Berdon Blogs

T&E TALK: Self-Canceling Installment Notes have Pros and Cons

Posted by Scott T. Ditman, CPA/PFS on Jul 2, 2018 7:00:00 AM

Many estate planning techniques are intended to minimize or even eliminate gift and estate taxes when transferring assets to family members. Sometimes, the most powerful techniques also have a significant drawback: mortality risk.

Example

You may have to outlive the term of a trust to realize its tax benefits. A self-canceling installment note (SCIN) eliminates mortality risk, so it may be appropriate for anyone in poor health who isn’t expecting to reach his or her actuarial life expectancy. But it has other potential downsides.

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Topics: T&E TALK

SALT TALK:  Sales Tax Collection No Longer Requires Physical Presence (AKA “The Day Stare Decisis Died”)

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Jun 25, 2018 10:58:15 AM

A long long time ago, I can still remember how[1] the concept of stare decisis “promotes the evenhanded, predictable, and consistent development of legal principles, fosters reliance on judicial decisions, and contributes to the actual and perceived integrity of the judicial process.[2]

Let’s get to what you need to know first.  On Thursday, June 22, the Supreme Court of the United States handed down the long awaited decision in South Dakota v. Wayfair, Inc. effectively eliminating the requirement that a seller of goods needs to have a physical presence in a jurisdiction in order to be compelled to collect sales tax.  As long as certain thresholds, yet to be determined, are met, any internet merchant, regardless of whether they ever set foot in a jurisdiction can (and likely will) be required to collect the sales tax.

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Topics: SALT TALK

TAX TALK: 2018 Q3 - Key Tax Deadlines for Businesses

Posted by Michael Eagan, J.D., LL.M. on Jun 25, 2018 9:17:00 AM

Here are some of the key tax-related deadlines affecting businesses and other employers during the third quarter of 2018.  Keep in mind that this list is not all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

July 31

  • Report income tax withholding and FICA taxes for second quarter 2018 (Form 941), and pay any tax due. (See the exception below, under “August 10.”)
  • File a 2017 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or request an extension.
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Topics: TAX TALK

T&E TALK: Naming a Minor as Beneficiary Can Lead to Unintended Outcomes

Posted by Scott T. Ditman, CPA/PFS on Jun 25, 2018 7:01:00 AM

A common estate planning mistake is to designate a minor as beneficiary — or contingent beneficiary — of a life insurance policy or retirement plan. While making your young child the beneficiary of these assets may seem like an excellent way to provide for him or her in the case of your untimely death, doing so can have significant undesirable consequences.

Not Per Your Wishes

The first problem is that insurance companies and financial institutions generally won’t pay large sums of money directly to a minor. What they’ll typically do in these situations is require costly court proceedings to appoint a guardian to manage the child’s inheritance. And there’s no guarantee the guardian will be someone you’d choose.

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Topics: T&E TALK

SALT TALK: Connecticut Fires Back at the TCJA

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Jun 18, 2018 1:39:45 PM

As my readers know, I’ve been anticipating strong state responses to some of the more onerous aspects of the Tax Cuts and Jobs Act (TCJA). Well, Connecticut Governor Dannel Malloys “An Act Concerning Connecticut’s Response to Federal Tax Reform” (The Act) is a major shot in what I expect will be a long war.  One key provision of the Act is the Pass-Through Entity Tax (PET).

PET is designed to be revenue neutral to both the State and taxpayers. The TCJA limited the deductibility of state and local taxes paid by individuals to $10,000 and pass through entities (PTE) with Connecticut source income are now required to pay a tax on that income at a rate of 6.99% -- the highest individual tax rate.  Malloy is trying to work around this.   Under the Act, members of the PTE will receive a credit on their Connecticut personal income tax return equal to their pro-rata share of entity income multiplied by 93.01%.

Here’s how it works:

  • AB partnership is owned equally by A, a Connecticut resident, and B a nonresident.  The partnership earns $1,000,000 before taxes in 2018, all Connecticut source.  AB will pay a PET of $69,900 (1,000,000 * 6.99%).  A and B will each have $465,050 of income from AB (($1,000,000 - $69,900)/2).
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Topics: SALT TALK

T&E TALK: You can Repair a “Broken” Trust with the Proper Tools

Posted by Scott T. Ditman, CPA/PFS on Jun 18, 2018 12:18:38 PM

An irrevocable trust has long been a key component of many estate plans. But what if it no longer serves your purposes? Is it too late to change it? Depending on applicable state law, you may have options to fix a “broken” trust.

