DONALD TRUMP IS NOW PRESIDENT-ELECT - SO WE LOOK FIRST AT HIS TAX PLAN ANNOUNCED DURING THE CAMPAIGN!
With a Republican Congress likely backing him up all the way, the Trump Administration tax plan would (1) reduce marginal income tax rates for all individuals and businesses, (2) increase standard deduction levels, but eliminate personal exemptions, (3) cap itemized deductions, (4) repeal the Alternative Minimum Tax (AMT), (5) repeal the "Medicare" 3.8% surtax on net investment income over certain levels, (6) repeal the Federal estate tax, (7) and more changes! So let's see about these changes that may well become law in 2017 (assuming Congress cooperates, and dare they not?);
INCOME TAX -
1 - reduce to 3 ordinary income tax rates - 12%, 25% and 33%; keep capital gains at -0-, 15% and 20%.
2 - increases of the standard deduction: from $6,300 to $15,000 for single filers, and from $12,600 to $30,000 for married couple filers; PLUS eliminate personal exemptions.
3 - cap itemized deductions: at $100,000 for single filers, and at $200,000 for married couple filers
4 - repeal the AMT (individual and corporate) and the 3.8% surtax on net investment income over certain levels.
5 - tax "carried interest" income at ordinary income tax rates.
TRANSFER TAXES (Estate, Gift and GST taxes) -
1 - repeal the estate, gift and GST taxes.
2 - establishing a carry-over income tax basis regime for appreciated value assets at death, but with an exemption of $5 million gain per decedent ($10 million for married couple).
3 - disallow an income tax deduction for contributions of appreciated value assets to a private charity established by a decedent or his/her family.
BUSINESS TAX PROPOSALS -
1 - reduce corporate income tax rate from 35% to 15% for all size businesses; but query how this will work with pass-through entities, e.g. partnerships, LLCs and S corporations.
2 - eliminate most deductions and credits for corporate tax expenditures, but keep the R&D credit.
3- impose a one-time 10% repatriation tax on corporate profits held offshore.
Note the House Tax Plan is somewhat different and changes can be expected once Congress takes up "tax reform", now expected to be early in 2017.
MORE CPE AVAILABLE FOR CPAs AND OTHER TAX PRACTITIONERS!
I am wrapping up my live webinars for CPAs and other tax practitioners for the year 2016 with seven (7) presentations of my courses for CPE Solutions, check www.cpecredit.com for the course details, descriptions and learning objectives. The November dates are November 14 (Family Wealth Succession Valuation Issues Today) and November 18 (Trusts, Pass-Through Entities & Family Wealth Planning). Then in December there are five (5) presentation dates, including December 2 (Buy-Sell & Deferred Compensation Agreement Planning), December 9 (Family Succession Planning Developments: 2012-2016), December 12 (Estate & Succession Planning for the 99%, December 16 (Trusts, Pass-Through Entities & Family Wealth Planning), and, finally, December 19 (Family Wealth Planning Valuation Issues Today). All of these courses relate to the important area of family estate and succession planning, and my readers are welcome to sign up with cpecredit for any or all of them!
AND NOW TO THE TAX COURT - ESTATE OF BEYER V. COMMISSIONER (T.C. Memo. 2016-183, issued September 29, 2016)
This is an FLP case, now there having been nearly 40 such cases since the one I tried in U.S. Tax Court, namely, Estate of Dorothy Schauerhamer v. Comm'r, T.C. Memo. 1997-242. The principal issue in the Beyer case is the application of estate tax provision IRC Sec. 2036(a). Certain lifetime transfers were made to the new FLP, Edward G. Beyer Limited Partnership (FLP), and the question was whether IRS could ignore the entity and tax the marketable securities that comprised the entity assets for estate tax purposes. Tax Court Judge Chiechi found YES, and thus another FLP plan was destroyed. Out of the nearly 40 court decisions on this issue, only about 15 have been taxpayer estate victories - and all of those wins were based on the exception to 2036(a) involving evidence of a "bona fide sale for adequate and full consideration in money or money's worth".
In my soon to-be-posted commentary on Beyer for LISI (Leimberg Information Services, Inc.), which is 14 pages in length and will appear in the LISI Estate Planning Email Newsletter, I state: "In large part, Judge Chiechi concluded that since other management arrangements had been made and would be possible (via grantor trusts, powers of attorney, and decedent's ability to make changes), the FLP was unnecessary, except to attempt estate tax avoidance." It was not helpful to the estate's position here that the FLP agreement had laid out 28 (!) "boilerplate" purposes AND the tax advisors to Mr. Beyer constantly wrote and emailed to him that the plan was designed to avoid or save estate taxes - saving taxes is not in and of itself bad, but there clearly must be a real and significant nontax purpose for setting up an FLP or any other entity. Here the court there were no such reasons!
I hope all of my readers have a wonderful holiday season, and enjoy family and friends to the fullest!