretary may examine a return of the deceased spouse to make determinations with respect to such amount for purposes of carrying out this subsection.

Under the authority of Code §2010(c)(5)(B). . .

Read More

Extended Due Dates for Hurricane Irma Victims

Hurricane Irma blazed a path of destruction through the Caribbean, the Florida Keys, and up through Florida. As a result, the IRS is postponing various tax filing and payment deadlines that occurred starting on September 4, 2017 in Florida and September 5, 2017 in Puerto Rico and the Virgin Islands. Persons with valid filing extensions in place will have their due dates extended until January 31, 2018. Extended deadlines include due dates for income tax returns for individuals and entities due on September 15 and October 16. . .

Read More

Time to Revise Your Partnership and LLC Agreements?

In June, the IRS reissued proposed regulations that adopt new centralized partnership audit procedures. These will replace the current TEFRA audit rules.

The short story is that by default, the PARTNERSHIP is responsible for paying any additions to tax, although the partnership can elect to push this out to the partners. The new rules also replace the “tax matters partner” with a “partnership representative” – this representative. . .

Read More

Reading the Tea Leaves on Trump Tax Reform

In a recent speech, President Trump did not provide much detail in regard to the tax reform proposals that are expected soon, or his particular desires. Nonetheless, he did drop hints as to some aspects of reform:

a. He has continued his call for a 15% business tax rate. . .

Read More

Kenya Birth Certificate Rejected

No, this has nothing to do with Barack Obama, and where he was born.

In a recent Tax Court case, Wilfred Omoloh found himself embroiled in a dispute over how old he was. There are various age limitations and age-related provisions in the Internal Revenue Code. This is the first time I recall litigation over a taxpayer’s actual age regarding such provisions. Here, the question was whether the taxpayer was subject to a 10% early withdrawal tax under Code §72(t) for a distribution taken from a qualified retirement plan while the participant was under the age of 59 1/2.

Wilfred was born in the Republic of Kenya and became a U.S. citizen in 1997. In preliminary proceedings, he represented that. ..

Read More

Failure to Disclose Adjusted Basis on Disclosure Form Costs Taxpayer $33M+ Charitable Deduction

Under Treas. Regs. §1.170A-13, taxpayers making substantial noncash charitable contributions are required to disclose information regarding the contribution on Form 8283.

In March 2002, a partnership paid $2.95 million to acquire a remainder interest in property. A year and a half later, it assigned the interest to a university and claimed a charitable deduction of $33,019,000. The Form 8283 that the taxpayer submitted with its income tax return to disclose the contribution required the donor to provide the “Donor’s cost or other adjusted basis,” but the partnership left that disclosure blank.

The IRS sought to disallow the deduction for the taxpayer’s failing to meet the reporting requirements. The taxpayer responded with a substantial compliance argument.

On review, the Tax Court held a taxpayer can raise substantial compliance. . .

Read More

Would You Take on a Job if the IRS Had Discretion to Decide Whether You Got Paid?

Raelinn Spiekhout was the personal representative of the estate of Deborah Scott. The estate was subject to claims of over $1.8 million dollars, including IRS claims for $591,406.05. The principal asset of the estate was real estate worth $282,000. After litigation involving the priority of payment of creditors, the issue came down to whether the personal representative was entitled to be paid compensation and expenses out of the proceeds of sale of the real estate, or whether the IRS, by reason of tax liens filed during the decedent’s lifetime, was entitled to all the net proceeds. . .

Read More

Disposition of U.S. Partnership Interest Will Not Result in Effectively Connected Income to Foreign Partner

What happens when a foreign individual or corporation sells an interest in a partnership that is engaged in a U.S. trade or business? The Internal Revenue Code does not directly answer this question – the answer lies at the intersection of several provisions and principles:

a. Foreign persons are subject to U.S. income taxes on their income effectively connected with a U.S. trade or business (ECI);

b. Foreign persons are usually not subject to tax on their capital gains (with exceptions for gains arising from. . .


IRS Regulations on the Chopping Block

Tax practitioners have complained for years about the ever-expanding scope and complexity of both the Internal Revenue Code and Treasury Regulations. A possible shrinkage in the Treasury Regulations may soon occur.

On April 21, 2017, President Trump issued Executive Order 13789, a directive designed to reduce tax regulatory burdens. The order instructed the Secretary to submit a 60-day interim report identifying regulations that (i) impose an undue financial burden on U.S. taxpayers; (ii) add undue complexity to the Federal tax laws; or (iii) exceed the statutory authority of the Internal Revenue Service (IRS). The order further instructs the Secretary to submit a final report to the President by September 18, 2017, recommending “specific actions to mitigate the burden imposed by regulations identified in the interim report.”

Treasury has identified numerous regulations that meet the criteria. . .

Read More

Update to Guide on U.S. Taxation of Nonresident Aliens

I first wrote a simplified guide to U.S. taxation of nonresident aliens before the Internet and emails. The first few editions were printed and mailed out to persons on our firm’s mailing list. Eventually, I circulated it by email, and then put it on our firm’s website. It now resides on this blog, in the publication list to the right. It has been a few years. . .

Read More

IRS Provides Automatic Extension to Make Portability Election (Under Some Circumstances)

A portability election by the estate of a first spouse to die allows the unused unified credit of the first spouse to be used by the surviving spouse for estate and gift tax purposes. Since Code §2010(c)(5)(A) requires the election be made on an estate tax return, the portability election is effective only if made on an estate tax return that is timely filed (including extensions).

Because of numerous requests for extensions of the timing period, and the administrative burden placed on the IRS, the IRS has issued a Revenue Procedure to allow for the filing of a late portability election. The key provisions of this extension are: . .

Read More


Shirley died in October 1997. The estate filed an estate tax return and paid the tax indicated. The IRS subsequently audited Shirley’s estate and issued a notice of deficiency. After Tax Court proceedings, the court issued a stipulated decision increasing estate taxes by $215,264. This tax was never paid.

The IRS issued liens on real property in the name of the estate and a beneficiary. It also issued a Notice of Intent to Levy. On October 5, 2013, the estate submitted to the IRS via certified mail a Form 12153 Request for a Collection Due Process or Equivalent Hearing. This submission occurred about the same time as a federal government shutdown, and the IRS claimed it did not receive the submission. One of the beneficiaries then wrote a letter to the IRS and enclosed a copy of a certified mail receipt showing that the received the submission in October 2013. Based on the certified mail receipt, the IRS accepted that it received the request on October 5, 2013.

On March 10, 2015, the IRS commenced a case in federal district court against two beneficiaries and the estate to foreclose outstanding liens. . .

Read More

IRS Reminds U.S. Taxpayers Living Abroad of Misc. Filing Due Dates and Filings

In News Release 2017-105, the IRS reminded U.S. taxpayers living abroad:

-The extended due date, if the taxpayer had his or her tax home and abode abroad on the original due date, is June 15. But interest on taxes runs from the original April 18 due date. The extension also applies to military personnel abroad. When filing the return, the taxpayer must file a statement indicating which of these exceptions to the normal due date apply.

-A taxpayer must still file even if. . .

Read More

Treasury Has No Authority to Collect PTIN Fees

Since 2010, federal tax return preparers have been required to obtain a Preparer Tax Identification Number (PTIN), which they include when signing a federal tax return. A fee has been charged, both to obtain an initial PTIN and to renew each year. A portion of the fee was slated to go towards funding the mandatory Registered Tax Return Preparer regulation regime. While this regime was killed by the courts, the annual fees remain.

An opinion today was issued in the U.S. District Court for the District of Columbia that . . .

Read More

FAQs Are Not Legal Authority

The IRS’s Small Business/Self Employed Division (SB/SE) has indicated that the IRS will add a provision to the Internal Revenue Manual at IRM 4.10.7 describing the lack of precedential value the IRS will grant to IRS FAQs.

The IRS often publishes guides and instructions . .

Read More

Florida Eliminates the Benefit of the Beneficiary Rule

Historically, the settlor’s intent is the key item in guiding the administration of a trust. Further, a settlor has a pretty free hand in crafting how a trust will operate, subject to some public policy limitations and legal doctrines (such as the Rule Against Perpetuities).

Knowingly or unknowingly, Florida may have elevated the interests of the beneficiaries of a trust over the settlor’s desire and intent, when it adopted provisions from the Uniform Trust Code into the Florida Trust Code. In adopting these UTC provisions, the Florida Trust Code adopted the benefit-of-the-beneficiary rule. That rule . . .

Read More

Applying Overpayments of Tax to Tax and the Offshore Penalty in the OVDP Program

The OVDP program allows taxpayers to remedy deficient disclosure filings relating to offshore accounts for a fixed penalty amount. As part of the program, taxpayers must file either original or amended tax returns which include the income earned by their foreign accounts for the most recent eight tax years for which the due date has passed. In addition to other applicable penalties, an offshore penalty is imposed in lieu of other penalties relating to failure to properly disclose foreign accounts.

In preparing or amending returns. . .

Read More

Florida Wills go Electronic

A bill has cleared both Houses of the Florida legislature authorizing electronic wills and electronic will execution in Florida. Absent an unexpected veto by Gov. Scott, the last wills of testators may now precede them into the cloud(s).

The new statute has endeavored to reduce avenues for fraud and misdeeds. Only time will tell whether electronic wills will be more or less subject to fraud and improper usage than paper wills. Paper wills are not affected by the new legislation, except as they may be revoked and replaced by electronic wills.

Here are some key provisions and observations regarding the new statutes, based on my initial review:

1. If the testator signed electronically…

Read More

Tax Changes in the Republican Bill to Replace Obamacare

Most of the attention on the bill relates to coverage and subsidy changes. However, the bill does have some significant tax relief included. While the bill still faces changes to get through both houses of Congress and the existential question whether the Senate will pass it, it is not too early to take a look at these changes.

One key change is to eliminate the 0.9% Medicare surtax on wages. Currently, earners pay a 1.45% payroll tax on wages up to $200,000 ($250,000) if married. Earnings above that level are subject to an additional 0.9% payroll tax. This 0.9% payroll tax will go away under the bill (but not until 2023).

Another is the elimination . . .

IRS Issues Guidance Regarding Estate Tax Lien Discharge Process

When an individual dies, an estate tax lien attaches automatically to all of the property included in the gross estate. It arises prior to tax assessment, and is not recorded.

Persons inheriting property, or purchasers of property, are interested in having the lien released. As to real property that an estate seeks to sell, a discharge of the lien can be applied for with a Form 4422. A Form 792 is issued to discharge particular property.

