California Society of CPAs / Estate Planning / CalCPA Discussion Forum

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Banwokard — Mon, 07 May 2012 05:07:20 GMT

You must concern a party involve in this business .Don't take any decision without any concern or suggestions from known person.Must read all legal documents and standard procedure from some lawyer.

Will not having 4G LTE keep T-Mobile from an iPhone 5?

Graham — Sun, 11 Mar 2012 18:29:05 GMT

Will not having 4G LTE keep T-Mobile from an iPhone 5?
Now that the "new" iPad has 4G LTE it's almost certain that the iPhone 5 will have it also. It was assumed that there would be LTE iPads for AT&T and Verizon, as well as a WiMax 4G one for Sprint. However, Sprint isn't getting the iPad, and it appears to be because it doesn't yet have LTE. T-Mobile and Sprint SHOULD both have LTE by 2013. Will they both miss out on the iPhone 5? Apple would have a hard time shoving 3 different 4G antennas in one iPad.

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QTIP Election - revoke?

Michele Day — Mon, 28 Jan 2008 13:48:03 GMT

Can a QTIP election be revoked?

If so, how can one check to confirm it has been done?

Thanks.

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Interest & Penalties

StumpedCPA — Thu, 22 Apr 2010 15:22:25 GMT

Our office extended a 706 filing for the first to die and filed the extension Form 4768 without checking the box at Part III as we did not intend to pay tax with the 706 of the first to die. The survivor died subsequent to our extension and we our now compelled to file the a taxable return for the first to die.

My questions is whether or not the payment made with the first to die's 706 will be subject to late payment penalties or interest. Can anyone help with this?

Thank you in advance!

Gift with potential debt in excess of basis

fjicpa — Thu, 15 Dec 2011 12:34:00 GMT

I have a client that wants to gift interest in 3 pieces of real property to one
of her sons before the end of the year.

On one of the properties there is debt in excess of basis. In the aggregate
there is not debt in excess of basis.

Do I have to report income on the mom's return for this one property or can I
look at the aggregate of all 3 properties?

I've looked and cannot find a definite answer on this. Any citation would be
appreciated.

National Tax Training School

Tiffany Pillsbury — Fri, 08 Feb 2008 15:02:32 GMT

Has anyone heard of National Tax Traninig School or took course(s) from this school? If so, would you suggest this school to a friend?

Thank you so much in advance for your reply to this message.

Tiffany

Cost Basis of Old Stock

StevoSanDiego — Mon, 02 May 2011 16:33:48 GMT

Does anyone know of a source on the Web to find the cost basis of an old stock.

Foundation has a sale in 2010. The stock was acquired in 1974. the original companies have merged with other companies over the years. Need to determine the cost basis.

Letter for gift of partnership interests

fjicpa — Thu, 22 Dec 2011 11:42:09 GMT

I have a client that wants to gift interests in a couple of partnerships to her son. Does anyone have a sample of a letter from the mom to the son that I can draft to document the gift intention?

If so, please post as a reply.

This was also posted on the new estate planning forum (looks like people are still using this one though).

Qualified dividends - income or principal?

HWilliams — Sat, 26 Feb 2011 10:29:33 GMT

I have a California client who is the surviving spouse and income beneficary of a Credit Shelter Trust. The terms provide that she is to be paid the "net income" of the trust at least quarterly, which is pretty typical. I understand that capital gains are "principal" to a trust and are not available to the income beneficary of the trust. I presume this to be true with respect to "capital gain distrubtions" from mutual funds but what about the "qualifying" portion of dividends from a mutual fund? I know that "qualifying dividends" receive preferential income tax treatment but are they "income" or "principal" under the Uniform Principal and Income Principal Act? I guess to make a long story short.....can the "qualifying dividends" be distributed to the income beneficary as "income" versus "principal"?

