American Taxpayer Relief Act 2012

The American Taxpayer Relief Act of 2012 makes permanent many otherwise expiring tax provisions. The following is my summary of what I believe to be relevant provisions: Ordinary income above a certain threshold is taxed at a higher rate. The thresholds are: taxable income of $400,000 (for an unmarried taxpayer), $425,000 (for a head of…

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The ‘Fiscal Cliff’ and Your Tax Obligations

Our esteemed President has proven to me to be extraordinarily disingenuous with his statements about the middle class and their purported tax obligations as pretty much everyone’s taxes will go up in 2013 as a direct result of the cumulative efforts of our ‘elected officials’ over the last few days.  Please don’t get me wrong…

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Gift Tax on Transferred Real Estate

The person or entity transferring a property has a capital gain to the extent that the amount realized exceeds the adjusted basis of the property. However according to Reg § 1.1001-1(e) no loss is allowed on a transfer that is part sale and part gift, if the amount received is less than the adjusted basis. For…

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Tax Treatment of Charitably Donated Artwork

Please refer to IRC 170 as well as Publication 526, Charitable Contributions (PDF), Publication 561, Determining the Value of Donated Property (PDF), and Publication 1771, Charitable Contributions Substantiation and Disclosure Requirements (PDF) for detailed information on charitable contributions. This is what I’ve learned about issues involving charitable contributions of artwork that tax examiners focus on: 1. The charitable contribution deduction for artwork by Art…

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IRS Statistics of Sole Proprietor Income

Approximately 22.7 million individual income tax returns reported non-farm sole proprietorship profits of $244.8 billion for tax year 2009 according to the recently released Statistics of Income Quarterly Report.  Check it out here -> Summer 2011 Some other points worth noting in my opinion include: 1. For tax year 2008, almost 67,000 foreign-controlled domestic corporations…

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Surviving Spouse Estate & Gift Tax Exclusion

IRS Notice 2011-82 makes available the ability for taxpayers to pass along their unused estate & gift tax exclusion amounts to their surviving spouse if an estate tax return is filed. This new portability election allows estates of married taxpayers to pass along the unused part of their exclusion amount ($5 million cap in 2011) to…

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Simple Trusts – Basic Observations

For tax purposes a Simple Trust requires that all income generated by the trust be distributed each year to the trust’s beneficiaries.  Even if a trust distributes all its income every year this alone does not necessarily make it a simple trust though. Understanding the trust document is important.  If all income is not distributed…

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Sale Leaseback

From a tax perspective the fundamental issue is whether a legitimate business purpose exists for the formation of a distinct entity to do a sale leaseback. If one exists and this is pursued all elements of the transaction should meet an arms length standard and be at fair market value. For a sale-leaseback, the business…

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Estate Tax Planning Tips for 2011

The 2010 Tax Act extends to December 31, 2012, the income, estate, gift and generation-skipping tax provisions enacted during the administration of President George W. Bush (“EGTRRA”). For the two-year period beginning January 1, 2011, it reinstates the unified federal estate, gift and GST exemption, sets the exemption at $5 million and sets the tax…

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