(6023,1,'2011-01-26 13:29:55','2011-01-26 13:29:55','<p style=\"text-align: justify;\">Appeals court reverses trial court decision that disallowed discounts for gifts of family limited liability company membership interests.</p>  <!--more-->  <p style=\"text-align: right;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011-appeals.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011-appeals.pdf\"><img class=\" size-full wp-image-5904\" alt=\"pdf-icon\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p><strong><span style=\"font-size: 12pt; color: black;\"> </span></strong></p> <p><strong><span style=\"text-decoration: underline;\"><span style=\"color: #3366ff;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/linton.pdf\">Linton, William A. v. U.S., (CA 9 1/21/2011)</a></span></span></strong></p> <p style=\"text-align: justify;\">The Court of Appeals for the Ninth Circuit has reversed a district court’s grant of summary judgment in favor of the government. The district court held that the donors’ transfer of real estate, cash, and securities (the bulk of which were municipal bonds) to a family limited liability company (“FLLC”) in which trusts for the donors\' children were given interests in the FLLC were not gifts of FLLC interest to the trusts, rather the transfers to these trusts were considered indirect gifts of pro rata shares of the assets transferred to the FLLC.</p> <p style=\"text-align: justify;\">Since the court of appeals reversed the district court’s finding that the property contributions to the FLLC occurred after the transfer of the FLLC interests to the children\'s trusts, the case was sent back to the district court to reexamine this issue.  Under the district court’s holding, no discount was allowable for transfer restrictions imposed by the FLLC operating agreement.  As a result of the reversal and remand, the district court will determine whether the contributions to the FLLC occurred before the transfers of the FLLC interests to the children’s trusts.  If the contributions are deemed to have occurred before the transfers, the value of the FLLC interests might be discountable for gift tax purposes.</p> <p style=\"text-align: justify;\">Transactional Facts.  On their gift tax return, donors William and Stacy Linton reported that they had made gifts of interests in an FLLC, and they claimed a 47% discount because the FLLC operating agreement imposed limitations on transfers to non-family members and gave the donors the sole authority to act for the FLLC.</p> <p style=\"text-align: justify;\">The documents evidencing the contribution of property to the FLLC, creating a trust for each child, and giving each trust a percentage interest in the FLLC were all signed and dated January 22, 2003.  However, the attorney who had prepared the documents testified that the reason the documents were all dated the same day was that a few months after the transactions were complete, when he was preparing the minute book for the FLLC, he noticed that the trust agreements and the gift documents were not dated.  The attorney subsequently filled in the date of January 22, 2003 on each document.  The attorney further testified that he later realized he had made a mistake in dating all the documents January 22, 2003, and that the intended date for the creation of the trusts and the transfers of interests in the FLLC to the trusts was January 31, 2003 (i.e., several days after the donors had contributed property to the FLLC).</p> <p style=\"text-align: justify;\">At trial, the IRS argued that no discount was allowable because the Lintons had not made gifts of FLLC interests, but had made indirect gifts of the underlying property they had contributed to the FLLC.</p> <p style=\"text-align: justify;\">The trial court agreed with the IRS, and found that the attorney’s testimony regarding the dating of the trust agreements was insufficient to prove the sequence of events the donors asserted.  The court emphasized that each trust agreement provided that it was effective upon contribution of property to the trust and that, at the time of the trust agreement’s signing, property consisting of interests in the FLLC had been transferred to the trustee.  Thus, the trial court found that the express language of the documents established that the trusts were created and the gifts were made on January 22, 2003.  Because the trusts were created and gifts of FLLC interests were made to the trusts on January 22, 2003—either before, or simultaneously with, the contribution of property to the FLLC—the trial court determined that the Lintons’ transfers enhanced the FLLC interests held by the children’s trusts, thereby constituting indirect gifts to the trusts.</p> <p style=\"text-align: justify;\">Ninth Circuit\'s View.  The Appeals Court determined that the trial court will be required to determine when the Lintons donated the FLLC interests to their children’s trusts - did they do so before they funded the FLLC (in which case the Lintons would potentially be liable for the full value of the assets conferred, as an indirect gift, to their children), or was it after they funded the FLLC (in which case the Lintons would be entitled to marketability and minority discounts on the assets transferred)?</p> <p style=\"text-align: justify;\">Recommendations.  While the Lintons may ultimately prevail, donors in these types of situations should take appropriate precautions in order to avoid being involved in subsequent litigation.  To that end, a donor should take these steps to help assure that a transfer of property to an FLLC, and a transfer of an ownership interest in the FLLC, will not be challenged as an indirect gift of the FLLC’s underlying property.</p> <p style=\"text-align: justify;\"><span style=\"text-decoration: line-through;\">1.</span>The donor should transfer property to the FLLC before other family members are given interests in the FLLC or when the other family members’ ownership interests in the FLLC are small.</p> <p style=\"text-align: justify;\">After creating and funding the FLLC, the donor should wait a reasonable period of time before making gifts of FLLC interests to the family members.</p> <p style=\"text-align: justify;\">The donor should keep meticulous records documenting the date each transaction is completed.</p> <p style=\"text-align: justify;\">Following the above steps should help donors achieve lack of control and marketability discounts for the transferred FLLC interests, while at the same time preventing the donor from being charged with indirect gifts of the full fair market value of the property transferred to the FLLC.  