How Trusts Break

There are several reasons a trust can break, including:

Changing Circumstances. A trust that works just fine when it’s established may no longer achieve its original goals if your family circumstances change — births, deaths, divorce, etc.

New Tax Laws. Many trusts were created when gift, estate, and generation-skipping transfer (GST) tax exemption amounts were relatively low. Today, however, the exemptions have risen to $11.18 million, so trusts designed to minimize gift, estate, and GST taxes may no longer be necessary.  And with transfer taxes out of the picture, the higher income taxes often associated with these trusts — previously overshadowed by transfer tax concerns — become a more important factor.

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Topics: T&E TALK

TAX TALK: Don’t Gamble on your Taxes

Posted by Michael Eagan, J.D., LL.M. on Jun 18, 2018 9:20:00 AM

For anyone who takes a spin at roulette, buys a lottery ticket, or engages in other wagering activities, it’s important to be familiar with the applicable tax rules. Otherwise, you could be putting yourself at risk for interest or penalties — or missing out on tax-saving opportunities.

Wins
You must report 100% of your wagering winnings as taxable income. The value of extraordinary complimentary items (“comps”), such as autos and jewelry, provided by gambling establishments must also be included in taxable income because comps are considered gambling winnings. The IRS has reserved its opinion on whether you can exclude “normal comps,” such as food, drink, lodging, and entertainment, from taxable income. Winnings are subject to your regular federal income tax rate, which may be as high as 39.6%.

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Topics: TAX TALK

SALT TALK: Telecommuting Becomes an Inconvenient Truth in Connecticut

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Jun 11, 2018 10:30:00 AM

You’re trying to do your share to stop global warming, so you persuade your employer to let you work from home. Think of the gas you will save and the burden lifted from the environment.  Well, not so fast, if you live in one of the few states with a so-called “Convenience of the Employer” rule.  You are going to be so mad when you realize the consequences that the steam rising from the top of your head is going to create more environmental damage than any reduction in carbon output from working at home. 

Currently only Delaware, Nebraska, New York, and Pennsylvania have a convenience rule.  But effective for tax years beginning on or after January 1, 2019, Connecticut will have one as well, albeit a slightly kinder version. The rule will only apply if the nonresident taxpayer in question lives in a jurisdiction that has its own version of the rule.

The inconvenient part about the convenience rule, simplified for brevity, can be best demonstrated by a simple example. 

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Topics: SALT TALK

TAX TALK: QSB Stock Offers Two Valuable Tax Benefits

Posted by Michael Eagan, J.D., LL.M. on Jun 11, 2018 10:08:49 AM

Investing in qualified small business (QSB) C corporation stock offers you the opportunity to diversify your portfolio and enjoy two valuable tax benefits:

  1. Tax-free gain rollovers. If you buy other QSB stock with the proceeds of selling QSB stock within 60 days, you can defer the tax on your gain until you dispose of the new stock. The rolled-over gain reduces your basis in the new stock. For determining long-term capital gains treatment, the new stock’s holding period includes the holding period of the stock you sold.
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Topics: TAX TALK

T&E TALK: For the Charitable, Consider a Donor-Advised Fund

Posted by Scott T. Ditman, CPA/PFS on Jun 11, 2018 7:00:00 AM

If you make sizable gifts to charitable causes, you can also realize personal rewards, and may be able to claim a deduction on your tax return. However, once you turn over the money or assets, you generally have no further say on how they’re used. You can exercise greater control over your charitable endeavors using a donor-advised fund (DAF). Bear in mind that under the Tax Cuts and Jobs Act, you must itemize to benefit from the charitable contributions deduction.

Setting Up a DAF

As the name implies, your recommendations are integral to a DAF. First, you contribute to a fund typically managed by an independent sponsoring organization or an arm of a reputable financial institution. The minimum contribution generally is $5,000. In exchange for handling the management of the fund, the financial institution or organization usually charges an administrative fee based on a percentage of the deposit.

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Topics: T&E TALK

About Berdon Blogs

Our experts examine the latest trends, economics, business conditions and industry issues to provide timely information you need to maximize your tax advantages and meet your financial goals.

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T&E TALK: Gain insights into how changes in tax laws, shifts in the financial markets, and regulatory concerns will impact assets and affect preserving and transferring wealth.

TAX TALK: Get an all-inclusive perspective on regulatory changes, industry issues, and trends from our team of multidisciplinary tax professionals – many of whom also hold J.D. and LL.M degrees.

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