California Estate Planning Blog by Kevin Staker

June 13, 2017

IRS Extends Missed Deadlines for Estate Tax Portability by Kevin Staker

To transfer the unused estate tax exemption of a deceased spouse, the transfer must be done in an estate tax return filed for the deceased spouse.  The deadline for such a return is nine months after the death of the deceased spouse.  That deadline cannot be extended by the typical extension for filing an estate tax return.

Many surviving spouses have missed that deadline.  Such a spouse up until June 9th had to apply for an expensive private letter ruling from the IRS to be allowed to file the estate tax return after the nine month deadline had been missed.  That entailed a filing fee of thousands of dollars and attorney’s fees of thousands and thousands of dollars to fill out the amazingly complex paperwork applying for a simple extension.

The IRS has come to its senses and on June 9th in Revenue Procedure 2017-34 (https://www.irs.gov/pub/irsdrop/rp-17-34.pdf) has ruled such a late return may now be filed by the later of January 2, 2018, or two years after the death of the decedent.

I personally had one client I called immediately.  I had recommended he go through the private ruling process because it would have saved tens of thousands of dollars in estate tax if he were to die in the near future.  Lucky for him he did not follow my advice.

See also http://www.journalofaccountancy.com/news/2017/jun/portability-election-extension-201716844.html

By Kevin Staker

 

December 20, 2016

Estate Tax May Be Repealed by Kevin Staker

Filed under: estate tax news,estate tax repeal,Kevin Staker — Kevin Staker @ 3:48 pm
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Estate Tax May Be Repealed, Believe It or Not

by Kevin Staker

Since the estate tax exemption was raised to $5,000,000 in 2010 I had told clients I thought the estate tax would never be repealed.  I believed that there would never be  60 Republican senators, the number needed to overcome a filibuster in the Senate by the Democrats.  It appears I was wrong.

Turns out only 51 Republican senators are needed if tax reform is enacted under “budget reconciliation”.  This is how the Democrats passed Obamacare, the Affordable Health Care Act, by a mere majority in 2010.

The Republicans have 52 votes in the Senate.  The Republican majority House of Representatives favors estate tax repeal.  Their plan, “A Better Way”, states they want to “repeal the Death Tax so that the loss of a family member will no longer be a taxable event.  See https://abetterway.speaker.gov/_assets/pdf/ABetterWay-Tax-Snapshot.pdf

President (presently elect) Trump favors estate tax repeal:

Death Tax

The Trump Plan will repeal the death tax, but capital gains held until death and valued over $10 million will be subject to tax to exempt small businesses and family farms. To prevent abuse, contributions of appreciated assets into a private charity established by the decedent or the decedent’s relatives will be disallowed.  (See https://www.donaldjtrump.com/policies/tax-plan/).

Hence, I, Kevin Staker, must admit I was wrong.  The federal estate tax will now be likely repealed.

By Kevin Staker

 

December 1, 2016

Federal Estate Tax Exemption for 2017 by Kevin Staker

Filed under: estate tax,estate tax news,Kevin Staker — Kevin Staker @ 8:34 am
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Federal Estate Tax Exemption for 2017

The Internal Revenue Service has announced in IRS Revenue Procedure 2016-55 that the federal estate tax exemption for 2017 will be $5,490,000.  The IRS also announced the gift tax exclusion will remain at $14,000.

The IRS never makes these things easy.  It would have been nice if the exemption had gone to $5,500,000 to make the math easier for us.  But alas the IRS was bound to the strict inflation adjusting formula of the Internal Revenue Code.  This formula adjusts for inflation applied to the $5,000,000 exemption since 2010.

The Rev Proc is found at https://www.irs.gov/pub/irs-drop/rp-16-55.pdf.  This technically is not official because it has not yet been published in a formal Internal Revenue Bulletin.  The full IRS announcement released on October 25, 2016, is found at https://www.irs.gov/uac/newsroom/in-2017-some-tax-benefits-increase-slightly-due-to-inflation-adjustments-others-are-unchanged.  This announcement lists the slight increase in a number of inflation adjusted figures under the federal tax law.

By Kevin Staker

January 13, 2013

It is Official: Exemptions Will Be $5,250,000

The IRS in Revenue Procedure 2013-15 announced the estate and related tax exemptions will be $5,250,000 in 2013. See http://www.irs.gov/pub/irs-drop/rp-13-15.pdf

Thanks to Brian Bergman at MacLean & Ema for passing along to me the citation.

We shall see.

Kevin Staker
Estate Tax News Blog

January 11, 2013

Bloomberg Claims the IRS Has Announced a $5,250,000 Exemption But I Cannot Find Proof

Bloomberg claims the IRS has announced a $5,250,000 exemption for the estate and related taxes.  See http://www.bloomberg.com/news/2013-01-11/irs-increases-exemption-from-estate-tax-to-5-25-million.html

However, I cannot find any proof.  They do not cite any IRS announcement.  The following is the link to where new IRS announcements are listed:  http://apps.irs.gov/app/picklist/list/formsPublications.html;jsessionid=Sr5t6S1uXbmUFGq86OUCcA__?sortColumn=postedDate&indexOfFirstRow=0&value=&criteria=&resultsPerPage=25&isDescending=true

We shall see.

Kevin Staker

Estate Tax News Blog

January 3, 2013

Most Predicting Estate and Related Exemptions Will Be $5,250,000 for 2013

I appear to be the only person predicting the exemptions will be $5,260,000, everyone else I can find is estimating it will be $5,250,000.