The same approach can be applied for transfers to family limited partnerships.</p> <p style=\"text-align: justify;\"><span style=\"color: black;\"> </span></p>','Appeals Court Reversal May Provide Discounts for Gifts of Family LLC Interests','','publish','open','open','','appeals-court-reversal-may-provide-discounts-for-gifts-of-family-llc-interests','','','2011-01-26 13:29:55','2011-01-26 13:29:55','',0,'http://www.racklaw.com/new-site/?p=6023',14,'post','',0),(6025,1,'2011-01-27 13:29:55','2011-01-27 13:29:55','<p style=\"text-align: justify;\">Health reform law effective January 1, 2011 includes added benefit of free preventive care for Medicare recipients.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011-medicare.pdf\"><img class=\" alignright size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" style=\"float: right;\" height=\"15\" width=\"15\" /></a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011-medicare.pdf\">Download PDF</a></p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: center;\" align=\"center\"><b> </b></p> <p style=\"text-align: justify;\">Health reform law effective January 1, 2011 includes added benefit of free preventive care for Medicare recipients.</p> <p style=\"text-align: justify;\">Those enrolled in Medicare should expect a decrease in their outpatient medical costs this year as the new health reform laws have waived patient cost-sharing for most preventive services covered by Medicare.</p> <p style=\"text-align: justify;\">Effective for services received on or after January 1, 2011, The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (the “Act”) provides that Medicare recipients will not be required to pay a co-pay, coinsurance or deductible to receive preventive services that are highly recommended by the U.S. Preventive Services Task Force.  Such services include the “Welcome to Medicare” medical evaluation visit, screenings for breast cancer, colon cancer, diabetes and heart disease, as well as smoking cessation counseling.</p> <p style=\"text-align: justify;\">Medicare Part B recipients will also receive a free annual wellness visit, including an update of the patient’s medical history, new prescriptions, if necessary, cognitive screening and the implementation of a 5-10 year screening schedule.</p> <p style=\"text-align: justify;\">“Preventing diseases that can be prevented, and detecting others at earlier, more treatable stages, are among the keystones for transforming Medicare,” said Jonathan Blum, CMS deputy administrator and director of the Center for Medicare.  “By eliminating the beneficiary’s out-of-pocket costs for most preventive services, we are removing a barrier to access and paving the way for improved health for seniors and people with disabilities who rely on Medicare for their health coverage.”</p> <p style=\"text-align: center;\" align=\"center\"><b>Partial List of Services Covered by Original Medicare Without a</b></p> <p style=\"text-align: center;\" align=\"center\"><b>Coinsurance or Deductible Starting in 2011</b></p> <p style=\"text-align: justify;\" align=\"center\"> </p> <table align=\"left\" border=\"0\"> <tbody> <tr> <td> <table style=\"border: 0pt solid #817e80; border-collapse: collapse;\" border=\"0\" cellpadding=\"0\" cellspacing=\"0\"> <tbody> <tr> <td style=\"padding: 0in 5.4pt; width: 167.4pt;\" valign=\"top\" width=\"223\"> <p style=\"text-align: center;\"><strong>Care</strong></p> </td> <td style=\"padding: 0in 5.4pt; width: 275.4pt;\" valign=\"top\" width=\"367\"> <p style=\"text-align: center;\"><strong>Service and Frequency</strong></p> </td> </tr> <tr> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 167.4pt; text-align: center;\" valign=\"top\" width=\"223\"> <p>“Welcome to Medicare” Physical Exam</p> </td> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 275.4pt; text-align: justify;\" valign=\"top\" width=\"367\"> <p>A one-time routine physical examination. This includes an   electrocardiogram (EKG); and height, weight and blood pressure measurements.   Covered if you receive the exam within 12 months of enrollment in Medicare   Part B.</p> </td> </tr> <tr> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 167.4pt; text-align: center;\" valign=\"top\" width=\"223\"> <p>Annual Wellness Visit</p> </td> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 275.4pt; text-align: justify;\" valign=\"top\" width=\"367\"> <p><strong>A yearly visit</strong> in which your doctor will update your   medical history and current prescriptions; measure your height, weight, blood   pressure and body mass index; create a screening schedule for the next 5 to   10 years and screen for cognitive issues.</p> </td> </tr> <tr> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 167.4pt; text-align: center;\" valign=\"top\" width=\"223\"> <p>Breast Cancer Screenings</p> </td> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 275.4pt; text-align: justify;\" valign=\"top\" width=\"367\"> <p><strong>Mammogram screening:</strong> Once every 12 months for women age   40+; women between ages 35 and 39 can get one baseline mammogram; Breast   examination: Once every 24 months; if at risk, once every 12 mos.</p> </td> </tr> <tr> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 167.4pt; text-align: center;\" valign=\"top\" width=\"223\"> <p>Heart Disease Screening</p> </td> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 275.4pt; text-align: justify;\" valign=\"top\" width=\"367\"> <p><strong>Blood tests to screen for cholesterol, lipid and   triglyceride levels:</strong> once every five years.</p> </td> </tr> <tr> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 167.4pt; text-align: center;\" valign=\"top\" width=\"223\"> <p>Osteoporosis Screening</p> </td> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 275.4pt; text-align: justify;\" valign=\"top\" width=\"367\"> <p><strong>Bone mass measurements:</strong> Once every 24 months; more   frequently if medically necessary.</p> </td> </tr> <tr> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 167.4pt; text-align: center;\" valign=\"top\" width=\"223\"> <p>Diabetes Screenings</p> </td> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 275.4pt; text-align: justify;\" valign=\"top\" width=\"367\"> <p>Once every 12 months if you have a family history or are   at risk for diabetes. Twice a year if you have been diagnosed with   pre-diabetes.