The income taxation of life insurance death benefits seems fairly simple initially. Many people know the general rule that death benefits are not subject to income tax. However, there are exceptions that can apply which will cause the beneficiary to owe income tax on the receipt of death benefits. This article describes certain of these…
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Parents are often in a position to help their children take advantage of business opportunities. A parent’s connections, business knowledge, expertise, and other intangibles acquired over may years of work can be used to benefit a child starting a career or business. Likewise, a parent may advance funds to a child to start or acquire…
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A couple of recent cases illustrate situations where moving assets from one state to another may have the effect of shielding those assets from creditors. In both of the cases, judgment debtors moved assets to another state and succeeded in avoiding enforcement of the judgment. In re Cleopatra Cameron Gift Trust, a California Judgment Against…
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The Tax Court has just ruled against a CPA in a case involving income tax, self-employment tax, deductions for personal expenses, fraud, and other items. The CPA at issue, Al Benavides, had previously been criminally convicted for assisting a client in evading income tax liabilities. Although there are a number of substantive issues in the…
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All too often, we see cases where failure to properly document a transaction or keep good records is a taxpayer’s undoing. A case recently handed down by the Tax Court illustrates how that can happen. In Moore v. Commissioner the taxpayer sought to expand his tax preparation business. To finance that expansion, Mr. Moore was able…
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By holding qualified small business stock (“QSBS”), noncorporate shareholders of qualifying C corporations can sell their stock tax free after a five-year holding period. Tax benefits associated with QSBS are nothing new. However, until recently, planning with QSBS has been neglected. The Tax Cuts and Jobs Act (“TCJA”) breathed new life into the potential benefits…
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Offshore and domestic asset protection trusts (“APT”) have been around for a while. Currently, there are seventeen states that allow a person to contribute assets to trust for their own benefit (i.e. a self-settled trust) and exempt those assets from claims of their own creditors subject to certain statutes of limitations and exception creditors. Other than…
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The Tax Court’s denial of a $33 million charitable deduction was affirmed by the D.C. Circuit Court of Appeals in a decision handed down on May 24, 2019. While the purported dollar value of the donation makes this case stand out, it involves a number of important issues including gift substantiation, substantial compliance, valuation, and…
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After the Tax Cuts and Jobs Act which came into effect in 2018, charitable deduction planning has changed. This is a result of a handful of changes, but the primary changes for purposes of this discussion relate to a doubling of the standard exemption, elimination of most itemized deductions, and reduction in individual income tax…
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Are assets transferred by your parents into a trust for your benefit subject to your tax liabilities? In general, no, provided the trust has the proper spendthrift language. Longstanding common law has recognized spendthrift clauses in trusts which restrain voluntary alienation of trust assets, thereby preventing a beneficiary’s creditors from reaching trust assets to satisfy…
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