Thanks for your help,

Hayden Williams, CPA

living trust as LLC member

Allmon — Wed, 15 Jul 2009 13:46:09 GMT

my experience is that several of our married clients who have LLCs want them to be two member so that the LLC files its own returns (to keep details off of the personal returns).
in the past I have shown the owners as husband and wife as trustees- and use two k-1s. i have never had this questioned by any taxing authority (no surprise there, since they do not understand trusts of any type!).
but, i just had an attorney tell me that this is not correct- his solution was to make .10% as joint tenancy and the rest as the living trust (so that there would be two partners).
guess i do not see the downside- worst case, can not imagine IRS getting upset that we filed a return that we did not need to file !!

is this attorney being too picky?
anyone have other solutions?

Step up on gifted property

Mary Kay Foss — Mon, 05 Mar 2007 20:18:07 GMT

A client put her brother's name on her residential property as joint tenants so that he could obtain a loan in 2001. He passed away unexpectedly in 2003. Does she get a step up in basis in the property?

Isn't there a provision that covers *death bed* transfers to a terminally ill person to create a step up in basis? Does that provision apply under these circumstances?

Incidently he made no contribution to the property but did make payments on his loan secured by the property and the property was subject to other creditors of his while he was alive.

PRESS RELEASE-IRS NEGLIGENCE

echoesofsteve — Tue, 28 Sep 2010 18:43:11 GMT

Steven L. Green
Certified Public Accountant
2333 Camino del Rio South
Suite 350
San Diego, CA 92108

619 – 294 – 9900 (work)
619 – 294-9933 (facsimile)

sgreen@bestcocpas.com

FOR IMMEDIATE RELEASE

As a Certified Public Accountant since 1987, I have become alarmed about recent experiences with the Internal Revenue Service.

In fairness, I have seen times when they were inefficient or made errors but generally service was adequate. I have been advised that there are new hires in substantial numbers but it appears that they have a lack of training and are under a great deal of stress.

Here is an example of what I did today: I spent a good deal of time attempting to make logic of an IRS communication that made no sense whatsoever.

These are the errors:

1. It referred to the wrong income tax form;

2. It was nonspecific in nature and referred to a half dozen possible penalties that may have been assessed and none of these applied. In fact, had their letter been reviewed internally (which would be called "quality control"), it would have been obvious that there was no tax due on which to base a late payment penalty. 　

3. It referred to a previous notice which simply said that they received our correspondence and it would take time, perhaps 45 days, to respond. The new notice referred back to that notice and asked us to ignore it, as it had been sent in error. All right, I’ll give them the benefit of the doubt, it was incorrect only in the sense that it took much longer than 45 days to receive this second nonsensical letter.

4. And worst of all, it appeared that the contents of the original response I sent were perhaps not even read. We only received confirmation that they had received our letter, there was no evidence whatsoever that they read the content or understood it. So they continued to bill the original amount and added some interest to increase our frustration.

Lastly, I have sent many responses, for many taxpayers due to the Internal Revenue Service errors and/or incompetence. In one case, a quarter – inch package was sent certified mail return receipt requested, and in fact we received confirmation of receipt; I had also faxed it and received confirmation of the fax. This was after responding to their first notice and they had only corrected one-half of their errors. The Service claimed they never received it.
The case was being handled by an individually named agent and all of my responses were directed to that agent.
If we give them the benefit of the doubt, they only managed to lose two identical packages sent to an individual. If we’re cynical about it, perhaps they ended up in circular files due to the over-stressed and poorly trained employees. I am deeply hoping it is only the former but even in that case, the Internal Revenue Service's errors are so egregious as to be terribly frustrating, costly, and time consuming.

As many of these are small businesses and many taxpayers are having serious financial difficulties, I am forced to discount the charges so they can afford it. They are spending money that is going down the drain and both their production and mine are forced down. Guess what? In a depressed economy when production goes down, wealth goes down, tax revenues go down, and people end up in even more dire financial difficulties.

There are many things that are happening to our beloved United States that are disheartening and quite disturbing.　

Very truly yours,

Steven L. Green, CPA

The views expressed are solely those of Steven L. Green, CPA as an individual.They are not necessarily the views of any firms,clients, businesses, professional organizations or individuals that he may be associated with.

Steve Green, CPA graduated with a Bachelors Degree in Accounting from San Diego State University in 1984, served as an bookkeeper for a prominent former data processing Company based in San Diego, was licensed to practice as a Certified Public Accountant in California in 1987and has been in public accounting since 1985.