In the past, if accepted the IRS would release the lien within a few days. Starting in 2016, the procedures changed, and all applications are now processed through Specialty Collection, Offers, Liens and Advisory. Once the IRS accepts the Form 4422. . .

Read More

Two Important New International Tax Filings

While not the only international reporting changes that are occurring, there are two significant ones that apply for the current filing season for 2016 returns.

First is the FBAR, which reports interests in foreign accounts. This used to be due on June 30, but is now due by April 18. . .

Read More

Asserting Reasonable Cause Defense to Penalties in a Pleading Does Not Automatically Waive Attorney-Client Privilege

Reliance on a tax professional can constitute reasonable cause, and thus avoid the application of an accuracy-related penalty under Code §6662 or a fraud penalty under Code §6663. When the professional is an attorney, case law indicates that this reliance waives the attorney-client privilege so that the government can determine if such reliance occurred and met the reasonable cause exception. See New Phoenix Sunrise Corp. v. C.I.R., 106 AFTR 2d 2010-7116 (CA 6 2010) and Ad Investment 2000 Fund, LLC, 142 TC 248 (2014).

So will the mere assertion. . .

Read More

Discretionary Trust Beneficiary Had No Standing to Challenge Adoption [Florida]

Since many estates and trusts define beneficiaries by description (e.g., “child” or “lineal descendant”) and it is a natural propensity for persons to gift or leave property to lineal descendants, the adoption of an individual can have a major impact on who benefits under a last will or a trust. Well drafted wills and trusts will typically contain provisions regarding adopting – such as whether an adopted person should be treated as a child or lineal descendant, and perhaps excluding persons who are adopted over a certain age from coming into those classes (so as minimize the risk of adoption being intentionally used to upset a dispositive scheme).

Ryan was a beneficiary of a trust established by his great-grandparents. His interest was discretionary only – distributions to him as a descendant were to be made only at the sole discretion of the trustees.

Ryan’s father adopted Brindley in 2004. . .

Read More

In re Cross Trusts

By Jenna G. Rubin

This decision raises a host of trust administration questions regarding claims of breach of fiduciary duty. While the specific breaches at issue in this case were very fact specific, the Court’s findings are useful in a variety of trust administration contexts:

Read More

Receiver Put in the Same Shoes as Underlying Taxpayer under Claim of Right Claim

At times, a taxpayer may receive and report income, and then in a later year have to return the income item. Depending on the circumstances, this could give rise to a deduction in the later year under Code §§162 or 165 under the Claim of Right Doctrine.

If the taxpayer does not have significant income in the year of repayment (or in the NOL carryback or carryforward periods if the deduction is under Code §162), the taxpayer not get much mileage from the deduction due to a lack of income to offset by the deduction. To remedy this situation, Code §1341, when operable, will allow the taxpayer a refund in the year of repayment equal to the tax savings that would have resulted if the initial income reporting was not required, regardless of the amount of income arising in the year of repayment.

A requirement to use Code §1341 is that at the time. . .

Robb Evans & Associations, LLC v. U.S., 119 AFTR 2d 2017-XXXX, (CA1), 03/03/2017

Read More

Strict Charitable Contribution Substantiation Requirements Trip Up Another Taxpayer

Taxpayers making contributions to charities that seek a charitable deduction have a myriad of reporting and receipt requirements to comply with. Code §170(f)(12) imposes additional requirements as to contributions of motor vehicles, boats, and airplanes. These various requirements are a major trap for taxpayers, as the IRS will often assert the most harmless errors or omissions in compliance as grounds for denying the deduction.

In a recent Tax Court case, a taxpayer lost a $338,080 charitable deduction for the contribution of an aircraft. . .

Read More

Michael Jackson Estate Tax Case Moving Forward

Most estate tax practitioners will tell you estate tax it is all about valuation when assets are other than cash and marketable securities. The estate tax case of the Michael Jackson estate is an ideal demonstration. Tax Court proceedings are presently underway in that case.

The fiduciaries of Michael Jackson’s estate filed an estate tax return showing a value of $7 million. The IRS issued a notice of deficiency claiming a value of $1.32 billion, and demanded additional estate taxes of $505.1 million and $196.9 million in penalties and interest. Wow!

A large issue in the case, and one that is relevant to other celebrities, is the value at death of Jackson’s name and likeness. The estate reported the value at $2,105.00, claiming his reputation was tainted by child-abuse allegations and strange behavior. The IRS pegs that value at. . .

Read More

Birds-Eye View of New Gain Recognition Rules on Transfers of Appreciated Property to Partnerships with Related Foreign Partners

The IRS recently issued extensive regulations under the authority of Section 721(c) that denies nonrecognition treatment for transfer of appreciated property to a controlled partnership (domestic or foreign) by a U.S. person if there are related foreign partners.

I have a prepared a map diagram (viewable in any browser) that provides an overview of the new provisions. Its purpose is to generally familiarize you with the new rules – you will need to review the rules themselves for full detail (translation: do not rely on the diagram since it is an abbreviated summary only). . .

Read More

IRA Owner Taxed on Distribution, Even Though Funds Were Improperly Rolled into IRA

A deceased husband’s IRA was incorrectly rolled over into an IRA of his widow, instead of being paid to his estate. The widow then distributed funds from the IRA to her stepson.

The Tax Court held that the widow was taxable on the funds distributed from the IRA under normal IRA distribution rules, even though the funds appear to have come from the erroneously rolled over IRA of her deceased husband. . .

Read More

30% Penalty Is Not an Excessive Fine

So says the Tax Court in the recent decision involving the 30% penalty imposed under Code §6662A(c). The penalty can be imposed if a taxpayer fails to adequately disclose a reportable transaction giving rise to an understatement of tax. The penalty is 30% of the tax understatement. When the penalty applies, there are no defenses allowed.

The Eighth Amendment to the United States Constitution provides “excessive bail shall not be required, nor excessive fines imposed. . .

Read More

IRS Permits Trust Division Without Adverse Federal Tax Consequences

In Private Letter Rulings 201702005 and 201702006, the IRS favorably ruled on federal tax consequences of a proposed trust division. But for a minor change in facts, the two rulings are identical, so we will focus only on 201702005. Two trusts are involved in the rulng – with each trust to be divided pursuant to state statute and court approval. The trusts involved are irrevocable trusts established for the benefit of the descendants of a child of the settlor (A). A has three adult children (B, C & D) and four minor grandchildren. Income is distributable to A’s children and the descendants of any deceased child of A (although in one trust such descendants are not included). The trustee has authority to withhold income and accumulate it or later pay it out. The trustee may also distribute principal if needed for care, eduation and support beyond what is being satisfied by income distributions. One year after A’s death the trust principal and accumulated income is to be distributed to A’s lineal descendants per stirpes. Proposed new subtrusts will be funded by fractionally dividing the existing trust assets of each trust into 3 new subtrusts, one for each of B, C & D. Trust provisions for the subjtrusts are similar, but not identical to the existing trusts, subject to the siloing of the interests of B, C & D and their descendants into separate trusts so as not to be directly impacted by the exercise of trustee discretion outside of their respective silo. The PLR sought rulings to the effect that (a) the new subtrusts will maintain the “grandfathered” trust status of the predecessor trust for GST purposes, (b) each subtrust will be treated as a separate trust for federal income tax purposes, (c) the division will not cause the predecessor trusts nor any new subtrust to recognize gain or loss from a sale or other disposition of property under Code §§61, 662, or 1001, (d) the subtrusts will inherit the tax basis and holding periods of the predecessor trust as to assets received, (e) the division will not result in any assets of the subtrusts being included in the gross estate of their beneficiaries, and (f) the divisions will not result in transfers subject to gift tax. The IRS favorably ruled on all of the requested rulings…

Read More

IRS Formalizes Transcripts as Substitute for Estate Tax Closing Letters

In 2005, I discussed here how the IRS had posted information on its website that an account transcript notation bearing transaction code “421” could be used to determine that the IRS had concluded its review of a filed estate tax return and has accepted the return as filed (or after an adjustment by the IRS to which the estate agreed to), in lieu of obtaining a closing letter. The IRS indicated that closing letters would no longer be automatically issued, but could be requested 4 months or later after the return was filed.

The IRS has now formalized this information into a Notice. The Notice is helpful, and presumably was promulgated . . .

Read More

Grant to Public Charity Qualifies as “Unusual Grant” for Public Support Test

Publicly supported charities provide favorable benefits under the Code for both the organization and donors, in contrast with non-publicly supported private foundations. To qualify, the organization must receive a substantial part of its support from either governmental bodies or from direct or indirect contributions from the public. The regulations provide tests for public support (the 1/3-of-support test and the 10% facts and circumstances test (Treas. Regs. §1.170A-9(f)). Under these tests, large grants from any individual (namely, grants exceeding 2% of the organization’s total support), can make it difficult to pass these tests. However, if a greater than 2% grant qualifies as an “unusual grant” under Treas. Regs. §1.170a-9(f)(6)(i), they are disregarded under the tests.

A recent private letter ruling determined that a large grant . . .

PLR 201701023

Read More

Treasury Department Unofficial Statements on Proposed Section 2704 Regulations

There is a lot of uncertainty whether the Section 2704 proposed regulations will ever be finalized, either due to policy to be set by President-elect Trump, and/or Congressional efforts to block those regulations. Nonetheless, practitioners still need to keep an eye on this project in the event they are finalized.

Kathy Veihmeyer Hughes of the Treasury Department’s Office of Tax Policy, provided some information on the project and what was intended by the proposed regulations in speaking to the Heckerling Institute on Estate Planning today in Orlando, Florida. Some key points (some of which have been previously put out there at other conferences) include:

a. Treasury is working on digesting. . .

Read More

Some Tax Law Changes That Take Effect in 2017

No new tax legislation has come forth yet, but per tax laws passed in prior years, some changes in the law will occur in 2017. Chief among them:

The floor beneath the itemized deduction for medical expenses of taxpayers who are age 65 or older increases from 7.5% of AGI to 10% of AGI. Thus, fewer medical expense deductions for older taxpayers. Code §213. . .

Read More

Stretch IRAs to be Hit?

Presently, if an IRA owner does not fully withdraw the balance of his IRA during lifetime, his or her heirs may be able to spread the withdrawal of the inherited IRA over the life expectancy of the recipient. By being able to slow down the required distributions, the taxation of the income that has been deferred from income tax within the IRA will be deferred further and spread over an extended period of time. Such IRAs are referred to as “stretch IRAs.”