</p> </td> </tr> <tr> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 167.4pt; text-align: center;\" valign=\"top\" width=\"223\"> <p>Colon   Cancer Screenings</p> </td> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 275.4pt; text-align: justify;\" valign=\"top\" width=\"367\"> <p><strong>Fecal occult blood test:</strong> Once every 12 months for people   age 50 and older; Colonoscopy: Once every 10 years if you are not at high   risk; once every 24 months if you are at high risk; Flexible sigmoidoscopy: Once   every 48 months.</p> </td> </tr> <tr> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 167.4pt; text-align: center;\" valign=\"top\" width=\"223\"> <p>Vaccinations</p> </td> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 275.4pt; text-align: justify;\" valign=\"top\" width=\"367\"> <p><strong>Pneumonia shot:</strong>** Most people need only one shot in their   lifetime; <strong>Flu shot**:</strong> Once a season; <strong>Hepatitis B shot:</strong> Only for people at   medium to high risk.</p> </td> </tr> <tr> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 167.4pt; text-align: center;\" valign=\"top\" width=\"223\"> <p>Smoking Cessation</p> </td> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 275.4pt; text-align: justify;\" valign=\"top\" width=\"367\"> <p><strong>Counseling to stop smoking for people without   smoking-related illnesses:</strong> Covers 2 quitting attempts per year; each attempt   includes 4 counseling sessions.</p> </td> </tr> <tr> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 167.4pt; text-align: center;\" valign=\"top\" width=\"223\"> <p>Cervical Cancer Screenings</p> </td> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 275.4pt; text-align: justify;\" valign=\"top\" width=\"367\"> <p><strong>Pap smear and pelvic examination:</strong> Once every 24 months; if   at risk, once every 12 months.</p> </td> </tr> <tr> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 167.4pt; text-align: center;\" valign=\"top\" width=\"223\"> <p>Prostate Cancer Screenings</p> </td> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 275.4pt; text-align: justify;\" valign=\"top\" width=\"367\"> <p><strong>Prostate specific antigen (PSA) test:</strong> One every 12 months   for men age 50 or older.</p> </td> </tr> <tr> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 167.4pt; text-align: center;\" valign=\"top\" width=\"223\"> <p>Glaucoma Screening</p> </td> <td class=\"mceSelected\" style=\"padding: 0in 5.4pt; width: 275.4pt; text-align: justify;\" valign=\"top\" width=\"367\"> <p>Once every 12 months if you are at high risk.  Screening must be supervised by a state certified eye doctor.</p> </td> </tr> </tbody> </table> <br /></td> </tr> </tbody> </table> <p><span style=\"font-size: 10pt;\" new=\"New\">For more on Medicare’s preventive services from the Medicare Rights Center, <a href=\"http://www.medicareinteractive.org/page2.php?topic=counselor&page=script&slide_id=387\">click here</a><a href=\"http://www.medicareinteractive.org/page2.php?topic=counselor&page=script&slide_id=387\">.</a></span></p>','New Medicare Benefit Takes Effect: Free Preventive Care','','publish','open','open','','new-medicare-benefit-takes-effect-free-preventive-care','','','2011-01-27 13:29:55','2011-01-27 13:29:55','',0,'http://www.racklaw.com/new-site/?p=6025',12,'post','',0),(6027,1,'2011-01-31 13:29:55','2011-01-31 13:29:55','<p style=\"text-align: justify;\">The Tax Court has held that a home occupied by an individual at her death was includible in the value of her estate even though the home was previously purchased and owned by her daughter and son-in-law at the time of the decedent’s death.</p>  <!--more-->  <p style=\"text-align: right;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011-adelina.pdf\">Download PDF</a> <a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011-adelina.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\"><strong>Estate of Adelina C. Van, TC Memo 2011-22</strong></p> <p style=\"text-align: justify;\"><strong>Transactional Facts. </strong> In 1962, Adelina Cheng Van (“Van”) emigrated from China to the United States with three of her four children and became a real estate agent and property manager.  In 1973, Van’s significant other, Marcel Periat (“Periat”), purchased a residence for Van to use in San Mateo (the “Capistrano house”), incurring all costs and keeping title to the property solely in his name.</p> <p style=\"text-align: justify;\">In 1988, Van’s adult daughter and her husband, Mr. and Mrs. Hu, asked Periat to sell the Capistrano house to them.  After negotiating the terms of the agreement, Periat instead sold the Capistrano house to Van for $250,000, with $170,000 paid from the personal funds of Mr. and Mrs. Hu as a down-payment and an $80,000 secured promissory note payable by Van.  The Hus also used their personal funds to make payments on the promissory note on behalf of Van.</p> <p style=\"text-align: justify;\">Van received title to the house in 1989.  On the same day that the deed transferring title to Van was recorded in San Mateo County, Van subsequently recorded a second deed transferring title to herself and two of her grandchildren (daughters of Mr. and Mrs. Hu), as joint tenants.  Five years later in 1994, without telling the Hus, Van had her granddaughters convey sole title of the Capistrano house back to her.  In 1997, Van created a revocable trust and transferred the house into the trust.  Finally, in 1999, Van conveyed the house from her, as trustee of the revocable trust, to her daughter and three grandchildren.</p> <p style=\"text-align: justify;\">On May 1, 2000, Van passed away.  Her son, Michael, served as personal representative of her estate and filed the estate tax return.  The return disclosed the existence of the Capistrano house, but did not list the house as an asset of the estate since Van did not hold title to the house at the time of her death.  The IRS responded to this return by sending the estate a notice of deficiency that included the Capistrano house as a taxable asset of Van\'s estate.</p> <p style=\"text-align: justify;\"><strong>Tax Court\'s Analysis.</strong>  The Court first looked to state law to determine what interests in the house Van held upon her death.  If California law gave Van a legal or beneficial interest in the Capistrano house at some point during her life, it might be includible in her estate under Internal Revenue Code §2036.  The estate argued that under California law, Van never had an interest in the Capistrano house because Mr. and Mrs. Hu were the real owners and Van had taken title only as their agent.  