Unfunded Bypass Trust

gilly05 — Sat, 28 Aug 2010 23:51:37 GMT

I am a new attorney and starting out in the area of estate planning... and I could use your help!

I have a client (widower) who wanted to restate his trust, which I have no problem doing. However, I have now discovered that his first trust, as most do, established that he was supposed to create two subtrusts: survivor's trust and decedent trust. However, he didn't do that when his wife passed in 2004.

If his gross estate is sitting at $1.5 million, the estate would get hit with about $275,000 worth of estate taxes if he passes in 2011. I am sure he'd like to avoid that. My question is, can we re-allocate the assets at this point to cure the bypass trust? If so, would that involve dividing the assets, obtaining a tax ID, and submitting back taxes? He's already reported the income as part of his taxes, so I cannot imagine any penalties on that end (correct me if I'm wrong). But, the valuation would be an issue.

If valuation is the only issue, should I just use the necessary amount of financial accounts to fund the bypass trust, since they have end of year values (as opposed to the primary residence, which did not get a formal appraisal in that year)?

Is this not recommended? If it's not, what is the best approach?

I am thankful for any recommendations!
Kyle

Loss on sale of a residence after death

kruspodin — Wed, 05 Dec 2007 15:43:13 GMT

We are preparing form 1041 for a Decedent's Estate. The return shows a sale of what previously was the deceased individual's principal residence. The property was sold shortly after death and after the 706 was filed. It happens that the property was sold for the same value as what was reported on form 706 except that there were $35,000 of commissions paid on sale. Therefore, there is a loss on sale of approx. $35,000. My question is whether this loss of $35,000 can be reported as investment loss and deducted at $3,000 per year on Sch. D since the property no longer serves as a personal residence (the taxpayer is deceased). The other option is to deduct the $35,000 commission fee as professional fees on form 1041. Of course, the third (undesirable) option is to treat the loss on sale as personal non-deductible loss.

I appreciate your help.

Mark Kruspodin

Transactions occuring on date of death

Karen Ginsburg — Mon, 26 Apr 2010 09:12:00 GMT

I am working on an estate that had a significant transaction (sale with a gain) which occurred on the date of death.

Does this transaction get reported on the decedent's final Form 1040 or does it get reported on the administrative trust's Form 1041?

Do NOT post to this Forum-NEW CalCPA Estate Planning Forum: http://calcpaestateplanning.ning.com/

Forum Administrator — Mon, 29 Mar 2010 10:54:27 GMT

Please post your questions/comments to the new CalCPA Estate Planning Forum: http://calcpaestateplanning.ning.com/

Thank you
CalCPA

irrevocable living trust - state tax filing

moncul — Sat, 27 Mar 2010 11:27:40 GMT

An irrevocable living trust was established in the state of NY. The grantor is still alive, lives in NY, the sole beneficiary is still alive, and lives in NY. The trustee/fiduciary lives in CA.

The trust is not paying anything out, just sitting in stocks/bonds/etc making money, so taxes need to be paid. Of course, the trustee is making all the financial decisions as to how/where to invest the money.

Where should state income tax form be filed? In NY or CA?

Below market stock repurchase option involving family members

sean39 — Tue, 16 Feb 2010 18:08:07 GMT

A father who owns 50% of a business (his brother owns the other 50%) gifts a minority stock position to his son. A buy-sell agreement states that the stock may not be transferred outside the family (including spouses), and if the son predeceases the father or gets divorced the company may repurchase the stock for $1.

1. Does IRC 2703 apply to the initial gift to prevent the father from discounting the gift for the restrictions on transfer and repurchase option? Is it possible that the exception to 2703 would apply since the primary intent was to keep the stock in the family rather than to avoid taxes?

2. Upon a triggering event, are there any tax consequences of the son (or his estate) selling stock back to the company for $1? For instance, could this be considered a gift back to the shareholders equal to the fair market value of the stock less $1? Would the son (or his estate) report a capital loss on the sale? Would there be any gain recognized by the other shareholders?