A provision of the Retirement Enhancement and Savings Act of 2016, which cleared the Senate Finance Committee in September by a vote of 26-0 and which was introduced to Congress in November, seeks to limit stretch IRAs. Under the proposed legislation, IRA balances of an individual that aggregate over $450,000 will need to be distributed within 5 years of the death . . .

Read More

New Reporting Requirements for U.S. Disregarded Entities Owned by Foreign Persons

Code § 6038A imposes reporting and recordkeeping requirements on domestic corporations that are at least 25% foreign-owned. They are required to file an annual return on Form 5472 with respect to each related party with which the reporting corporation has had any reportable transactions.

In newly issued regulations, the IRS will treat U.S. disregarded entities, such as single member LLCs not electing to be taxed as a corporation, as U.S. corporations for this purpose. . .

Read More


U.S. persons transferring appreciated property to foreign corporations may be eligible for nonrecognition of gain using Section 351 or the corporate reorganization provisions. However, Code §367(a) and its regulations provide exceptions to nonrecognition for transfers of certain property based on the policy that it is appropriate for the U.S. to tax the gain in such items at the time they move to foreign corporate taxpayers.

Previously, foreign goodwill and going concern value were excepted from gain recognition under Code §367(a), based on legislative history that allowing such items to escape gain recognition would not adversely impact the U.S. Per more recent Treasury determinations . . .

Read More


A husband and wife had an accounting in Switzerland at UBS AG, into which they deposited commissions from camera sales and also directed some of their international customers to make deposits. In 2007, the tax year at issue, the taxpayers did not file the required Form TD F 90-22.1 (FBAR) form with the Department of Treasury which they should have filed to disclose their interest in the UBS account (such FBAR reporting now occurs on FinCen Form 114). They also did not file FBARs, nor U.S. income tax returns, for other tax years. In 2010, the taxpayers applied to participate in the Offshore Voluntary Disclosure Program (OVDP), and filed delinquent income tax returns and FBARs. The FBARs failed to report other non-U.S. accounts of the taxpayers, and the income tax returns failed to report certain commission income. The taxpayers were ultimately rejected from the OVDP program. . .

Read More

Existence of Unpaid Tax Claim in Bankruptcy Opens the Door to Expanded Statute of Limitations on Fraudulent Conveyances

In bankruptcy proceedings, if the bankruptcy trustee seeks to gain access to assets that the debtor transferred prior to bankruptcy under fraudulent conveyance law, the trustee must act within the applicable state fraudulent conveyance law statute of limitations. For example, in Florida, this would mean transfers occurring more than 4 years prior to the bankruptcy could not be challenged by the trustee.

A recent Bankruptcy Court case demonstrates a large loophole in this limitation, In that case. . .

[In re Kipnis, —- B.R. —-, 2016 WL 4543772, 118 A.F.T.R.2d 2016-5639 (S.D. Fla. 2016)]

Read More

3 Strikes Against the IRS in Attempting to Impose Fiduciary and Beneficiary Liability for Estate Taxes

During her lifetime, Anna Smith established the Anna Smith Family Trust, a revocable trust administered for her benefit. Initially, Anna was initially a co-trustee with two of her children, but eventually became sole trustee. A significant asset of the trust was stock of a closely held company that owned a gaming license.

Anna later died, and her estate filed an estate tax return showing $15.958 million in gross estate assets, showing $6.631 million in estate tax, and the estate paid $4 million in taxes with the return. The estate made a Section 6166 election to pay the remaining taxes in installments. The trust provided for distributions of trust assets to limited partnerships owned by the heirs, and for direct distributions to heirs, after Anna’s death.

An additional $1 million was paid in estate taxes. Eventually, the closely-held stock was distributed to the beneficiaries due to issues with state law restrictions on a gaming license being owned by a trust – at that time . .

Read More

Burden of Proof Issues in Gift Tax Matter

A recent case illustrates 3 important burden of proof issues.

The general facts of the case involved a merger of a company owned by parents with a company owned by children. The gift tax issue involved the relative value of the two companies to determine how much, if anything, was transferred to the children by the merger due to their resulting stock ownership in the merged company.

A rebuttable presumption of correctness cloaks an IRS notice of deficiency. Thus, the taxpayer typically bears the burden of proving by a preponderance of the evidence that the Commissioner’s assessment is erroneous. However, there are some circumstances where the burden of proof shifts to the IRS. . .

Read More

New Regulations Issued Regarding CFCs and Investment in U.S. Property

Income earned abroad by U.S. controlled foreign corporations can often qualify for deferral of U.S. income tax. If the foreign corporation is a controlled foreign corporation (CFC), its U.S. shareholders may be taxable on such untaxed income if the corporation converts the property to U.S. property (Code §956).

The U.S. has now issued new and revised regulations . . .

Read More

What Kind of Tax Changes Can We Expect From Trump’s Presidency?

The tears have not yet dried for some, and the celebrating is not yet over for others, but let’s turn our attention to taxes. With a Republican Congress and a Republican president, some measure of tax relief is a given. What can we expect?

A good place to start is Trump’s platform. Here are the key elements:

1. Cut in half the number of individual income tax brackets and bring rates down to 12%, 25% and 33%.

2. Elimination of the 3.8% Obamacare tax.

3. Lower the business tax rate for corporations and small businesses alike to 15%, but with elimination of many deductions. . .

Read More

$100 Million FBAR Penalty – Ouch

Taxpayers who fail to file Reports of Foreign Bank and Financial Accounts (FBARs) disclosing their non-U.S. accounts can suffer a 50% penalty on the balance of the unreported accounts. In one of the largest penalties I have seen, a New York professor of business administration has been subjected to a $100 million civil FBAR penalty for failing to report a $200 million account.

Clients often enquire . . .

Read More

Exceptions to Limited Liability for LLC Members [Florida]

Fla.Stats. §605.0304(1) provides for the limited liability of LLC members – it provides: “A debt, obligation, or other liability of a limited liability company is solely the debt, obligation, or other liability of the company. A member or manager is not personally liable, directly or indirectly, by way of contribution or otherwise, for a debt, obligation, or other liability of the company solely by reason of being or acting as a member or manager.”

Nonetheless, there are other routes to liability for members, arising in their capacity as members. A recent article in the Florida Bar Journal provides details on many of these. These routes include . . .

Read More

2017 Inflation Adjustments

Rev. Proc. 2016-55 has provided adjusted figures for 2017 for tax items subject to inflation adjustments. Here are some highlights . . .

Read More

Overview of New Section 385 Regulations

The IRS has issued final and temporary regulations under Code Section 385. These provisions, intended to limit earnings stripping, will enhance the IRS’ ability to characterize related party ownership arrangements, purportedly established as debt, as equity instead.

One set of rules provides prerequisite requirements …

Read More

Executor Loses Out on Fees Due to Section 6166 Lien

A personal representative/executor for an estate granted a special estate tax lien under Code §6324A to the U.S. as part of a Section 6166 election to defer payment of federal estate tax. At the time, the executor had been paid only been part of his fees, leaving $486,265 unpaid. The IRS has the ability to demand a lien before allowing a Section 6166 election if adequate bond is not posted.

During the course of the lien period, the value of the liened property fell below the amounts still due to the IRS . . .

U.S. v. Spoor, 118 AFTR 2d 2016-xxxx (11th Cir 10/4/16)

Read More

Filing an Entity Income Tax Return Does Not Constitute a Check-the-Box Election

A single member limited liability company (SMLLC) is treated by default under the check-the-box rules as a disregarded entity. If a Form 8832 is filed, the owner can elect to treat it as a corporation/association.

A single owner corporation was merged into an SMLLC owned by the same person. The surviving SMLLC filed Forms 1120 as a ‘c’ corporation thereafter. The IRS processed the Forms 1120. No Form 8832 election was ever made to treated the SMLLC as a corporation…

Heber E. Costello, LLC, et al., TC Memo 2016-184

Read More

Business Protection from Payroll Provider Fraud

Many businesses rely on third parties to handle their payroll, including making withholding deposits with the IRS on behalf of the business. Way too often, the payroll provider will embezzle the funds and not pay them over to the IRS.

In this circumstance, the business is still on the hook for the unpaid employment taxes. To add insult to injury, if the IRS takes a hard line it will usually be successful in obtaining interest and penalties from the business. This is based on the view of the courts that a taxpayer’s duty to file returns and pay taxes is nondelegable. For a recent example where the employer was held responsible for interest and penalties, see Kimdun, Inc. v. U.S., 118 AFTR 2d 2016-5508 (DC CA 2016).

So what can employers do to protect themselves? . . .

Read More

Mission Near Impossible – Reliance on Professionals Defense to Late Filing and Payment Penalties

An estate sought relief for $1.189 million in penalties for the late filing of a Form 706 and the late payment of estate taxes when the filing and payment were over a year late. The U.S. District Court granted the government’s motion for summary judgment upholding the penalties, and the 6th Circuit Court of Appeals affirmed the lower court. The late filing and payment were principally attributable to the estate attorney who was responsible for the filings. The courts ruled for the government notwithstanding the following favorable facts supporting reasonable cause: (1) the executor was elderly, (2) he only had a high school diploma, (3) he had never interacted with attorneys before serving as executor, (4) he had never served as an executor, (5) the attorney was suffering from brain cancer and her competency was deteriorating during the applicable period, (6) the attorney told the executor that extensions had been obtained whenever questioned about the filing status, but this was a lie, (7) the State of Ohio refunded the penalties as to state estate taxes for reasonable cause, and (8) the government conceded . .

Read More

IRS Attempts Collection Against Surviving Spouse and Marital Deduction Property

In a recent U.S. District Court case from the Southern District of California, the court ruled on several motions to dismiss relating to the IRS’ attempt to impose liability on a surviving spouse for estate taxes on the estate of her decedent husband, even though the property received by the surviving spouse was eligible for the marital deduction. The IRS attempted various approaches. Some of the more interesting approaches are discussed below, along with the court’s resolution.
The facts are somewhat lengthy. Boiling them down to the key aspects, Allen Paulson (the decedent) entered into a prenuptial agreement with his spouse-to-be, Madeleine Pickens. The agreement included obligations for Mr. Paulson to make certain gifts to Ms. Pickens when he died. Mr. Paulson’s living trust made provisions for Ms. Pickens, but gave her the ability to elect to receive either under the prenuptial agreement or the living trust provisions. The living trust provided for substantial gifts to a marital trust.

After Mr. Paulson’s death . . .