The Tax Court found that the Hus gave Van the money for the down-payment and payments on the note, but determined that this in itself did not prove Van was merely their agent.</p> <p style=\"text-align: justify;\">The Hus testified that they put the house in Van\'s name because they were worried that creditors of Mr. Hu\'s Taiwanese business might someday take the residence.  However, since Mr. and Mrs. Hu owned other California properties titled in their own names, the Court was unconvinced that Van was acting merely as their agent in acquiring the Capistrano house. Van did not only initially hold title in her name, but she also she lived there. Therefore, the Tax Court found that Van acquired a beneficial interest in the house during her lifetime.</p> <p style=\"text-align: justify;\">The Court did find that Van intended to leave the house to her daughter\'s family; however, having found that Van had a beneficial interest in the house, the Court\'s next task was to determine whether her divestment of title to the house acted to remove its value from her estate.  In this regard, the Court noted that, even where a decedent has transferred property before death, the value of such transfer can be included in the estate if she kept some sort of continuing interest in the property. (Treas. Reg. §20.2036-1).</p> <p style=\"text-align: justify;\">The next question was whether Van retained sufficient “possession or enjoyment” of the Capistrano house until her death so as to require that the house be included in her estate.  Van lived in the Capistrano house without paying any rent from 1973 until her death in 2000.  The Tax Court found that, on numerous occasions, the type of possession or enjoyment Van retained was sufficient to include the full fair market value of the residence in her estate.  Ultimately, the Court concluded that Van had a beneficial interest in the Capistrano house, and while she no longer held legal title to the home at the time of her death, she retained a sufficient degree of “possession or enjoyment” of the home to warrant inclusion of its entire fair market value in her estate under Internal Revenue Code §2036.</p> <p style=\"text-align: justify;\"><strong>Recommendations.</strong>  In this case, the determinative factor for the estate was Van’s retention of possession of the Capistrano house. Here, as in the typical case, inclusion of the house could have been avoided if, more than three years before her death, the decedent had both given away title <span style=\"text-decoration: underline;\">and</span> retained no right to possess or enjoy the property without paying fair market rent to the titleholders of the property.  Also, in this case, inclusion could have been avoided in the first instance had the property originally been deeded to the Hus and never been titled in Van’s name.</p>','Tax Court Includes Value of Home Purchased by Daughter in Mother’s Estate','','publish','open','open','','tax-court-includes-value-of-home-purchased-by-daughter-in-mothers-estate','','','2011-01-31 13:29:55','2011-01-31 13:29:55','',0,'http://www.racklaw.com/new-site/?p=6027',11,'post','',0),(6029,1,'2011-02-02 13:29:55','2011-02-02 13:29:55','<p style=\"text-align: justify;\">The U.S. Court of Appeals, Third Circuit, has ruled against a Medicaid applicant who requested a “credit” towards her Medicaid ineligibility penalty period after receiving returned countable assets that she previously gifted to family members.</p>  <!--more-->  <p style=\"text-align: right;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011-medicaid-applicant.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011-medicaid-applicant.pdf\"><img class=\" size-full wp-image-5904\" alt=\"pdf-icon\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p><strong><span style=\"font-size: 12pt; color: black;\"> </span></strong></p> <p><strong>Marino v. Velez (U.S. Ct. App., 3rd Cir., No. 10-2324, Jan. 10, 2011).</strong></p> <p style=\"text-align: justify;\">Beatrice Marino, a resident of a nursing home in New Jersey, made gifts to family members totaling $192,000 in an effort to spend-down her countable assets in order to become eligible for Medicaid benefits.  Upon applying for Medicaid in February of 2009, a penalty period was imposed on Ms. Marino due to the uncompensated transfers.  Thereafter, her family returned $89,000 so that Beatrice would have funds for living expenses during her penalty period.  Although the state reduced her penalty period upon her receipt of such assets, she was told that the penalty period would not begin until April 1, 2010, which was the date that Ms. Marino\'s resources would be below the allowable resource limit.</p> <p style=\"text-align: justify;\">Ms. Marino began federal court litigation, requesting a preliminary injunction on the grounds that the state violated the Medicaid act by \"tolling\" her penalty period.  The U.S. District Court denied her request, holding that Ms. Marino was not eligible for Medicaid benefits until after she had spent down the returned gifts, at which time the penalty period would begin to run.  On appeal, Ms. Marino argued that the penalty period should have begun on March 1, 2009 (since she was resource eligible at that time), and been suspended beginning on June 1, 2009 (when the gifted funds were returned by her family) and then resumed on April 1, 2010.</p> <p style=\"text-align: justify;\">The U.S. Court of Appeals, Third Circuit affirmed the District Court’s holding.  According to the Court of Appeals, since Ms. Marino requested that the state (1) recalculate her penalty after the gifts were returned, and (2) treat the gifts as though they had remained in her possession, she \"cannot now claim that she should get credit toward her recalculated penalty period for those months, even though she remained technically resource-eligible for Medicaid.\"</p> <p style=\"text-align: justify;\">While properly implemented Medicaid spend-down strategies can be extremely valuable when planning for long-term care expenses and asset preservation, the unintentional incurrence of an ineligibility penalty period can be both financially and physically destructive to the applicant.  A thorough understanding of the complex Medicaid rules and regulations, as well as detailed information regarding the applicant’s resources, income and family circumstances, is required in order to correctly plan for the transfer and distribution of assets prior to the successful filing of an application for Medicaid benefits.