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FEATURED CONTENT
Some of What You Need to Know to Do 1041 Right Because Nobody Knows Everything
There was a recent IRS memo from an associate chief counsel that should be shocking but actually isn’t. Promoters have for many years been hawking a “copyrighted non-grantor irrevocable complex discretionary spendthrift trust,” which purported to avoid capital gains tax. You could learn about it on TikTok. It “worked” by citing Section 643(a)(3), which excludes capital gains allocable to corpus from distributable net income. You and I both know that DNI is not taxable income, but not everybody who learns the tax law from TikTok has caught onto that subtle point yet. Although I have never encountered anything as egregious as the “copyrighted, etc, etc, trust” I have seen a lot of problems with trusts over the years (and partnerships and SALT – don’t get me started). Much of it has to do with working under a lot of pressure. Often, the things that are wrong end up not mattering all that much, but I get a little frightened, because maybe one of these days the IRS is going to start getting its act back together. If it does, I think things may be a little shocking to practitioners who have grown up in an environment where enforcement has been progressively gutted.
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CURRENT EDITION
When Your Client’s World Is Bigger Than the U.S.
A lot of client meetings still start with the same assumptions: W-2 in a U.S. state, mortgage nearby, a 401(k), maybe some RSUs, and a college-savings plan. Yet many of those “simple” clients now own an apartment in another country, freelance for a foreign company, or have parents wiring money from overseas. The tax code does not see those details as background color; it treats them as organizing facts. This is where citizenship, residency, and domicile quietly step onto center stage. For planners, the challenge is not memorizing every cross-border rule. It is knowing when a client is no longer “just domestic” and shifting your planning framework before you stumble into penalties, double taxation, or blown opportunities.
Are You Committing Filing Status Malpractice?
Consider this article your periodic reminder that, for married taxpayers, filing jointly is an election and not the default (and certainly not the only) filing status option. It is important in a busy practice to remember to offer this option to clients who may benefit from filing separately, even if they don’t ask.
Syndicated Easements: Fresh IRS Offer and the Perils of Post-BBA Gamesmanship
The IRS has issued a statement about a new settlement offer that is going out for conservation and historic preservation easement disputes. It is similar to previous offers, but there is one big difference. The partnership will not have to make a payment at the time that it accepts the offer. Other than that, it is similar to the deal offered in 2020. Taxpayers get to deduct what they are out-of-pocket as an ordinary deduction and are subject to a 10% penalty. In general, the out-of-pocket donation might be around 20% to 25% of the claimed charitable deduction. The Tax Court, on average, has been allowing 6%, although results vary. There is usually a 40% penalty in the decided cases.
SIMPLIFIED TAX STRATEGIES &
PRACTICAL IMPLEMENTATION
Think Outside the Tax Box provides tax reduction strategies along with practical
implementation advice in order to reduce your clients’ federal tax bill with ease.
