Berdon Blogs

T&E TALK: Does Your Family Know Where to Find Your Will?

Posted by Scott T. Ditman, CPA/PFS on Jun 4, 2018 9:12:30 AM

In a world that’s increasingly paperless, you’re likely becoming accustomed to conducting many transactions digitally. But when it comes to your last will and testament, only an original, signed document will do.

A Photocopy Isn’t Good Enough

Many people mistakenly believe that a photocopy of a signed will is sufficient. In fact, most states require that a deceased’s original will be filed with the county clerk and, if probate is necessary, presented to the probate court. If your family or executor can’t find your original will, there’s a presumption in most states that you destroyed it with the intent to revoke it. That means the court will generally administer your estate as if you’d died without a will.

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Topics: T&E TALK

SALT TALK: Battle Royal Heats Up Between IRS and States

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on May 29, 2018 9:58:08 AM

Digital or Analog? Mono or Stereo? I’ve never been much for format wars. In the classic 1961 release, “First Time! The Count Meets the Duke” you had your choice. If you bought the mono version, both bandleaders’ orchestras could be heard blaring equally out of both speakers. But if you bought the stereo release, Basie is blaring from the left and Ellington from the right. Even though the very first cut on the record is entitled “Battle Royal,” critics described the release as far from a battle of the bands and more like a mutual admiration society. Stereo or mono, pay no mind. Let’s just get to the music.

Yet since the enactment of the federal Tax Cuts and Jobs Act (TCJA) states have been fighting the format wars, attempting to repackage lost state and local tax deductions into charitable contributions and deductible business taxes. Who sounds better? In my opinion I would sooner go back to eight-tracks.

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Topics: SALT TALK

TAX TALK: TCJA Changed Rules for Deducting Pass-Through Business Losses

Posted by Michael Eagan, J.D., LL.M. on May 29, 2018 9:40:30 AM

It’s not uncommon for businesses to sometimes generate tax losses. But the losses that can be deducted are limited by tax law in some situations. Beginning in 2018, the Tax Cuts and Jobs Act (TCJA) further restricts the amount of losses that sole proprietors, partners, S corporation shareholders and, typically, limited liability company (LLC) members can currently deduct. This could negatively impact owners of start-ups and businesses facing adverse conditions.

Before the TCJA

Under pre-TCJA law, an individual taxpayer’s business losses could usually be fully deducted in the tax year when they arose unless:

  • The passive activity loss (PAL) rules or some other provision of tax law limited that favorable outcome, or
  • The business loss was so large that it exceeded taxable income from other sources, creating a net operating loss (NOL).
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T&E TALK: 2nd Marriage Trap — Unintentionally Shortchanging Your Current Spouse

Posted by Scott T. Ditman, CPA/PFS on May 29, 2018 9:31:34 AM

In my previous blog we looked at harnessing the power of a QTIP (qualified terminable interest property) trust for passing wealth to your spouse and children.  However, if you've been married more than once, especially if you have children from different marriages, your estate plan should be even more carefully reviewed to avoid a trap where you could unintentionally shortchange your current spouse.

Consider this scenario:

The Tax Cuts and Jobs Act (TCJA) retained the federal estate, gift, and generation-skipping transfer (GST) taxes but doubled the federal exemption amount to $11,180,000 per taxpayer through December 31, 2025 (indexed for inflation). But, unintended consequences of this temporary doubling of the exemption may be seen in wills containing “formula” based trusts which automatically adjust for the changes in the exemption. 

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Topics: T&E TALK

SALT TALK: Beatles Norwegian Wood (This Bird(y) Has Flown) is Homage to Golf

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on May 21, 2018 12:06:57 PM

The byline for this week’s blog is simply not true.  As are many things you might hear on the golf course, especially as they relate to changing one’s residency for income tax purposes.

I’ve written about this topic many times before, but it can’t be repeated often enough.  Spending less than 184 days in certain jurisdictions (New York, New Jersey, Connecticut, Pennsylvania, and most others) is not going to be enough in and of itself to break a long-standing taxing relationship with the jurisdiction. 

The “I heard it on the golf course” approach to changing residency just doesn’t work. For those of you who don’t play golf, that approach usually consists of buying a home in a low or no tax jurisdiction, changing your voter registration and driver’s license, and going to the county clerk to declare your domicile in that new jurisdiction.  Some golf buddies even go as far to suggest that it doesn’t matter if you are in the jurisdiction for more than 183 days, as long as you don’t sleep at the house or apartment. 