</p> <p style=\"text-align: justify;\"><span style=\"color: black;\"> </span></p>','Penalty Period for Medicaid Applicant Begins  After Returned Assets are Spent Down','','publish','open','open','','penalty-period-for-medicaid-applicant-begins-after-returned-assets-are-spent-down','','','2011-02-02 13:29:55','2011-02-02 13:29:55','',0,'http://www.racklaw.com/new-site/?p=6029',11,'post','',0),(6033,1,'2011-02-03 13:29:55','2011-02-03 13:29:55','<p style=\"text-align: justify;\">If your business is one of millions of small employers, it may be eligible for the new tax credit for employee provided health care insurance.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011-healthcare-tax.pdf\"><img class=\" alignright size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" style=\"float: right;\" height=\"15\" width=\"15\" /></a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011-healthcare-tax.pdf\">Download PDF</a></p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: center;\" align=\"center\"><b> </b></p> <p style=\"text-align: justify;\">Millions of small employers received postcards from the IRS beginning in April 2010 that alerted them to the new small business health care tax credit and encouraged them to check their eligibility.  Even if a business did not receive a postcard, it still may be eligible.</p> <p style=\"text-align: justify;\"><strong>Eligibility Rules</strong></p> <ul> <li><strong>Providing health care coverage.</strong>  A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.</li> <li><strong>Firm size. </strong> A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).</li> <li><strong>Average annual wage.</strong>  A qualifying employer must pay average annual wages below $50,000 (owners’ wages are not included in the calculation).</li> <li><strong>Both taxable and tax-exempt entities qualify.</strong></li> </ul> <p style=\"text-align: justify;\"><strong>Amount of Credit</strong></p> <ul> <li><strong>Maximum Amount. </strong> The credit is worth up to 35 percent of premium costs in 2010 (25% for tax-exempt employers).  On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).</li> <li><strong>Phase-out. </strong> The credit phases out gradually for employers with average wages between $25,000 and $50,000, and for employers with the equivalent of between 10 and 25 full-time workers.</li> </ul> <p style=\"text-align: justify;\"><strong>Claiming the Credit</strong></p> <p style=\"text-align: justify;\">Small employers, whether businesses or tax-exempt organizations, will use new <a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/f8941.pdf\"><span style=\"font-size: 9pt; font-family: Arial;\">Form 8941</span></a> (Credit for Small Employer Health Insurance Premiums), to calculate the small business health care tax credit.  Small businesses will include the amount of the credit as part of the general business credit on their income tax returns.</p> <p style=\"text-align: justify;\">Tax-exempt organizations will include the amount of the credit on Line 44f of revised Form 990-T (Exempt Organization Business Income Tax Return).  Form 990-T (<a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/f990t--dft.pdf\"><span style=\"font-size: 9pt; font-family: Arial;\">draft</span></a> available for viewing) will be revised for the 2011 filing season to enable eligible tax-exempt organizations –– even those that owe no tax on unrelated business income –– to claim the small business health care tax credit.</p>','Health Care Tax Credit for Small Employers','','publish','open','open','','health-care-tax-credit-for-small-employers','','','2011-02-03 13:29:55','2011-02-03 13:29:55','',0,'http://www.racklaw.com/new-site/?p=6033',10,'post','',0),(6035,1,'2011-02-07 13:29:55','2011-02-07 13:29:55','<p style=\"text-align: justify;\">The Tax Court has held that the full fair market value of an 1,100 acre parcel of land previously divided and transferred to the decedent’s five children was includible in his estate since he continued to use and treat the land as his own during his lifetime.</p>  <!--more-->  <p style=\"text-align: right;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011-adelina-fractional.pdf\">Download PDF</a> <a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011-adelina-fractional.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\"><strong>Estate Of Axel O. Adler, TC Memo 2011-28</strong></p> <p style=\"text-align: justify;\"><strong>Transactional Facts.</strong>  Axel O. Adler (“Adler”) owned an 1,100 acre parcel of land in California.  In December of 1965, Adler transferred undivided 1/5th interests in the property to his five children, as tenants in common.  The deed transferring such interest included language reserving “the full use, control, income and possession” of the property for Adler during his lifetime.</p> <p style=\"text-align: justify;\">After the deed was executed, Adler continued to use the property as he had before, including paying all of the expenses, taxes and maintenance fees.  None of his children resided on the property or interfered with his use, possession, or enjoyment of the land, and Adler did not request permission prior to altering or improving the property.  In August of 1991, one of Adler’s daughters executed a quitclaim deed transferring her 1/5th interest back to her father (although the deed was never recorded).</p> <p style=\"text-align: justify;\">Adler died on June 20, 2004, and his daughter subsequently executed a grant deed transferring her interest in the property to the estate in May of 2005.  The parties stipulated that as of Adler’s date of death, the fair market value of a fee simple interest in the entire property was $6,390,000.</p> <p style=\"text-align: justify;\">On its Federal Estate Tax Return (Form 706), the estate reported that Adler owned a one-fifth interest in the property, and applied a 32% marketability discount and a 16% minority-interest discount to its value.  Further, the, on Form 706, Schedule G, Transfers During Decedent\'s Life, the estate reported four separate one-fifth interest transfers in the property, each subject to a 22% marketability discount and a 16% minority-interest discount.  The parties stipulated that the date-of-death fair market value of a fee simple interest in the entire property was $6,390,000</p> <p style=\"text-align: justify;\"><strong>Tax Court’s Analysis and Holding.</strong> The Tax Court disallowed the marketability and minority-interest discounts taken by Adler’s estate on Form 706 and held that the full fair market value of the property was includible in his gross estate.  