3. If the repurchase has undesirable tax consequences, is it possible to design the restrictions to achieve a better result? For example, what if the restrictions on transfer and repurchase applied equally to all shareholders rather than just the son, and were implemented via stock legends and provisions of the bylaws and/or articles?

CRT owned annuity distributions when no income in annuity

dharriger — Tue, 16 Feb 2010 09:44:50 GMT

Client has CRT requiring untrust payout of 7% per year. Only assets owned by the CRT consit of 3 annuities that have suffered losses during the past two years. Distributions have been taken from the annuities each year.

Since annuity has no income buildup inside, are these distributions considered return of capital? Under IRC sec. 72, all distributions of an annuity to a "non-natural person" (trust) are considered ordinary income.

Question: Since there is no income in the annuity, would these be considered return or principal, and would distributions of unitrust amount to beneficiary be considered as having been made from Corpus and therefore would be non-taxable?

Please advise

Filing first trust tax return

Rob — Wed, 06 Jan 2010 14:54:20 GMT

Decedent died in Nov 2008. His will created a testamentary trust which was not funded until Aug of 2009. What date should be put on the first 1041 as "Date entity created"?

Should the first return be for 2009 with a created date of Aug 09?

Or should I file a 2009 return with a created date of Nov 08?

Final year of estate

HWilliams — Thu, 17 Dec 2009 09:36:32 GMT

I have an estate as follows:

Gross 5,644,562

Deductions (272,464)

Net 5,372,098

To surviving spouse 3,491,291

To credit trust 1,430,087

The credit trust is being funded now with a note payable effective date-of-death. Does this close the estate or is the estate still open until the note is paid? If it does close the estate is it closed as of date-of-death or on the currrent execution date of the note?

PASS THROUGH OF 1231 LOSS TO ESTATE BENEFICIARIES

Rob — Tue, 24 Nov 2009 09:03:45 GMT

Filing 2nd and final 1041. After decedent's home did not sell, executors rented it out. Two of four siblings are executors and all four siblings are equal beneficiaries. It sold this year with a 1231 loss. But it was sold to sibling of executors(at probably close to market value which is less than DOD value). I understand loss cannot be passed out to beneficiaries because it was sold to a related party, but can be used as a basis adjustment for purchaser.

This was also part of a 1031 exchange, but I don't think that has any tax consequences to the estate, because the estate received cash.

I'm not sure how to handle the loss on the 1041 since it is not being passed out and the software will want to allocate it. Also not sure how to notify purchaser of the amount of loss to be used as basis adjustment.

Thanks.

Conservatorship for married couple

Bill — Tue, 13 Oct 2009 14:40:48 GMT

I am helping with a report to the court of a conservator. Daughter is conservator for both her parents. There is one bank account, in the name of all three, the two parents and the daughter.

I'm wondering if we can make one report to the court for the combined (community) assets of both elderly parents, or if we have to split this into two.

And since it's community property, wouldn't the split be 50-50, even though H receives more Soc Security and retirement than W does.

TIA
Bill Downs, CPA
Sherman Oaks, CA

CRUT payout, no income and illiquid assets

Linda Williams — Tue, 01 Dec 2009 10:55:56 GMT

Client has set up a CRUT that requires an annual payout of 7%. The document says that the payout should first come from income and then principal. The initial cash from sale of property was invested in construction loans, no payments are being made on the loans, and the majority may become worthless. What do I tell the client when he wants to know if he needs to may the annual payout?

Oops, my post was generated twice

Linda Williams — Tue, 01 Dec 2009 10:57:38 GMT

sorry for the duplication, Linda

Unitrust distribution, when no income

Linda Williams — Tue, 24 Nov 2009 13:39:48 GMT

The only assets of the CRUT are short term notes for real estate. It has always been hard to make the unitrust amount with the interest collected. Now most of the notes are not good and no income is generated.

The unitrust amount is calculated as a % of the FMV. The trust instructions direct that the installments should be paid from income then from principal. The document addresses the income issue (the lesser of the trust income for the year or the calculated unitrust amount) for the Initial Term only. There is no language in the trust that directs the trustee if there is no income, and principal that is difficult to distribute.