U.S. v. Paulson, Case No. 3:15-cv-02057, U.S. District Court, Southern District of California (September 6, 2016)

Read More

Regulations Issued to Make Marriage References Gender Neutral

Further to the recent U.S. Supreme Court cases recognizing same-sex marriages, the IRS has issued final regulations that codify same-sex marriages for federal tax purposes, regardless of gender. Under Treasury Regulations § 301.7701-18(a), the terms “spouse,” “husband,” and “wife” mean an individual lawfully married to another individual, and the term “husband and wife” means two individuals lawfully married to each other.

Different jurisdictions have different rules . . .

Read More

Treasury Provides Relief for Late 60-Day Rollovers

The Internal Revenue Code allows qualified plan participants and IRA owners to withdraw assets from a plan or IRA and contribute them to another (or the same) plan or IRA without being taxed on the distribution, if the rollover occurs within 60 days. If the deposit occurs after 60 days, the taxpayer can seek a Private Letter Ruling that avoids taxation if the taxpayer has good cause. Unfortunately, such a route is expensive, requiring a $10,000 user fee.

In Rev.Proc. 2016 – 47, Treasury is now allowing taxpayers that make a late rollover to avoid tax without having to seek a Private Letter Ruling if the . . .

Read More

Spouses Need to Exercise Care in Transferring Property between Them When Subject to a Marital Agreement [Florida]

Many prenuptial and postnuptial agreements provide for a class of property known as Separate Property. Such Separate Property will often not be subject to claim by or transfer to the non-owning spouse upon death or divorce. When Separate Property is provided for in the agreement, the participants need to exercise care in transferring property between and among them to avoid unintended consequences.

This was illustrated in a recent case when . . .

Colino v. Volino, 41 Fla. L. weekly D1990b (5th DCA, August 26, 2016)

Practice Aid – A Redlined Version of the Proposed Section 2701 and 2704 Regulations

These proposed regulations are difficult enough in substance to deal with, without having to piece together the changes that they make to the existing regulations. Maybe there is a redlined version out there already, but I could not find one, so I created a redlined comparison of the recently proposed regulations that show the current full regulation as redlined to show the new proposed changes. I did it myself so I don’t attest to total accuracy – use with caution and if anyone locates any errors, let me know…

Read More

No Obligation to File Inaccurate Return to Avoid Failure to File Penalty

A partnership was a partner in a Cayman Islands partnership – that investment made up most of its assets. The Cayman Islands partnership did not file a Form 1065 income tax return and did not give a Form K-1 to the taxpayer partnership, because it was determined that the partnership accounting records were such a mess that it would cost several million dollars to put them in good shape and meanwhile the Cayman Islands partnership was liquidating.

Thus, the taxpayer partnership did not have the information it needed to file its own Form 1065, and did not file one. The IRS sought to impose a failure to file penalty under Section 6698. This penalty is only $195 multiplied by the number of partners – but this partnership had about 1600 partners. That would put the penalty at $312,000! And this went on for 3 years.

The taxpayer partnership claimed reasonable cause. The partnership tried, but failed…

Read More

Updated ITIN Procedures

Foreign individuals who are ineligible to obtain a social security number but who require a U.S. taxpayer identification number can apply for a an Individual Taxpayer Identification Number (ITIN) using Form W-7. The process is cumbersome since it requires the provision of original identity documents.

Treasury recently released Notice 2016-48 which provides some changes to the procedures, arising principally from 2015 legislation. Highlights of the Notice include:

The basis methodology of the Form W-7 and the provision of original identity documents remains in place, principally through certified acceptance agents (CAAs)who have received certification from the IRS or through some IRS Taxpayer Assistance Centers.
Taxpayers should check to find IRS Taxpayer Assistance Centers that can perform these functions, and to make appointments. . .

Read More

Some Food for Thought – Code Section 2704 Proposed Regulations

As the proposed regulations are digested by practitioners, here is some food for thought:

a. Will GRATs be underwater from the start – that is, nondiscounted values for the funding transactions, and discounted values for distributions back to the grantor?

b. Nondiscounted values required for sales to IDGTs?

c. Silver lining – assuming the higher Section 2704 values allow for higher basis for interests held at death, this will allow for income tax savings. For estates within annual exclusion amounts (and thus no estate tax) such basis step-ups could make this a revenue loser for the IRS.

d. For interests in corporations . . .

Read More

IRS Issues Long-Awaiting Section 2704 Proposed Regulations

In case you haven’t heard, these proposed regulations were issued on August 2. The particular focus is to substantially reduce valuation discounts for transfer tax purposes on minority interests, nonvoting, and limited control interests that are transferred to family members. Some of the restrictions will only apply if a transfer is made within 3 years of death – others will apply more broadly. The definition of “control” is expanded to catch more circumstances within its net. The use of non-family owners of interests in entities to avoid Section 2704 will be made more difficult.

The regulations are only in proposed form. With hearings set for early December, they should not be finalized until at least 30 days after that (if ever)…

Read More

Executrix Held Liable Under Federal Claims Statute For Actions Taken Prior to Appointment as Executrix

A decedent died while owing over $340,000 in unpaid federal income tax liabilities. His estate was insolvent. The assets of his estate consisted almost entirely of a 100% interest in one corporation and 50% of another corporation. Each corporation owned a fishing vessel as its sole asset. Shortly after the decedent died, the decedent’s surviving spouse transferred the shares of the 100% owned company to herself. About six months later, she was appointed executrix of the decedent’s estate, and later transferred the shares of the second corporation to herself. At the time of these transfers, she knew of the unpaid tax liabilities.

The IRS sought to impose liability on the wife for the unpaid tax liabilities per the application of the federal claims statute for the value of the stock she distributed (31 U.S.C. Section 3713). The trial court concurred and entered a judgment against the wife, and the appellate court affirmed the judgment, even though some of the shares were distributed prior to the wife being appointed executrix.

31 U.S.C. Section 3713(a)(1)(B)…

U.S. v. McNicol, 118 AFTR 2d 2016-5150 (CA1 2016))

Read More

IRS Wins Debt vs. Equity Case

A frequent area of dispute between taxpayers and the IRS is whether an indebtedness obligation should be treated as debt, or an equity investment, for income tax purposes. Taxpayers often seek debt treatment to obtain interest deductions, defer gain to a seller, or avoid gift treatment. Sometimes the underlying transaction is a straight loan – other times it involves a financed purchased of property.

The latter is what occurred in the subject case – a U.S. corporation purchased partnership units from a foreign corporation for a debt obligation. The debt was helpful since it provided an interest deduction to the U.S. obligor, deferred gain on the sale to the selling foreign corporation, and no taxable interest income to the foreign corporation obligee per qualification of the debt as tax-exempt portfolio interest debt.

There were factual aspects of the transaction…

American Metallurgical Coal Co., TC Memo 2016-139

Read More

Treasury Removes a Reporting Trap for Section 83(b) Elections

Taxpayers who receive property as payment for performing services are generally taxable on the value of the property received in the year of receipt. Section 83 may allow such taxation to be deferred when the property received is subject to a substantial risk of forfeiture (e.g., an employee is issued stock, but will forfeit it if he quits or is fired) until the risk of forfeiture is removed.

Such a delay can hurt the employee, since the value of the property may increase before the risk of forfeiture is removed – the employee is required to include the value of property in income based on the value at the time such forfeiture risk goes away.

Section 83(b) provides relief to the employee – …

Read More

Safe Harbor Acquisition of Control for Spin-Offs

Code Section 355, and related Code provisions, when applicable, will allow a corporation to spin-off or split-off a subsidiary corporation to its shareholders without triggering gain to the corporation or its stockholders. One of the requirements for this treatment is that the distributing corporation “control” the distributed corporation (i.e., own 80% or more of the voting power and number of shares of the distributed corporation) immediately before distributing it to its shareholders.

To come under Section 355, the distributing corporation may intentionally acquire control before the spin-off or split-off, and then transactions are undertaken after the distribution that reverse in whole or in part such acquired control as to the shareholders that succeed to ownership of the distributed corporation. Determining whether the IRS will respect such acquisition and subsequent disposition of control and the application of Section 355 can be difficult to determine.

The IRS has now issued a Revenue Procedure…

Read More

State Court Retroactive Change to IRA Beneficiary Not Given Tax Effect by IRS

A decedent had 2 IRAs. The death beneficiaries of the IRAs were trusts that qualified as “look through” trusts, such that the payout period for the IRAs after the decedent died could be computed using the life expectancy of the trust beneficiaries.

However, before he died, the decedent moved the IRAs to another firm, and entered into new paperwork that erroneously designated his estate as the death beneficiary. With the estate as beneficiary, the payout period for the IRAs could not be “stretched” under IRS regulations The decedent thereafter died…

Private Letter Ruling 201628004, July 8, 2016

Read More

Napkin Theory Saves the Day [Florida]

Renee established and funded a revocable trust, with charitable residuary beneficiaries at her death. The trust was revocable, but it did not provide a method for revocation.

Four years later, Renee prepared a will that left all of her estate to a caretaker. The will included language that “I…declare this to be my Last Will and Testament, revoking all other wills, trust and codicils previously made by me.” …

Bernal v. Marin, 3rd DCA (Case No. 3D15-171, June 15, 2016)

Read More

Anatomy of a Busted Tax Rescue Transaction

For many years, there were companies out there that marketed a service to tax professionals to help their corporate clients with large tax liabilities. I remember receiving solicitations to think of them if I came across companies that could benefit from their services. The bare bones of a typical transaction involved a C corporation that had sold assets for a gain or otherwise incurred a large amount of income (or expected this to happen in the near future). The rescue company would purchase the sale of the stock of the company, either with rescue company funds, funds from a lender, or possibly from the target company itself…

Read More

Withholding Agents–Obligation to Withhold On Payments to Foreign Persons When Source of Payment Uncertain

In recent guidance to auditors, the IRS discusses what happens when a payor withholding agent pays items to a foreign payee when the withholding agent is uncertain whether the payment is U.S. source.

By way of background, Code Sections 1441 and 1442 impose a 30% withholding obligation (less under treaties) on payors of U.S. source fixed or determinable annual or periodical income (FDAPI). In most cases, the payor will know if the source is U.S. source. The guidance notes these common rules: …

Read More

Anderson v. McDonough

By Jenna G. Rubin

In this appeal, the appellant appealed a final order requiring him to pay fees and costs to his mother’s estate following an unsuccessful will contest. The fee award was granted pursuant to F.S. 733.106 (which provides that the court can direct from what part of an estate fees are to be paid) even though the appellant did not receive anything from the estate.