In so holding, the Tax Court rejected the claim by the estate to apply fractional interest discounts since Adler effectively retained a 100% interest in the property during his lifetime.  The Court explained that, for tax purposes, the property should not be considered to have been divided among Adler’s children until after his death; therefore, his children each held a life estate in the property.  Accordingly, the property’s full fair market value of $6,390,000 was included in Adler’s gross estate.</p> <p style=\"text-align: justify;\"><strong>Recommendations.</strong>  Although Adler executed a deed purportedly transferring his interest in his real property to his children, his actions clearly demonstrated that he retained full interest in the property until the time of his death.  If Adler had paid rent to his children for use of the property, or gifted a fractional interest in the land to his children during his lifetime (and the children contributed to pay the property tax and upkeep), then he may have been able to transfer a portion of his assets out of his estate and received fractional discounts for lack of marketability and minority interests.  The Tax Court’s ruling in this case prevents a taxpayer from reducing the value of his estate by making lifetime transfers that are essentially testamentary in nature, since the children were really only given a life estate in the property.</p>','Estate Does Not Receive Fractional Interest Discount on Land Gifted to Decedent’s Children','','publish','open','open','','estate-does-not-receive-fractional-interest-discount-on-land-gifted-to-decedents-children','','','2011-02-07 13:29:55','2011-02-07 13:29:55','',0,'http://www.racklaw.com/new-site/?p=6035',8,'post','',0),(6037,1,'2011-02-08 13:29:55','2011-02-08 13:29:55','<p style=\"text-align: justify;\">A New York trial court ruled against adult children’s request for a preliminary injunction against their mother for breach of contract since no consideration was given by children and contract was executed solely to qualify their father for Medicaid.</p>  <!--more-->  <p style=\"text-align: right;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011-soran.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011-soran.pdf\"><img class=\" size-full wp-image-5904\" alt=\"pdf-icon\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p><strong><span style=\"font-size: 12pt; color: black;\"> </span></strong></p> <p style=\"text-align: justify;\"><strong>Soran v. Addeo (N.Y. Sup. Ct., Nassau County, No. 19940/10).</strong></p> <p style=\"text-align: justify;\"><strong>Transactional Facts.</strong>  Since Mr. Addeo owned countable assets in excess of the amount required to receive Medicaid benefits, he entered into an agreement with his family to transfer his house to them in order to qualify for Medicaid.  This “Family Agreement” was executed by Mr. Addeo, Mrs. Addeo and their children.  The terms of the contract required Mr. Addeo to transfer his house to his wife, and then, upon Mr. Addeo’s death, Mrs. Addeo would transfer the property to their children, retaining only a life estate.  The contract expressly stated that this transaction was entered into in order for Mr. Addeo to become eligible for Medicaid benefits.</p> <p style=\"text-align: justify;\">Mr. Addeo subsequently transferred the house to his wife.  Upon his death, Mrs. Addeo decided not to transfer the house to her children, and they sued her for breach of contract.  In their complaint, the children requested that the New York trial court grant them a preliminary injunction preventing Mrs. Addeo from selling or encumbering the property.</p> <p style=\"text-align: justify;\"><strong>Court’s Analysis.</strong>  Mrs. Addeo readily admitted that the contract was only executed in order to commit Medicaid fraud (an issue that was not addressed during this hearing), and the court found that there was no evidence that the children had made any promises to their mother, or that the children suffered any detriment as a result of the “Family Agreement.”  Therefore, the court confirmed that \"the fact that the [a]greement plainly states that it was executed in order to render defendant\'s husband eligible for Medicaid calls into question the motivation and credibility of all of the parties to that [a]greement.\"</p> <p style=\"text-align: justify;\">The New York Supreme Court denied a preliminary injunction, holding that there was no consideration for the agreement.</p> <p style=\"text-align: justify;\"><strong>Recommendations.</strong>  While there are effective asset-transfer and spend-down strategies available for people who plan to apply for Medicaid benefits, the implementation of such plans must be carefully executed.  If Mrs. Addeo had transferred the house to her children, she likely would have been denied Medicaid benefits for up to a five-year penalty period for the uncompensated transfer of assets.  However, there are contracts between family members that effectively shift wealth without causing ineligibility for benefits, such as the personal care services agreement, that are recognized and allowed by Medicaid.  Although the Medicaid rules are complex, proper advice regarding the rules and certain allowances can help applicants preserve their wealth while planning for their long-term care.</p> <p style=\"text-align: justify;\"><span style=\"color: black;\"> </span></p>','No Consideration Found in Family Agreement Transferring  Property for Medicaid Eligibility','','publish','open','open','','no-consideration-found-in-family-agreement-transferring-property-for-medicaid-eligibility','','','2011-02-08 13:29:55','2011-02-08 13:29:55','',0,'http://www.racklaw.com/new-site/?p=6037',7,'post','',0),(6045,1,'2011-02-10 13:29:55','2011-02-10 13:29:55','<p style=\"text-align: justify;\">IRS determines that “wrap fees” paid from a taxable investment account on behalf of IRA and Roth IRA accounts are not treated as additional contributions, thereby allowing a taxpayer to deduct the cost of IRA and Roth IRA account management fees.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011-wrapfees.pdf\"><img class=\" alignright size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" style=\"float: right;\" height=\"15\" width=\"15\" /></a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011-wrapfees.pdf\">Download PDF</a></p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: center;\" align=\"center\"><b> </b></p> <p><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011PLR.pdf\"><span style=\"text-decoration: underline;\"><span style=\"color: #3366ff;\">PLR 201104061</span></span></a></p> <p style=\"text-align: justify;\">In private letter ruling 201104061, the IRS determined that “wrap fees” charged to IRA and Roth IRA accounts paid out of taxable investment accounts are not treated as additional contributions to the IRA and Roth IRA accounts.  