For example: see National Law review at http://www.natlawreview.com/article/taxpayer-relief-act-brings-assortment-changes

And see Greenberg, Glusker: http://greenbergglusker.com/news/headlines/Fiscal-Cliff-Deal-Extends-5-Million-Estate-and-Gift-Tax-Credit-and-Generation-Skipping-Transfer-Tax-Exemption-but-Increases-Tax-Rate-to-40-

We await word from the IRS. It will come in the form of a “Revenue Procedure”. I will check for it to be published and will post when it comes out.

We shall see.

Kevin Staker
Estate Tax News Blog

P.S. President Obama signed the Tax Act today while in Hawaii using an autopen, whatever in the heck that is.

January 2, 2013

House Passes Estate Tax Act

On a vote of 257 to 167, the House of Representatives passed the American Taxpayer Relief Act which returns the estate tax law to as it was in 2012.  Technically the exemption had gone down to $1 million on January 1st and so this is a tax cut.  However, just from a technical standpoint; the Act is retroactive.

The mainstream news media is stating the exemption has gone to $5 million but that is not correct.  It is $5 million adjusted for inflation since 2010.  I estimate the exemption will be around $5.2 million.  We need to hear the calculation from the IRS.  Its should come in the next few days.

The President has yet to sign the Act.  Hence, we technically still have a $1 million exemption as I write this post.

We shall see.

Kevin Staker

Estate Tax News Blog

January 1, 2013

Senate Passes the Change to the Estate Tax, 89-8; Exemption for 2013 To Be Over $5.2 Million and Rate To Be 40 Percent

It is official. The Senate passed the “American Taxpayer Relief Act of 2012” on a vote of 89-8 early on January 1, 2013.  We will now have an estate tax rate of 40 percent.   The estate tax and related exemptions will now be $5,000,000 adjusted for inflation from 2010.  That number was $5,120,000 for 2012.  The news media erroneously reports the exemption at $5,000,000 now.   The Senate bill technically (and simply) makes permanent the changes made to the estate tax by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.

I must admit I am still trying to find out what the inflation adjusted number for 2013 will be.  The IRS it appears has not come out with an official number.  IRS Revenue Procedure 2012-41 announced the inflation adjustments for 2013 but specifically fails to state the number for the estate tax exemption.

See http://www.irs.gov/pub/irs-drop/RP-12-41.pdf

My guess is the estate, gift, and generation-skipping transfer tax exemptions will be increased to $5,270,000.  The number is the $5,120,000 exemptions of 2012 adjusted for 3 percent inflation in 2011 ($5,273,600) rounded down the the nearest $10,000.  It is a wild guess on my part as to the inflation number to be used.  United States inflation was an even 3.0 percent for 2011, and I assume they use the figure for the year two years before the year to be adjusted because you do not know the figure for the prior year until you are already in the year to be adjusted.

The bill is technically House Resolution number 8, a bill passed by the House that the Senate technically gutted and substituted in the language of the their tax act. They had to do it this way because revenue acts technically have to start in the House.

The full text of the bill can be found at http://www.businessinsider.com/breaking-full-text-of-the-157-page-bill-to-avert-the-fiscal-cliff-2013-1 or at http://i2.cdn.turner.com/cnn/2013/images/01/01/american.taxpayer.relief.act.pdf

The bill now goes to the House of Representatives for approval. The Tea Party folk will not be happy. This bill has all sorts of tax pork in it. They especially will not like the increase in income tax rates for higher income folk. However, this is the best they are going to get. And they will have another chance to rein in federal government spending next in the fight over increasing the federal debt limit.

We shall see,

Kevin Staker
Estate Tax News Blog

December 31, 2012

Latest Word: Estate Tax Law to Remain As Is But With 40 percent Top Rate

Exemptions and all else as the law is now, in 2012, but with top rate going to 40 percent. What a coup for the Republicans!. Reported by JULIE PACE and BEN FELLER at Associated Press: See http://www.wvva.com/story/20471309/fiscal-cliff-disputes-remain-as-deadline-nears

On the other hand, CNN reporting no deal as of 1:01 pm eastern.  See http://politicalticker.blogs.cnn.com/2012/12/31/latest-updates-final-fiscal-cliff-scramble/?hpt=hp_t1

We shall see.

Kevin Staker

Estate Tax New Blog

Estate Tax Is One of the “Sticking Points” Preventing Avoidance of “Fiscal Cliff”

Multiple media sources report the estate tax issue is one of the remaining issues preventing avoidance of the Fiscal Cliff. It appears the most important issue, the income level at which the Bush Tax Cuts will not be extended, will be settled at $400,000 for a single person and $500,000 for a couple. That about splits the difference on the positions of the two sides.

The major remaining issues are the Republicans want to extend the present estate tax exemption, $5,120,000, and rate, 35 percent, and the Democrats want $3,500,000 and 45 percent (the 2009 law). On the other hand, the Democrats want to extend long term unemployment benefits, and the Republicans oppose such as a luxury we cannot afford.

Bloomberg reports the estate tax is still a major issue.  See http://www.bloomberg.com/news/2012-12-30/mcconnell-says-he-called-biden-to-try-to-jump-start-talks.html

However, ABC News reports they have already agreed to the Republican position.  See http://abcnews.go.com/Politics/OTUS/fiscal-cliff-biden-mcconnell-close-minute-deal/story?id=18099848#.UOHF1KwzR_c

The Washington Post has a good, concise explanation of what is involved in the estate tax issue.   See http://www.washingtonpost.com/blogs/wonkblog/wp/2012/12/30/the-fiscal-cliffs-estate-tax-fight-explained/

Z. Byron Wolf and Sarah Parnass at ABC News are keeping an excellent live update of what is going on.  See http://abcnews.go.com/blogs/politics/2012/12/live-updates-countdown-to-fiscal-cliff/

I predict each side will capitulate and give the other what they want. This is want happened at the end of 2010.

We shall see.

Kevin Staker
Estate Tax News Blog

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