Read More

Whose Fraud Extends the Statute of Limitations on Assessment?

The IRS generally has 3 years to assess additional tax after a return is filed. Code Section 6501(a).However, an important exception is Code Section 6501(c)(1). Under that provision, if there is fraud in regard to the preparation of a return, there is no statute of limitations for assessment of tax relating to that return…

Finnegan v. Commissioner, T.C. Memo. 2016-118 (June 16, 2016)

Read More

IRS Tax Liens and Discretionary Trust Interests – Part 2

In April, I wrote how a U.S. District Court held that a beneficiary’s discretionary interest could be liened by the IRS for tax liabilities of the beneficiary. The interest was “halfway” between a purely discretionary interest and a mandatory HEMS ascertainable standard interest (health, education, maintenance, support) clause – it provided for HEMS-like distributions, but only in the “sole discretion” of the trustee. You can read my post here.

The District Court has now issued an order relating to enforcement of the lien. The IRS sought an order forcing a distribution to pay the beneficiary’s liabilities. The District Court denied the IRS’ request.

The IRS’ rights under its lien only extend as far as the beneficiary’s right to trust funds. Here, that right “has no permanently fixed dollar value” and “is variable according to [his] needs.” The amount of the beneficiary’s interest is equal to “payments the withholding of which would constitute an abuse of discretion in applying an ascertainable standard.” This could vary from $0 to some other dollar amount…

Duckett v. Enomoto, Et Al., 117 AFTR 2d 2016-XXXX, (DC AZ), 06/06/2016

Read More

Northern Trust Co. v. Shaw

By Jenna G. Rubin

This decision deals with an interpretation of a surviving spouse’s rights under a prenuptial agreement. While the spouse argued that she was entitled to both $500,000 under the agreement and other assets left to her by the decedent, the personal representative felt that she was only entitled to the $500,000, and the other assets left to her by the decedent should be taken into account in satisfying that amount. The Court, relying on North Carolina contract law, ultimately felt that the personal representative’s interpretation was correct.

Read More

Taxpayer Required to Pay Tax Twice on the Same Income – Tax Court Unsympathetic

A taxpayer in the medical supply business received payments from Cigna before 2005. He reported those items in income and paid federal income tax on them.

A dispute later arose and the taxpayer returned payments to Cigna. He did not deduct the repayments in the year of repayment, even though Code Section 1341 might have allowed it.

In 2010, Cigna paid the funds back to the taxpayer in resolution of the dispute. The taxpayer did NOT report those payments, reasoning that he had already paid income tax on them the first time he received them…

Read More

Howard v. Howard

By Jenna G. Rubin

While most practitioners are familiar with the rules and procedures surrounding the guardianship process, many are less familiar with the procedural requirements for the appointment of a guardian advocate on behalf of someone with a developmental disability. This decision deals with two such procedural requirements: (1) what constitutes a finding of “good cause” to proceed with the guardianship proceeding without the potential ward present and (2) the requirements for a written order appointing guardian advocates.

Read More

What Happens to Jointly Owned Property When One of the Owners Owes the IRS

Leonard and Joyce owned 50% of a commercial property. Their son, Derek, owned the other 50%. The IRS liened the property due to amounts owed by Leonard and Joyce to the IRS for unpaid taxes. The IRS sought to foreclose its tax liens and force a sale of the property. 50% of the proceeds would go to the IRS, and 50% would go to Derek.

The taxpayers argued that the district court should not order the sale.

Code Section 7403 provides authority to the government to file suit to enforce its lien and force a sale of the liened property. There is no exception in Section 7403 that prevents its operation even though there are “innocent third-party” interest holders in the subject property that do not owe taxes to the IRS. The U.S. Supreme Court, in US v. Rodgers, 461 US 677 (1983), confirmed that the Code Section authorizes the sale of the whole property in these circumstances, and that the Supremacy Clause of the U.S. Constitution overrides any state law to the contrary that seeks to protect innocent third-party interest holders.

However, Code Section 7403…

Read More

Make Sure the Corporation is in Good Standing Before Filing a Tax Court Petition

Many states will involuntarily or administratively dissolve a corporation for not paying or filing annual reports, fees, or tax returns. The ability of a dissolved corporation to engage in activities after dissolution depends on applicable state law, and typically there are procedures for reinstating such a dissolved corporation.

So what happens if such a dissolved corporation receives a notice of deficiency and petitions the Tax Court for review? Under applicable state law, there may be specific guidance on whether a dissolved corporation can prosecute or defend a lawsuit. Also, some states allow for a dissolved corporation to conduct winding up activities after the dissolution. Such state law provisions have at times allowed authority for a dissolved corporation to file a valid Tax Court petition.

A recent case indicates there are limits…

Read More

2014 Statistics of Income

The IRS regularly releases information garnered from tax filings. For those with an interest in this sort of information, based on individual income tax returns for 2014:

-Taxpayers filed 148.7 million U.S. individual income tax returns, an increase of 0.6% from 2013;
-There were significant increases in adjusted gross income (AGI), which rose to $9.7 trillion (an increase of 6.1% compared to 2013);
-Taxable income increased to $6.9 trillion (an increase of 8% compared to 2013); and
-Total income tax rose to $1.4 trillion (an increase of 10% compared to 2013).

Read More

Florida Sales Taxes on Internet Sales Outside of Florida [Florida]

Question: A Florida corporation, with a physical location and principal address in Florida, sells flowers, gift baskets, and other items of tangible personal property over the Internet. The company does not maintain any inventory and instead uses the inventory of florists in the delivery location to deliver purchased products. Are deliveries outside of Florida subject to Florida sales tax?

Answer: Reversing the lower appeals court, the Florida Supreme Court says yes.

The florist mounted two challenges. First was a Due Process argument. The Due Process Clause requires some type…

Florida Department of Revenue v. American Business USA Corp., 41 Fla.L.Weekly S237a (Florida Supreme Court, May 26, 2016)

Read More

Cole, TC Summary Opinion 2016-22

Facts: A U.S. citizen and permanent resident of Israel incurs capital gains from the sale of stock of a U.S. corporation.

U.S. – Israel Income Tax Treaty Provisions:

Article 15, Paragraph 1: “[a] resident of one of the Contracting States shall be exempt from tax by the other Contracting State on gains from the sale, exchange, or other disposition of capital assets.”

Article 6, Paragraph 3: ““[n]otwithstanding any provisions of this Convention except paragraph (4), a Contracting State may tax its residents and its citizens as if this Convention had not come into effect.”

Question: Can the U.S. subject the taxpayer’s gain to U.S. income tax…

Cole, TC Summary Opinion 2016-22

Read More

Form 5472 Reporting by Foreign Owned Disregarded Entities Established in the U.S. – Coming Soon!

Presently, a domestic single member LLC, and other similar single owner entities, absent a check-the-box election to the contrary, are disregarded for almost all U.S. tax purposes.

Presently, a foreign owner of such disregarded entity need not file a Form 5472 regarding that entity, since it is a non-entity for tax purposes. The Form 5472 form (Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business) is authorized under Code Sections 6038A and 6038C, with respect to each related party with which the reporting corporation has had any “reportable transactions.” These corporations must also keep permanent books of account or records as required by section 6001 that are sufficient to establish the accuracy of the federal income tax return of the corporation, including information, documents, or records to the extent they may be relevant to determine the correct U.S. tax treatment of transactions with related parties. Failure to report can result in significant penalties.

New proposed regulations will treat such entities as a corporation for purposes of Section 6038A, thus giving rise to the above…

Read More

Richard v. Richard

By Jenna G. Rubin

This decision deals with the application of the relation back doctrine found in F.S. 733.601, and whether it would apply to validate a notice to creditors that was published one day prior to the appointment of the PR. The Court interpreted the meaning and history behind F.S. 733.601 and ultimately found that the doctrine does apply to validate the earlier filed notice to creditors.

Read More

Marital Deduction Trusts and Expatriates – More Questions Than Answers

If an expatriate dies and leaves property to a U.S. citizen or resident spouse, can a marital trust be used to defer or avoid the transfer tax imposed under Section 2801? Both the Code and the Regulations seem to say yes, but a closer reading suggests that absent further regulatory relief, the answer is uncertain. And will the surviving spouse be taxable on the marital trust assets at his or her later death?

FACTS: Code Section 2801 imposes a transfer tax at the highest estate tax rate of estate tax on a covered gift or bequest to a U.S. citizen or resident. In the circumstances of death of an individual, a covered bequest is any property acquired directly or indirectly by reason of the death of an individual who, immediately before such death, was a covered expatriate. Code Section 2801(e)(1)(B). A covered expatriate is an individual who expatriated from the U.S. and met or exceeded certain asset or income thresholds at the time of expatriation. This tax is not a Chapter 11 estate tax (nor a Chapter 12 gift tax) – this will be an important fact.

Code Section…

Read More

Woodward v. Woodward

By Jenna G. Rubin

This decision deals with whether res judicata and laches barred a beneficiary’s claim against a trustee. The Court held that neither applied, since the beneficiary’s two claims against the trustee did not contain identity of the causes of action, and because the beneficiary did not know about the trustee’s actions until he was served with an accounting.

Read More

Hall v. Hall

By Jenna G. Rubin

The Court took the opportunity in this decision to “reiterate a fundamental tenet of appellate advocacy.” Appellants attempted to appeal a probate court decision denying an undue influence claim and petition to revoke probate of a will and trust.

Read More

Breach of Trust Statute of Limitations Held Open for 10 Years – With New Summary Chart [Florida]

The concepts of statute of limitations and repose, and laches, exist to bring finality after the passage of time as to liability risks. Claims for breach of trust against a trustee can be subject to a confusing array of rules as to when the statute expires, especially when the concept of fiduciary accountings, and different rules for a continuing trust versus a terminating trust, are thrown into the mix. A recent Florida case demonstrates these complexities.

A short summary of the facts: (a) in 2002, the assets of the subject trust…

Woodward v. Woodward, 41 Fla. L. Weekly D1073a (4th DCA, May 4, 2016)

Read More

Giller v. Giller

By Jenna G. Rubin

This case involved whether a personal representative has the right to bring a suit for declaratory action under F.S. 689.07(1), which deals with real estate deed and conveyances which add the words “trustee” or “as trustee” to the name of the grantee, or whether relief under that section is limited only to subsequent purchasers or others relying on the deed.

Read More

Genauer v. Downey & Downey, P.A.