Please advise, thanks

Which schedule on 706 do you report real property titled "Community property with right of survivorship"?

Mike Hagedorn — Fri, 13 Nov 2009 09:37:10 GMT

I know what it is, but I've never had to report it before on a 706. Even though it isn't subject to probate, and is similar to jointly owned property (except both halves get stepped up), it seems to me that Schedule A is the logical schedule.

Does anybody know?

Can a surviving spouse disclaim property that is owned by the survivor in his survivor's trust?

Mike Hagedorn — Wed, 04 Nov 2009 16:38:47 GMT

I have a situation whereby I may need to amend a 706 for the first spouse to die. The trust had 2.8 million of assets in it, including a 2 million dollar home. The surviving spouse also had 3.5 million of retirement accounts, that are in his name.

The trust document has a provision for three trusts to be formed. Since the decedent died in 2008 and one half of the trust estate is 1.4 million, there are not enough assets to fund a QTIP Trust. The surviving spouse wanted to max the credit trust out if possible. We may have misinterpreted the trust document in trying to fully fund the credit trust.

The Trust Document has the following clause:

Right of Surviving Spouse to Disclaim Part of Survivor's Survivor's Trust - If the Surviving Spouse effectively disclaims his or her entire beneficial interest in the income, or in the principal, or in both the income and principal of the assets of the Deceased Spouse transferred to the Survivor's Trust, or an undivided portion of such interest or interests, then, to the extent of the disclaimer, the property subject to such interest or interests, or such undivided portion thereof, shall become part of the Tax Free Trust (credit trust) and shall be disposed of in accordance with its provisions. The words "effectively disclaims", as used in this Paragraph shall mean the making of a disclaimer which meets and satisfies the requirements of Internal Revenue Code Section 2518, as amended.

We had the surviving spouse disclaim part of his community property assets allocated to the survivor's trust.

An attorney who was going to transfer title of the house over to the credit trust, says she doesn't believe a survivor can disclaim his or her own trust assets. She went on to say that she consulted four other tax attorneys, who believed the same.

I know in a CPE seminar several years ago that the attorney said a survivor can disclaim their own property in a survivor's trust if it is within nine months of the date of death of the deceased spouse. I'm not talking about disclaiming income that may be coming from one of the decedent's trusts or principal from a 5 and 5 provision, but outright assets in the survivor's trust.

I'm having difficulty in finding anything in my research that backs my point up.

I did however find the following passage from a book titled "How to Settle Your Living Trust" by Henry W. Abts III.

The following excerpt is from his book:

Filling the Decedent's B Sub-Trust

I am often asked if the surviving spouse can increase the asset value in the decedent's B sub-trust (e.g. by adding some of the surviving spouse's assets to the decedent's sub-trust) in order to fully utilize the decedent's federal estate tax exemption. The quick answer is no, but let me explain an exception to this pat answer.

For example, let's assume an estate of $800,000. Let's further assume that the assets are all marital assets (i.e. community property); one-half of the assets ($400,000) would flow into the survivor's A sub-trust and the other half of the assets would flow into the decedent's B sub-trust.

As you can see, the normal allocation (half of the assets going into each sub-trust) does not fully utilize the decedent's federal estate tax exemption of $600,000. Unfortunately, a surviving spouse may not gift assets to a decedent spouse. However, the surviving spouse may disclaim a part of the survivor's estate, as described in the next section. In this manner, and in this manner only, the surviving spouse could transfer assets from the survivor's A sub-trust to the decedent's B sub-trust. Remember, however, that this arrangement is best suited for couples who are not involved in a second marriage.