In essence, the determination allows taxpayers to deduct the fees of their IRA and Roth IRA accounts on Schedule A of Form 1040 (U.S. Individual Income Tax Return), thereby increasing the overall return on the accounts and further leveraging the benefits of tax-deferred retirement investing.</p> <p style=\"text-align: justify;\"><strong>Transactional Facts.</strong>  ACME company is a securities broker-dealer and investment advisor that provides a variety of financial services to its clients.  ACME offers three levels of account management services for clients that maintain traditional IRAs and Roth IRAs with ACME.  All three levels of management service require the client to pay to ACME a quarterly fee based on the percentage of assets under management.  The fee, which is not related to the number of trades executed in any account, is called a “wrap fee.”  For example, in one type of non-discretionary investment advisory account, ACME offers five risk-based portfolios invested in mutual funds.  An ACME advisor assists the client in selecting an appropriate portfolio based on the client’s financial goals, time horizon to invest, and risk tolerance.  Each portfolio features professional risk allocation and quarterly rebalancing, including monitoring and review of the underlying funds in the account, by a research specialist focused on portfolio management.  Historically, ACME was charging the wrap fees to, and paying the wrap fees from, the IRA or Roth IRA accounts on a quarterly basis.</p> <p style=\"text-align: justify;\">ACME filed its private letter ruling request because it wanted to offer its clients the option of paying the wrap fee with non-IRA assets, without the payment being treated as a deemed contribution to the client’s IRA under Code §408 and/or Roth IRA under Code §408A.</p> <p style=\"text-align: justify;\"><strong>The IRS Ruling. </strong> The IRS concluded that the wrap fees assessed by ACME for its investment advisory accounts are recurring administrative or overhead expenses incurred in connection with the maintenance of clients’ respective IRAs and/or Roth IRAs.  The wrap fees include investment advice, performance monitoring and review, trade execution, money management and custodial services.  Further, the wrap fees are based on a fee structure calculated as a percentage of the value of the assets held in the respective account.  The fees do not vary with the frequency of the transactions performed and are distinct from the cost or volume of any assets purchased or sold.</p> <p style=\"text-align: justify;\">As a result, the IRS determined that the payment of wrap fees by account holders that participate in the investment advisory accounts will not be treated as deemed contributions to such clients’ traditional IRAs under Code §408 and/or Roth IRAs under Code §408A, if they are paid directly from funds that are not part of the account holders’ respective IRAs and/or Roth IRAs.</p> <p style=\"text-align: justify;\"><strong>Planning Point. </strong> The IRS ruling does not express an opinion on other aspects of the transactions described by ACME.  Nonetheless, it appears that as investment fees, the clients’ separately-paid wrap fees should be deductible on Schedule A of Form 1040 as miscellaneous itemized deductions subject to the 2%-of-AGI floor.  In essence, allowing the client to make an additional tax deductible contribution to an IRA or Roth IRA.</p>','IRS Allows Deduction for Payment of IRA “Wrap Fees”','','publish','open','open','','irs-allows-deduction-for-payment-of-ira-wrap-fees','','','2011-02-10 13:29:55','2011-02-10 13:29:55','',0,'http://www.racklaw.com/new-site/?p=6045',7,'post','',0),(6047,1,'2011-02-11 13:29:55','2011-02-11 13:29:55','<p style=\"text-align: justify;\">The Supreme Court of Virginia concludes that although a person may be declared legally incompetent, he may nonetheless possess the requisite capacity to execute a valid last will and testament.</p>  <!--more-->  <p style=\"text-align: right;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011-incompetent.pdf\">Download PDF</a> <a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011-incompetent.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\">Parish v. Parish, __ S.E.2d __ (2011)</p> <p style=\"text-align: justify;\"><strong>Facts. </strong> The decedent, Eugene Neal Parish (“Eugene”), suffered a head and spinal cord injury in 1982 after being struck in the head with a metal pipe while at a bar.  The injury left him paralyzed in his legs and right arm.  Eugene sued the bar and the person who attacked him and recovered $3.5 million.  At the time of his injury, Eugene’s only child, David M. Parish (“David”), was eleven months old.</p> <p style=\"text-align: justify;\">In 1983, Eugene was declared incompetent in Florida due to encephalopathy (generalized brain dysfunction marked by varying degrees of impairment of speech, cognition, orientation, and arousal).  His wife was appointed as guardian.  For the court to make such an appointment, Eugene had to be shown “incapable of caring for himself or managing his property or ... likely to dissipate or lose his property or inflict harm on himself or others.”  Former Fla. Stat. § 744.331 (as in effect prior to amendment by 1989 Fla. Laws ch. 89-96, § 35).  Later, Eugene’s mother assumed the duties as his guardian.</p> <p style=\"text-align: justify;\">In 1989, Eugene moved to Tennessee and resided at a nursing facility near Memphis.  David Wayne Parish (“David Wayne”), Eugene’s brother, lived with his wife, Diane, near Eugene’s nursing facility.  Since Eugene’s mother remained in Florida, she agreed to transfer the conservatorship to David Wayne and Diane in Tennessee.</p> <p style=\"text-align: justify;\">In 2000, David Wayne and Diane petitioned to be appointed as Eugene’s co-conservators in Tennessee.  In order to be appointed, Tennessee law required that David Wayne and Diane show that Eugene was a “[d]isabled person,” which “means any person eighteen (18) years of age or older determined by the court to be in need of partial or full supervision, protection and assistance by reason of mental illness, physical illness or injury, developmental disability or other mental or physical incapacity.”  Tenn.Code Ann. § 34-1-101(7).  