By Jenna G. Rubin

Does a trust beneficiary have the right to intervene in trust litigation already being defended by the trustee? In this decision, which involved a dispute about the right of an attorney for a former trustee to recover his fees from the trust, the Court ultimately held that the beneficiaries of the trust had a sufficient interest in the proceeding that they should have been given the right to intervene and participate.

Read More

Brokerage Account is a Safe Account to Temporarily Hold Homestead Sale Proceeds for Reinvestment [Florida]

An individual sold his interest in a Florida homestead, and put a portion of the proceeds in two Wells Fargo brokerage investment accounts entitled “Fl. homestead account..” The account was invested in mutual funds and unit investment trusts.

The Florida constitution protects a Florida homestead from claims of creditors of the owner. This has been extended to the proceeds from sale of a homestead if (1) there is a good faith intention, prior to and at the time of the sale, to reinvest the proceeds in another homestead within a reasonable time; (2) the funds are not commingled with other monies; (3) the proceeds are kept separate and apart and held for the sole purpose of acquiring another home…

JBK Associates, Inc. v. Sill Bros., Inc., Florida Supreme Court (April 28, 2016)

Read More

Foreign Financial Asset Reporting – Coming Soon to a Domestic Entity Near You

When Form 8938 reporting for foreign financial assets of U.S. taxpayers was first imposed a few years, only U.S. individuals were subject to it. The IRS has now issued final regulations that will commence reporting by domestic corporations, partnerships and trusts owning such assets. Nothing to worry about for this tax season – but next year will be different as this reporting commences for tax years starting after 12/31/15.

Read More

Post-Death Action Reduced Amount of Estate Tax Charitable Deduction

Decedent died and left a majority stake in a real property management corporation to a private foundation. The estate tax value of the stock was $14.182M.

After the decedent’s death, but before the stock was transferred to the foundation, certain things happened, including:

a. The corporation elected Subchapter S status;

b. The corporation redeemed from the decedent’s trust a large portion of the company shares for a value far less than the estate tax value.

At least part of the difference in value was attributed to changes in business climate after the date of death and before the 7th month date after death when the stock was appraised for the redemption. The Tax Court, however, found that there was insufficient evidence to support the large decrease in value. There was also concern that the redemption price was calculated on a minority basis even though the decedent owned a majority interest…

Estate of Victoria E. Dieringer, et al., 146 T.C. No. 8

Read More

Parker v. Parker

By Jenna G. Rubin

This decision deals with whether an estate is an indispensable party in a proceeding to recover properties transferred by the decedent prior to his death.

Read More

New Regulations Issued to Expand the Reach of Anti-Inversion Rules

Code Section 7874 seeks to remove the U.S. tax benefits that can apply by inserting a non-U.S. holding company into the ownership structure of businesses formerly conducted through a U.S. holding company. This is a big political issue as several large U.S. multinationals have shifted into a foreign holding company structure in ways that have skirted these rules. Many in the U.S. want to stop such corporate expatriations, and thus the IRS is beefing up the reach of Section 7874 to disincentivize such transfers.

Taxpayers have attempted to work around the technical rules of Section 7874…

T.D. 9761, 04/04/2016

Read More

Oreal v. Steven Kwartin, P.A.

By Jenna G. Rubin

This appeal deals with a claimant’s attempt to collect interest due the claimant on a promissory note. The claimant filed a timely statement of claim in the estate, seeking payment due on a note plus interest.

Read More

The IRS Is Looking to Recharacterize Related Party Debt as Equity Simply for Failing to Meet on a Timely Basis New Contemporaneous Written Documentation Requirements

In the early 1980’s, the IRS issued regulations on the question of when loans to corporations would be recharacterized under Code Section 385 as equity. The conversion of purported debt can have significant adverse income tax effects for the borrower and lender. Those regulations were withdrawn and we have been without regulations since then. The IRS has now issued new proposed regulations on the subject.

Below is a short overview of the new regulations and some observations. The proposed regulations are lengthy and complicated, so there will surely be a lot written about the as they are digested by the tax community…

Read More

A Death Abroad – Assistance and Issues

The death of a loved one is obviously a difficult time and process for family and friends. If the decedent dies outside of the U.S., the family and friends have the additional burden of dealing with local law and requirements.

The legal and practical process varies by country. So while not comprehensive, below is a list of key practical and legal concerns and information.

Notification of death to the local authorities.
Obtaining a local death certificate (which can often take awhile)…

Read More

Out of State Homestead Exemption Voids Florida Exemption [Florida]

Florida exempts a portion of a Florida homestead from ad valorem tax. This could save a taxpayer a few hundred dollars a year. The real economic value to such an exemption is that under Florida’s Save our Homes provision, ad valorem tax value increases are limited to 3% per year even though the value of the residence increases more.

A husband owned a residence in Indiana. He received a residency-based property tax exemption from Indiana on that property. His wife owned a Florida residence…

VENICE L. ENDSLEY, Appellant, v. BROWARD COUNTY, FINANCE AND ADMINISTRATIVE SERVICES DEPARTMENT, REVENUE COLLECTIONS DIVISION; LORI PARRISH, as Broward County Property Appraiser, et al., Appellees. 4th District. Case No. 4D14-3997. March 23, 2016


Form 8971 Filing Date Extended

The new Form relating to reporting to beneficiaries of estates and the IRS on the tax basis of distributed assets has had its first filing due date extended to June 30, 2016. The IRS has taken notice of the scrambling around imposed on estates to meet the end of March deadline, and is giving more time for compliance.

Notice 2016-27

Read More

Income Tax Assessment on Beneficiary Allowed Even Though the Statute of Limitations Had Expired

A recent Tax Court case illustrates how the IRS was able to assess income taxes against two trust beneficiaries even though the statute of limitations for assessment had expired, via the mitigation provisions of the Internal Revenue Code.

FACTS: A father established a revocable trust during his lifetime. Several IRAs of father named the trust as beneficiary. Father then died on June 21, 1998. In 2001, $228,530.44 was distributed to the trust from the IRAs. In the same year, the trust distributed the same amount to two beneficiaries of the trust (who were children of the father).

On its timely Form 1041 for 2001, the trust reported $228,530 in gross income, and also deducted that amount as an income distribution, so that it had no net income. It reported the distributions to the beneficiaries on Schedules K-1. The two beneficiaries each reported $114,265 in income from the distributions on their Forms 1040 for 2001.

The Form 1041 was selected for audit, and in 2004 the IRS disallowed the income distribution deductions, and determined an $80,302 deficiency for the trust for 2001…

Read More

IRS Audit Instructions for Outbound Section 482 Transactions

Code Section 482 requires taxpayers that conduct related party sales and transactions to use arms-length pricing. Section 482 particularly applies to international transactions given the possibility to shift taxable income out of the United States by overcharging or undercharging in these transactions.

Taxpayers who violate these pricing rules can be subject to a 20% adjustment penalty, or at times a 40% adjustment penalty. However, if taxpayers at the time of the transaction make a good-faith effort to compute a fair arms-length price and properly document their efforts, even if the IRS later adjusts the pricing, the 40% penalty will not apply. Treasury regulations provide what documentation and analysis is required of the taxpayer. Generally, this documentation and analysis must be provided to the IRS within 30 days of an IRS request.

In a recent International Practice Unit (IPU) advice, the IRS provides steps…

Review of Transfer Pricing Documentation by Outbound Taxpayers (ISO/PUO/P_1.7_02(2014)) (Mar. 4, 2016)

Read More

Expatriation Case

Cases on the new expatriation regime under Code Section 877A are few and far between. The Tax Court has now issued an opinion involving a U.S. resident who gave up his green card and the resulting consequences under Code Section 877A.

The case has two interesting points. The first goes to the issue whether one can be a covered expatriate solely by not filing a Form 8854 that certifies five years of tax compliance at the time of expatriation. Remember that Code Section 877A applies to persons giving up their citizenship or U.S. residency only if they are a “covered expatriate.” This generally means the expatriate has income or assets in excess of statutory thresholds, or does not certify the five years of compliance.

Here, the taxpayer did not file a Form 8854 when he surrendered his green card. Further, the taxpayer in fact had not fully complied with required filings for the preceding five years.

Do these provisions really mean that even…

Gerd Topsnik, 146 TC No. 1 (January 20, 2016)

Read More

Smith v. Smith

By Jenna G. Rubin

This decision deals with the question of whether a ward’s right to marry is subject to court approval during a guardianship proceeding.

Read More

New Basis Consistency and Reporting Proposed Regulations – Did the IRS Go Too Far?

The IRS has issued proposed regulations under new Code Sections 1014(f) (relating to requirements that the initial income tax basis of an asset received from a decedent cannot exceed the estate tax basis of that asset) and Section 6035 (relating to the reporting of basis on property acquired from a decedent). You can read those regulations here and here.

The proposed regulations have two requirements which are eyebrow raising (to say the least), and of questionable validity.

Zero Basis for Assets Not Reported on an Estate Tax Return. The regulations provide that if an asset is required to be reported on an estate tax return, is otherwise subject to the basis consistency rules of Section 1014(f) (e.g., assets that do not increase the estate tax after credits are not subject to the rules), and is NOT reported on a return before the expiration of the estate tax statute of limitations, the basis of the asset in the hands of the recipient is adjusted to ZERO!

Looking back at Section 1014(f), I do not see…

Read More

Guardianship Court Permitted to Annul Marriage [Florida]

An incapacitated ward had his rights to contract removed by a guardianship court. The ward thereafter married, without court approval. The marriage was then challenged based on FS 744.3215(2)(a) (2013). That statute provides “[i]f the right to enter into a contract has been removed, the right to marry is subject to court approval.”

So the statute definitely raises problems for the marriage. The real question turned out to be …

Smith v. Smith, 4th DCA (March 2, 2016), Case No. 4D14-1436

Read More

Code Section 752 Liabilities Include Obligations Under Construction Contract

Partners in a partnership receive adjusted basis in their partnership interests for their allocable share of partnership liabilities. Since basis will allow for distributions to be made to partners without gain, losses to be deducted by partners, and gain reduction on a sale of a partnership interest, such basis is often advantageous.

When thinking about what partnership liabilities count for this purpose, most practitioners will first think of promissory notes, mortgages, and other major booked liabilities of the partnership. A recent private letter ruling points out that other esoteric liabilities can enter this computation.

In the PLR, the partnership received “notice to proceed” payments..