Disclaiming an Interest in Assets

Upon the death of the first spouse, the surviving spouse may disclaim an interest in part of his or her assets and pass the disclaimed assets to the decedent's B sub-trust and/or C sub-trust. The disclaimer must be made within nine months from the date of death of the first spouse, and it must be made before the disclaimant receives any income whatsoever from the asset to be disclaimed. The surviving spouse, as the trustee and beneficiary of the decedent's B sub-trust, retains full rights to use or sell his or her disclaimed assets.

http://books.google.com/books?id=2a-I_6eoblEC&pg=PA223&lpg=PA223&dq=disclaim+survivor's+assets&source=bl&ots=eaT-uKETp3&sig=MhQu0e4d46S8V37rgyDyGl3LUXU&hl=en&ei=2-PxSvvoBo2qtgOoyYX4AQ&sa=X&oi=book_result&ct=result&resnum=4&ved=0CBEQ6AEwAw#v=onepage&q=disclaim%20survivor's%20assets&f=false

We disclaimed part of the survivor's assets and funded the 2 million dollar home to the credit trust. Of course there was no income received from this asset within the nine month period after death.

Is the author wrong about this, or am I misreading what he wrote? There are no references or footnotes listed in the passage to give back up to what he has stated.

Any help would be appreciated.

Property tax reassessment for a somewhat complicated situation

Mike Hagedorn — Thu, 15 Oct 2009 09:56:54 GMT

Please bear with me as I give you the facts, because there are several events that took place.

1. Taxpayer and spouse created a living trust and wife died in 2008.

2. Taxpayer had a house worth 2 million plus about 800,000 in other assets in the living trust.

3. Taxpayer also has retirement accounts worth 3.5 million in his name. The named beneficiary on the retirement accounts is the living trust. None of these retirement accounts are currently in the living trust.

4. Ordinarily the bypass trust can not be funded for the full 2 million dollar amount because the decedent's community property share of the trust estate was 1.4 million. However, the trust has a provision whereby any disclaimed property is to be added to the bypass trust.

5. We went ahead and prepared the 706. The surviving spouse made a valid disclaimer and we transferred the 2 million dollar house to the bypass trust.

We would now like for the survivor's trust to buy half of the house back and for the bypass trust to carry a demand note at a fair market interest rate. The note would be secured so that the surviving spouse can take the interest deduction. The bypass trust would recognize the interest income, but would distribute it back to the taxpayer because it is a simple trust. Only a million or half of the house is being sold, because you can only deduct mortage interest on a loan up to one million dollars.

The reason we would like to do this is in case the real estate market should rebound, and the surviving spouse should sell the house some day. we would like to be able to take advantage of the Section 121 deduction for the portion of the house owned by the survivor's trust.

The big question in all of this is whether or not the house can be reassessed by the county tax assessor, on the sale of 50% of the house back to the survivor's trust?

I can't seem to reach the right person at the assessor's office.

Interest due on amended 706

nteplin — Fri, 09 Oct 2009 10:08:27 GMT

I am amending a 706 and there is a significant tax due. I don't know how to compute the interest since this would be a deduction from the amended return. Will the IRS bill the estate a net interest (like a 6166 rate)?
Neal Teplin

Schedule R on form 706

Susan E. Cohen — Fri, 25 Sep 2009 09:56:08 GMT

Skip persons share of estate on 706 Part 4, page 2 is 495,000 and there is no GST tax. The schedule R, Part 1 Line 4 shows 505,000 which is the share of the assets without regard to the expenses reported on J,K,L. I am wondering if I have to work around the program or if it is correct to use the share of the gross estate without regarding to expenses when preparing the schedule R. Since there is no GST tax it is not a tax issue, I would just like to understand the proper way to report this for the future.

Thank you for your help.

Susan E. Cohen

scohen@sscllp.com

Loss on sale of residence

HWilliams — Mon, 07 Sep 2009 09:43:54 GMT

I have a first-to-die estate with a Section 645 Election in place for a continuing revocable trust. I understand the surviving spouse's 1/2 is still considered a revocable, grantor trust. The surviving spouse is a resident of an adult care facility. I think that I am correct that the surviving spouse's share is reported on his Form 1040. Does the surviving spouse's share of the loss on a residence sold by the trust estate get reported on the surviving spouse's Form 1040 as a non-deductible capital loss?

Sec 121 for trust property

cpabob — Fri, 11 Sep 2009 13:42:24 GMT

Mother sets up a living trust, then dies, leaving her house to her children, X, Y & Z. There is no debt on the property at any time. X is the successor trustee. Z has lived with mother for the past 35 years and continues to live alone in the residence after mother's death. The house remains in mother's trust for 5 years (while unrelated disputes between X, Y & Z were being settled), and then sold.The proceeds are distributed equally between X, Y & Z. There is total gain of (using stepped up basis) of $150K. The trustee issues K-1's to each beneficiary reporting their respective share of the gain.