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Topics: SALT TALK

TAX TALK: Before Selling your Home, Weigh the Tax Consequences

Posted by Michael Eagan, J.D., LL.M. on May 21, 2018 9:20:00 AM

In many parts of the country, summer is peak season for selling a home. If you’re planning to put your home on the market, you’re probably thinking about things like how quickly it will sell and how much you’ll get for it. But don’t neglect to consider the tax consequences.

Home Sale Gain Exclusion

The U.S. House of Representatives’ original version of the Tax Cuts and Jobs Act included a provision tightening the rules for the home sale gain exclusion. Fortunately, that provision didn’t make it into the version that was signed into law.

As a result, if you’re selling your principal residence, there’s still a good chance you’ll be able to exclude up to $250,000 ($500,000 for joint filers) of gain. Gain that qualifies for exclusion also is excluded from the 3.8% net investment income tax.

To qualify for the exclusion, you must meet certain tests. For example, you generally must own and use the home as your principal residence for at least two years during the five-year period preceding the sale. (Gain allocable to a period of “nonqualified” use generally isn’t excludable.) In addition, you can’t use the exclusion more than once every two years.

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Topics: TAX TALK

T&E TALK: Provide for your Spouse and Children with a QTIP Trust

Posted by Scott T. Ditman, CPA/PFS on May 21, 2018 7:00:00 AM

If you want to preserve as much wealth as possible for your children, but you leave property to your spouse outright, there’s no guarantee your objective will be met. This may be a concern if your spouse has poor money management skills or, more importantly, if you are in a second marriage and have children from the first marriage. In both of these situations, a properly designed qualified terminable interest property (QTIP) trust may be the answer.

How QTIPs Work

A QTIP trust provides your spouse with income for life while preserving the trust principal for your children. By appointing a qualified trustee, you can have greater confidence that the assets will be invested and managed wisely. And the trust documents will ensure that, upon your spouse’s death, the trust assets will be distributed to your children according to your wishes.

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Topics: T&E TALK

SALT TALK: New York on My Mind – Sourcing on New York’s Mind

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on May 14, 2018 11:06:28 AM

Did you know that Hoagy Carmichael was an attorney? That’s right, the coauthor of the song “Georgia on My Mind" received his law degree from Indiana University in 1926. While he very briefly hung up a shingle in West Palm Beach, the composer, singer, actor, and bandleader apparently pursued other interests. I’ll bet you didn’t know that Georgia Code Title 50, State Government Section 3-60 (50-3-60) designates the song as the official song of the State of Georgia and proceeds to list the lyrics. One more diversion before we talk tax; I’ll bet you also didn’t know that the State of Georgia successfully pursued a copyright infringement action asserting that the Georgia Code is copyrighted and payment must be made for its reproduction. 

The connection you’ve been waiting for — on one day in April (the sixth), the New York State Department of Taxation and Finance released not one, but three Technical Memorandums, all addressing the sourcing of income to New York. Interestingly enough, the first and second address New York State Tax Law changes made in 2017, while the third addresses the sourcing of income related to a federal law change (Internal Revenue Code Section 457A) enacted during the Bush administration and effective as of January 1, 2009.

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Topics: SALT TALK

TAX TALK: Time to Adjust your Withholding?

Posted by Michael Eagan, J.D., LL.M. on May 14, 2018 9:31:16 AM

If you received a large refund after filing your 2017 income tax return, you’re probably enjoying the influx of cash. But a large refund isn’t all positive. It also means you were essentially giving the government an interest-free loan.

That’s why a large refund for the previous tax year would usually indicate that you should consider reducing the amounts you’re having withheld (and/or what estimated tax payments you’re making) for the current year. But 2018 is a little different.

The TCJA and Withholding

To reflect changes under the Tax Cuts and Jobs Act (TCJA) — such as the increase in the standard deduction, suspension of personal exemptions and changes in tax rates and brackets — the IRS updated the withholding tables that indicate how much employers should hold back from their employees’ paychecks, generally reducing the amount withheld.

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T&E TALK: Received an Inheritance? Beware IRD Liability

Posted by Scott T. Ditman, CPA/PFS on May 14, 2018 9:24:11 AM

Most people are genuinely appreciative of inheritances. But sometimes it may be too good to be true. While inherited property is typically tax-free to the recipient, this isn’t the case with an asset that’s considered income in respect of a decedent (IRD). If you inherit previously untaxed property, such as an IRA or other retirement account, the resulting IRD can produce significant income tax liability.

What is IRD?

IRD is income that the deceased was entitled to, but hadn’t yet received, at the time of his or her death.  It is included in the deceased’s estate for estate tax purposes, but not reported on his or her final income tax return, which includes only income received before death.

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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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