Read More

Uniform Voidable Transactions Act (UVTA) Threatens Asset Protection Planning

The UVTA has been enacted in several states. The Act is a reworking of fraudulent conveyance law, which allows a creditor to avoid transfers made that attempt to put property beyond the reach of a creditor. A number of attorneys and others are beginning to realize that the UVTA is a threat to debtor protections that might exist outside of the UVTA.

For example, Section 10(b) of the Act reads “[a] claim for relief in the nature of the claim for relief under this Act is governed by the local law of the jurisdiction in which the debtor is located when the transfer is made or the obligation is incurred.” Thus, if a resident of a state without domestic asset protection trust provisions settles such a trust in another state, the settlor may not be able to rely on the law of that other state to protect himself or herself against a voidable transaction claim – Section 10(b), if applicable, would arguably require that the law of the home state of the debtor would instead apply. If that home state fraudulent conveyance…

Read More

New FIRTPA Regulations

As previously noted, the Protecting Americans from Tax Hikes Act of 2015 modify the withholding provisions under FIRPTA. The Service has now issued regulations implementing the statutory changes. Key among them are:

A. The increase of the withholding rate on dispositions of US real property interests from 10% to 15%;

B. Implementation of a new reduced 10% rate of withholding when the US real property interest transferred will be used by the transferee as a residence and the amount realized for the property does not exceed $1 million…

Read More

Delay in Need to Report Basis

Currently, taxpayers have until February 29, 2016 to file Forms 8971 for estate tax returns previously filed. Form 8971 is used to report basis to beneficiaries of inherited assets, pursuant to provisions that came into law in 2015.

The IRS is providing taxpayers with a further breather – such forms now need not be filed with the IRS nor furnished to a beneficiary until March 31, 2016.

Notice 2016-19

Read More

Gort v. Gort

By Jenna G. Rubin

In this decision, the Court considered, among other things, whether a petition to determine incapacity may be voluntarily dismissed. The statutes governing guardianship do not expressly address this issue.

Read More

Form 8971 Filing Unhappiness

The IRS has now issued a final Form 8971 and instructions. If you recall, this Form is newly required by executors of estates filing a Form 706 (federal estate tax return). The Form requires a schedule for each beneficiary which lists the assets received by the beneficiary and the estate tax value of those assets. The purpose is to put documentation in the hands of the beneficiary to allow it to calculate basis in the received assets. This will allow the beneficiary to calculate gain or loss on a subsequent sale of the assets received…

Read More

Not Enough Activity to Be a Developer

If you suffer a loss on the disposition of real property, you want to be treated as a developer for income tax purposes – that is, to be treated as engaged in a trade or business. That way, you can get ordinary loss treatment and not a long termor short term capital – the ordinary loss will typically be available to offset more types of income than a capital loss.

So how many properties must one be dealing with and how much activity is needed to cross into developer territory? This question comes up a lot – it is a question of facts and circumstances. In a recent Tax Court case, ownership of 3 properties coupled with sporadic development activities was not enough for ordinary loss treatment…

Evans, TC Memo 2016-7

Read More

Elective Share Rulings

Under Florida law, a surviving spouse can elect to receive 30% of the elective share estate of his or her deceased spouse, in lieu of receiving what was left to the surviving spouse under the decedent’s estate planning documents. This prevents a spouse from entirely cutting a surviving spouse out of his or her Last Will and other dispositive documents.

In determing what makes up the total value of the elective estate (against which the 30% is multiplied), Florida Statutes provide a listing of what to include. They also provide a listing, in Fla.Stats. §732.2055, of what is allowed to reduce the size of that estate for purposes of the 30% computation…

ACE J. BLACKBURN, JR., CHRIS A. ECONOMOU, GUS MORFIDIS and JOAN S. WAGNER, as Personal Representatives of the Estate of Konstantinos Boulis, a/k/a, Gus Boulis, Appellants, v. EFROSINI BOULIS a/k/a FRANCES BOULIS, Appellee. 4th District. Case Nos. 4D14-1579 and 4D14-2048. January 20, 2016.

Read More

Blackburn v. Boulis

By Jenna G. Rubin

This appeal centers around two distinct issues with regard to a surviving spouse’s elective share: (1) first, whether a court can direct the payment of interest on a portion of the elective share amount, and (2) whether attorney’s fees can be charged against the elective share.

Read More

Lodestar Methodology for Determining Reasonable Attorney Fees is Rejected

Fla.Stats. §736.0708(1) tells us that unless the trust agreement says different, “a trustee is entitled to compensation that is reasonable under the circumstances.” The statutes do not tell us how to compute what is “reasonable.”

Back in 1958, the Florida Supreme Court, in West Coast Hospital Ass’n v. Florida National Bank of Jacksonville, 100 So.2d 807 (Fla. 1958), listed out the factors that should determine what is reasonable for this purpose. These factors are: …

Read More

Dowdy v. Dowdy

By Jenna G. Rubin

This decision centered around whether the construction of a trust could support the issuance of a temporary injunction directing the trustee to deposit proceeds of a property sale into the court registry pending the court’s decision on the construction petition.

Read More

Robert Rauschenberg Foundation v. Grutman

By Jenna G. Rubin

In this decision, the Court considered which methodology to apply when calculating trustee fees. The beneficiary of the trust, a charitable foundation, argued that the trustee fees should be calculated using the lodestar method set forth in Florida Patient’s Compensation Fund v. Rowe, 472 So.2d 1145. The trustees argued that their fees should be calculated based on the factors set forth in West Coast Hospital Ass’n v. Florida National Bank of Jacksonville, 100 So.2d 807 (Fla. 1958).

Read More

Fraudulent Conveyance Litigation Expenses are Not Deductible

Chief Counsel Advice 201552028

Expenses of business litigation, and litigation involving the production or collection of income or of property held for the production of income, are typically deductible under Code Sections 162 or 212. It is often forgotten, however, that if the subject of litigation is the defense of, or to perfect title to, real or personal property, such expenses must be capitalized into the asset and not deducted. See Treas. Regs. §1.263(a)-2(e)…

read more

Did You Get An Erroneous IP-PIN Number from the IRS?

Taxpayers who are the victim of identity theft in regard to tax filings are eligible to receive an IP-PIN number from the IRS. This is a special number issued to the taxpayer that the taxpayer uses when filing the income tax return…

Read More

Improper Decanting [Florida]

In a case of first impression, Florida’s 5th District Court of Appeals interpreted Fla.Stats. §736.04117 relating to the ability of a trustee to decant a trust into a new trust arrangement. A trustee transferred the funds of a trust…

Read More


The Protecting Americans from Tax Hikes Act of 2015 was recently signed into law. Section 324 of the Act modifies Code Section 1445 to increase the required withholding amount on dispositions by nonresident aliens and foreign entities of U.S. real property interests from 10% to 15%…

Read More

Deeds to Trusts [Florida]

One statute that most Florida real estate and trust lawyers have to deal with at some time is Fla.Stats. Section 689.07(1). Let’s read it together:

(1) Every deed or conveyance of real estate…

Read More

Gossett v. Gossett

By Jenna G. Rubin

In this decision on the equitable doctrine of “renunciation,” the Court held that a trust beneficiary who challenged a trust document did not have to repay distributions made to him from the trust in order to challenge the trust document.

Read More

Gulag America

A few years back, Congress passed FATCA. While purportedly aimed at reaching money of tax evaders hidden offshore, a practical effect has been it is nearly impossible for U.S. persons to hold or open bank or brokerage accounts outside of the U.S. That is, for a tax policy objective, the freedom enjoyed by U.S. persons to hold their liquid assets wherever they want in the world has been substantially curtailed…

Read More

An Illustration of How NOT to Do an Related Party Loan

While the Internal Revenue Code does have provisions that may impact the tax consequences of related party loans, conceptually there is nothing wrong with a related party loan. Loans can have favorable tax aspects, including deductibility of interest payments, principal repayments by entities being treated as such instead of taxable distributions, and bad debt deductions if the obligations cannot be repaid…

Read More

Keul v. Hodges Blvd. Presbyterian Church

By Jenna G. Rubin

This decision deals with whether a POD designation can be invalidated for undue influence , as well as the right of a probate court to require a party to return POD funds to an estate instead of entering a money judgment against the party for the amount of the funds.

Read More

Identity Theft Victims Can Now Get a Copy of Fraudulently Filed Returns

Many taxpayers, upon filing (or trying to file electronically) their income tax return, hear back that the IRS has already received a filed return for them. Typically, this is due to a fraudulent return filed using the taxpayer identification number and name of the taxpayer that seeks a fraudulent refund of taxes already paid to the IRS – the IRS version of identity theft…

Read More

Be Cautious of Late In the Year Mutual Fund Purchases

This is the time of year to be cautious about buying a mutual fund. Many funds pay dividends near the end of the calendar year in December. If you buy one now, and it pays a dividend, you will be paying taxes for 2015 on the dividend. However, you are not any “richer” for the dividend, since the mutual fund value will usually decline by the amount of the dividend you receive…

Read More

Rocke v. American Research Bureau et al.

By Jenna G. Rubin

For anyone looking for a refresher on the doctrine of dependent relative revocation, this decision is a good read.  In this case, after 9 years of litigation, the Court ultimately determined that the probate court’s failure to apply the doctrine of dependent relative revocation incorrectly resulted in the distribution of an estate worth $12 million to the decedent’s intestate heirs rather than to the beneficiary of one of her prior wills.

Read More

Power of Attorney Holder Cannot Sign for Another

Tax practitioners are familiar with Form 2848. With that form, a taxpayer authorizes an attorney, accountant, or other authorized representative to act as attorney-in-fact for the taxpayer as to the specified tax matter in dealing with the IRS…


Some 2015 Florida Law Changes

Below are some statutory changes enacted in Florida in 2015 that you may not have noticed:

GRANDPARENT VISITATION RIGHTS. In a major rewrite of Chapter 752, statutory rights of a grandparent to obtain visitation rights…

Read More

Another Advantage of Proceedings Supplementary

Debtors oftentimes attempt to shield their assets from creditors by transferring them away to others. If this is done, a creditor can bring an action under Florida’s Uniform Fraudulent Transfer Act (UFTA) to attempt to undue the transfer and execute on the transferred property as a fraudulent transfer…

Read More

Substantial Compliance Doctrine Will Not Override Return Signing Requirement

In a recent Tax Court case, a joint return was timely filed by a husband and wife. However, the return was filed without the wife signing the return. The IRS rejected the initially filed return and imposed late filing penalties. Note that the late taxes here came to over $5 million (over two tax years), so the penalties involved were very significant…

Read More

Soriano v. Estate of Manes

By Jenna G. Rubin

This decision centered around whether a potential civil claimant arising out of a pending criminal prosecution was a “reasonably ascertainable creditor” entitled to personal service of the notice to creditors.  The Court ultimately held that the claimant was not a reasonably ascertainable creditor, because the personal representative has no actual knowledge of the claimant’s civil claim, nor would a more diligent search have revealed the existence of the claim.