Z wants to claim the Sec 121 exclusion for gain on sale of principal residence becasue he lived in the residence for 2 of the past 5 years. He is arguing that even though he is not on title that his beneficial ownership of 1/3rd of the residence entitles him to receive the exclusion.

Rev Rul 85-45 indicates that a sole beneficiary is treated as the owner and would therefore qualify for the Sec 121 exclusion, but it does not address a split-ownership scenario. What do you think?

Bob Abelson, CPA

Torrance, CA

Amended 706

HWilliams — Mon, 07 Sep 2009 09:34:39 GMT

This is just a quick question. Do you file just the return when amending Form 706 or do you need to attach all of the supporting documents (i.e. appraisals, etc.) sent with the original return?

Personal expenses paid by an FLP

kruspodin — Thu, 06 Aug 2009 10:44:16 GMT

I have a new client who had his estate planning done by an estate attorney who is now deceased. The attorney set up a Nevada FLP for my client and told the client to transfer all of their investments (mostly brokerage accounts) into the FLP. According to my client, the attorney also told them to set up a checking account in the name of the FLP and pay all of their personal expenses from this checking account in the name of the FLP. Thus, all personal expenses (deductible and non-deductible) get paid from this account. Also, the W-2 income from my client's 100 percent owned professional corporation gets deposited directly into the FLP's the same checking account. I understand the validity of transferring the investment accounts into an FLP but I am unclear about the reasoning of paying ongoing personal expenses from the FLP account and depositing regular W-2 earnings into the FLP. I would think that personal expenses and earned income should be handled by a personal bank account rather than an FLP account. I am wondering if my client misunderstood their estate attorney. Does anyone have an opinion about whether personal expenses should be paid from a personal account or if there is a reason to pay them from an FLP account?

Thank you for your help.

Mark Kruspodin, CPA

Does a GRAT file its own tax return?

title26usc — Thu, 23 Jul 2009 23:36:07 GMT

Since a GRAT by definition is a grantor trust, is there any reason to file a separate GRAT return? The GRAT owns appreciating S Corp stock. Stock was distributed this year in order to make its annuity payment to the grantor. Thank you in advance for your help.

Court Accounting Preparation Software...Does it exist?

Susan Woods — Wed, 24 Jun 2009 15:12:42 GMT

I've just gotten back into preparation of court accountings after many years. I find that there are not many options for court accounting software. Every program I used to use seems to have disappeared. Does anyone have a program they use for the preparation of court accountings?

Gift Tax - Community Propert

hlcpa — Mon, 27 Jul 2009 15:47:38 GMT

Grandparents gift $500,000 to grandchild and his wife to buy house in 2008. Grandmother has been in bad health for years. I was going to file only one 709 for the grandfather, and have it so that the grandmother gifted $12,000 each to kids, and grandfather gifted 476,000, of which $452,000 would be subject to gift tax. (This would be the first such gift so no tax due)

I thought this would be wise as then if grandmother died, a full $3.5M could go to bypass trust. If the gift was split, then this amount would have to be reduced by $226,000. This assumes that in the future the exemption amount will go up above $3.5M, for when Grandfather dies.

Is this thinking correct, and can this be done in light of CA community property rules.Thank you very much

Intentionally Defective Grantor Trusts - Initial sale

Mike Hagedorn — Thu, 16 Jul 2009 11:25:02 GMT

I fully understand IDGT's and how interest and capital gains are not picked up from a note used by an IDGT to purchase a partnership interest or closely held business interest.

My question of the board is regarding the initial year of the IDGT, when the IDGT makes the initial purchase from the taxpayer or the taxpayer's inter-vivos trust. Do you make any type of notation on the taxpayer's individual return for this sale, or is nothing done? Once again, I realize no gain or loss would be recognized on the sale, but I want to know if you need to note the sale in the tax return?