Read More

The Benefit of Establishing an Offshore Asset Protection Trust While the Coast is Clear

Offshore asset protection trusts avoid or diminish a number of creditor exposures that apply to such trusts organized in the U.S. High net worth individuals and persons involved in high liability exposure businesses and professions should consider establishing a “nest egg” offshore trust to provide a protected fund that is exempt from creditor claims but which can still be expended for the benefit of the grantor/settlor and his or her family…

Read More

Loan Transaction Costs IRA its Bankruptcy Exemption

A recent case illustrates a common problem with IRAs when their participants declare bankruptcy. Generally, IRAs are exempt assets in bankruptcy proceedings, and are thus beyond the reach of the bankrupt individual’s creditors. This exemption in the Bankruptcy Code is tied to the tax-exempt status of the IRA. 11 USC §522(d)(12) provides an exemption to “[r]etirement funds to the extent that those funds are in a fund or account that is exempt from taxation under section … 408 … of the Internal Revenue Code of 1986.”

Read More

Delbrouck v. Eberling

By Jenna G. Rubin

In this case, one of the sons of the decedent claimed a constructive trust over certain properties titled in the name of the decedent.  The personal representative moved to compel the son to surrender to her the properties and to cease his business activities on the properties.  This decision dealt with whether the probate court was required to hear evidence before directing the son to turn over possession of the property to the personal representative.

Read More

Prenuptial and Postnuptial Agreements

I gave a presentation yesterday at the Florida Bar Tax Section CLE How to Be an Estate Planning Wizard. The subject was the tax and other aspects of prenuptial and postnuptial agreements. The presentation covered both federal and Florida issues.

For those with an interest in the subject, you can watch slides the slides here

Read More

No Charitable Set Aside Deduction for Estate Due to Litigation

Under Code Section 642(c)(2) an estate may claim a current charitable contribution deduction for income tax purposes, notwithstanding that the income earned will not be paid or used for a charitable purpose until sometime in the future. That is, the estate need not actually pay income over to the charity in the year it is earned to obtain a charitable deduction – it is enough if the funds are set aside for later payment to the charity…

Read More

Florida Supreme Court Gives Expansive Protection to Husband’s Separate Property under a Prenuptial Agreement

A divorcing wife asserted that because a 20 year old prenuptial agreement made no specific reference to enhancement in value of nonmarital property attributable to marital labor or funds, the enhancement in value to the husband’s assets during the marriage is subject to equitable distribution. Similarly, the agreement did not specifically provide that the husband’s earnings will be his separate property, so the wife sought a finding that these were not protected under the prenuptial agreement…

Read More

No Section 121 Gain Exclusion When Seller of Residence Obtains it Back in Foreclosure

By: Charles (Chuck) Rubin

Marvin sold his principal residence for $1.4 million on an installment basis. He reported current gain of $657,796, and excluded $500,000 of that gain from income under Code Section 121 as a sale of a principal residence. The remaining $157,796 of gain was reported on the installment basis. After the sale, Marvin reported $56,920 of gain from cash installment payments received…

Read More

Adelman v. Elfenbein

By Jenna G. Rubin

Following the dismissal of a petition for incapacity because the court found sufficient least restrictive alternatives to guardianship, the petitioner brought a subsequent “petition to reopen” the guardianship, alleging that the fiduciary appointed in the alleged incapacitated person’s advance directive documents was not providing adequate care for that person.

Read More

Table of Revised Income Tax Return Filing Due Dates

by Charles (Chuck) Rubin

A cheat sheet summary of the new filing dates enacted in the recently enacted Surface Transportation and Veterans Health Care Choice Improvement Act of 2015. Note that most of these will start applying only to filings for the 2016 tax year.

Read More

IRS Announces Delay in Consistent Basis Notice to Beneficiaries Rules

I recently wrote about the provisions of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 that require estates to give statements to beneficiaries regarding the basis of property if an estate tax return is required to be filed, generally within 30 days of the due date of the return.

The IRS has now issued guidance delaying…

Read More

Congress Sneaks in Some Important Procedural Tax Changes

On July 31, 2015, President Obama signed HR 3236, the “Surface Transportation and Veterans Health Care Choice Improvement Act of 2015.” While you wouldn’t know it from the title, Congress included some important procedural tax changes that are of special interest to tax return preparers and estate administrators…

Read More

Goldman v. Estateof Goldman

By Jenna G. Rubin

This decision deals with an award of attorney’s fees and costs against a party without a finding of bad faith by the trial court.  An attorney, in her capacity as Guardian Ad Litem, inadvertently disclosed confidential financial and medical information of the ward to the ward’s nieces and nephews.

Read More

Article Abstract: Estate Planning with Carried Interests & Code §2701

By Charles (Chuck) Rubin

Issue: Fund managers of private equity funds typically obtain a percentage of total profits via general partner interests – a “carried interest.” Because the GP is not entitled to its carried interest unless the fund’s investments generate sufficient profit to return all invested capital…

Read More

Fiel v. Hoffman

By Jenna G. Rubin

This case involved the effect of the Slayer Statute and undue influence on a murdered decedent’s will.  The decedent was murdered by his wife, who also murdered the decedent’s mother, to ensure that she and her family would receive the decedent’s estate on his death.

Read More

In re Estate of Maldonado

By Jenna G. Rubin

In this case, the former spouse of a decedent appealed an order directing the personal representative to distribute the estate’s assets and close the estate.  The decedent and his ex-wife divorced in 1993 in Puerto Rico, but the Puerto Rico order dissolving the marriage did not distribute the spouses’ marital assets.

Read More

No Four Year Statute of Limitations for Fraudulent Conveyance

By Charles (Chuck) Rubin

Florida Statutes Section 726.110 generally provides for a four year statute of limitations in regard to fraudulent conveyances (or if longer, 1 year after the transfer was or could have reasonably been discovered by the claimant). Fraudulent conveyance law generally allows a creditor…Biel Reo, LLC v. Barefoot Cottages Development Co., LLC, 156 So.3d 506 (1st DCA 2014)

Read More

No Need to File §83(b) Election with Tax Return

By: Charles (Chuck) Rubin

Not a big item, but a helpful one – under proposed regulations a taxpayer need no longer file a copy of their Code §83(b) election with their income tax return for the year of the election…

Read More

Flegal v. Guardianship of Swistock

By Jenna G. Rubin

This case centered around the ownership of stock shares and due process within a guardianship proceeding.  The dispute arose over the ownership of stock shares which were initially purchased by a father and his daughters as joint tenants with right of survivorship….

Read More

Article Abstract: CPA Contingency Fees

By Charles (Chuck) Rubin

In Ridgely v. Lew (2014), the court found the IRS exceeded its statutory authority when it prohibited tax practitioners (including CPAs) from charging contingent fees for preparing and filing “ordinary refund claims…”

Read More

Brown v. Brown

By Jenna G. Rubin

This decision serves as a nice reminder about a court’s jurisdiction over real property.  A circuit court in an estate proceeding cannot direct a personal representative to divide and distribute a decedent’s real estate in another state, since the court lacks in rem jurisdiction to order and partition the sale of that real property…

Read More

Living at the Casino Does Not Make You a Professional Gambler

By Charles (Chuck) Rubin

Professional gamblers can offset their losses from gambling against their gambling winnings. They can also deduct their other gambling expenses. Non-professionals (those not engaged in the trade or business of gambling) are limited in deducting their losses against gains as miscellaneous itemized deductions…

Read More

Carroll v. Israelson

By Jenna G. Rubin

The focus of this case was the applicability of F.S. 732.507(2), dealing with the effect of divorce on a decedent’s will which included a devise to his former spouse and a trust for her family….

Read More

Pierre v. Brown

By Jenna G. Rubin

In this guardianship fee dispute, the Court affirmed a harsh result for a successor guardian who incurred fees in cleaning up a mess created by the initial guardian…

Read More

First Time Abate

By Charles (Chuck) Rubin

Taxpayers who file a return late, make a late payment, or make a late tax deposit are subject to penalties. What is not known by most taxpayers, and a lot of tax practitioners, is that the IRS has a program to abate these penalties…

Read More

No Theft Loss for Securities “Pump-and-Dump”

By Charles (Chuck) Rubin

Pump-and-dump occurs when corporate officers or other shareholders fraudulently promote shares of a company and engage in fraudulent sales to increase the value of shares. This is injurious to other shareholders who suffer losses when the value of the stock ultimately collapses…

Read More

Saadeh v. Connors

By Jenna G. Rubin

In this portion of the Saadeh guardianship saga, the court was asked to determine whether an attorney representing a court-appointed guardian in a guardianship proceeding owes a duty to the ward under a third-party beneficiary theory.  The Court ultimately found that it did…

Read More

UF Advisor Network

Charles (Chuck) Rubin joined the UF Advisor Network as a founding member.

Harrell v. Badger

This case highlights the lack of understanding many trust and estate practitioners have about what “decanting” actually means.  Despite the clear language of F.S. 736.04117, it seems  many are still confused about when decanting is appropriate, and about how to follow the simple rules provided in the statute….
Read More

Outbound IP Transfer in an F Reorganization

In one corner, we have Code §368(a)(1)(F) which generally allows for a corporation to move from one jurisdiction to another without triggering gain or other immediate adverse income tax consequences…

Read More

Critiques, Strategies, and Analysis of Current State of Offshore Compliance Initiatives and Programs

Richard (Rick) Josepher has prepared an excellent and detailed review that analyzes and critiques the current state of affairs in regard to the various offshore enforcement environment. It provides a unique in-depth review of the failings and problems of the current system, suggestions to the government to address these issues, and specific strategic analysis for tax practitioners operating in this area.

Read More

Supreme Court Mandates State Income Tax Credits, Pretty Much

Maryland imposes income taxes on its residents. There is a state level income tax, and a county level tax. If a Maryland resident incurs income in other states and pays state income tax to those other states, there is a mechanism for the resident to receive a credit against the Maryland state…

Read More

A boutique law firm with a practice limited to

tax, estate planning, probate, trust & guardianship law and litigation, and related commercial matters