The Tennessee court granted the petition, and David Wayne and Diane became Eugene’s conservators.</p> <p style=\"text-align: justify;\">In the fall of 2002, David Wayne assisted Eugene in preparing a Last Will and Testament (the “will”).  David Wayne testified at trial that Eugene had informed him “out of the blue” that he wanted a will.  During Eugene’s meeting with the paralegal who drafted the will, David Wayne acted as a translator because Eugene, who spoke through a voice box due to a tracheotomy, was difficult to understand.  David Wayne was present in the room with the witnesses and the notary when the will was executed and witnessed on October 2, 2002.</p> <p style=\"text-align: justify;\">In the will, Eugene bequeathed 25% of his estate to David Wayne, 25% to Diane, 25% to David, and 25% to other family members.  Eugene’s will appointed David Wayne as executor and Diane as substitute executor.</p> <p style=\"text-align: justify;\">In 2004, David Wayne and Diane requested that David and his wife Jessika Parish (“Jessika”) take over as conservators and guardians of Eugene.  David and Jessika, who lived in Virginia Beach, petitioned the local circuit court in Virginia to adjudicate Eugene incompetent and appoint them as guardians and conservators and the Virginia circuit court granted the petition.  The 2004 order appointing a temporary conservator found that Eugene “is incapacitated to such an extent that he is unable to care for himself, make medical decisions, manage his estate or understand his debts as they come due.”</p> <p style=\"text-align: justify;\">Eugene died in 2006.  David qualified as his administrator.  Diane then petitioned the circuit court to have David removed as administrator and herself appointed as executor pursuant to Eugene’s will.  David filed a counterclaim to impeach the will.  David claimed that Eugene lacked testamentary capacity to execute the will due to encephalopathy.  He further claimed that David Wayne and Diane subjected Eugene to undue influence.  At trial, the circuit court found that Diane had proved by clear and convincing evidence that Eugene had testamentary capacity, and that Eugene was not subjected to undue influence.</p> <p style=\"text-align: justify;\"><strong>Discussion.</strong>  One may be capable of making a will yet incapable of disposing of his property by contract or of managing his estate.  While the mental strength to compete with an antagonist and an understanding to protect one’s own interest are essential in the transaction of ordinary business, the execution of a will only requires the testator to understand the business in which he is engaged, his property, the natural objects of his bounty, and the disposition he desires to make of his property.  Therefore, the condition of being unable, by reason of weakness of mind, to manage and care for one’s estate is not inconsistent with capacity to make a will.</p> <p style=\"text-align: justify;\">The proponent of a will is entitled to a presumption that testamentary capacity existed by proving compliance with all statutory requirements for the valid execution of the will.  Since David was able to prove compliance with the statutory requirements of Tennessee law (the jurisdiction where the will was executed), the burden shifted to Diane to prove Eugene lacked testamentary capacity.</p> <p style=\"text-align: justify;\">At trial, Leonard Kyles (the paralegal who assisted Eugene in drafting the will and was a witness to its execution), testified that he was satisfied that Eugene knew what he was doing when he signed the will.  Cheryl Campbell witnessed the execution of the will to notarize Eugene’s signature and testified that Eugene, when asked what the document was, replied it was his last will and testament.  Ms. Campbell also testified that Eugene did not do or say anything to cause her concern as to his understanding of what was happening.</p> <p style=\"text-align: justify;\">In addition, Dr. Elbert Hines, Eugene’s treating physician at the nursing facility in Tennessee, testified that he saw Eugene at least once every 60 days, beginning in the fall of 2000.  He assessed Eugene in September of 2002 and testified with a reasonable degree of medical probability that Eugene was not confused in any way, that he knew what it was he was doing and who his relatives were at that time.  Dr. Hines saw Eugene again in October and December of 2002, and testified that he was alert and oriented to self and place and that he had not deteriorated since the September visit.</p> <p style=\"text-align: justify;\"><strong>Ruling.</strong>  Although Diane presented contrary evidence at trial, the Court considered the testimony of Mr. Kyles, Ms. Campbell, and Dr. Hines to be sufficient to support David’s assertion that Eugene understood he was making a will and who the natural objects of his bounty were.  Accordingly, the Virginia Supreme Court held that Eugene’s adjudications of incompetence due to encephalopathy and the attendant appointments of conservators did not create a presumption of testamentary incapacity, and that his will was valid.</p>','Legally “Incompetent” Man has Capacity to Make Last Will and Testament','','publish','open','open','','legally-incompetent-man-has-capacity-to-make-last-will-and-testament','','','2011-02-11 13:29:55','2011-02-11 13:29:55','',0,'http://www.racklaw.com/new-site/?p=6047',6,'post','',0),(6054,1,'2011-02-15 13:29:55','2011-02-15 13:29:55','<p style=\"text-align: justify;\">The Supreme Court of Virginia ruled that custodians of UTMA accounts were in breach of their duty of care owed under the Uniform Transfers to Minors Act and awarded children compensatory damages, attorney fees and costs.</p>  <!--more-->  <p style=\"text-align: right;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011-carlson.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011-carlson.pdf\"><img class=\" size-full wp-image-5904\" alt=\"pdf-icon\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p><strong><span style=\"font-size: 12pt; color: black;\"> </span></strong></p> <p><strong>Carlson v. Wells, ____ S.E.2d _____, (2011).</strong></p> <p style=\"text-align: justify;\">Procedural History.  An action was brought on behalf of Eric Carlson, Scott Carlson and Ariel Carlson (the “Children”) against their father, Jon, and their uncle, James, as the custodians of the Children’s UTMA accounts.  The Children sought the removal of Jon and James (the “Custodians”) and requested an accounting, compensatory damages, attorney fees, and costs due to the transfer of funds to other accounts and use of funds for a speculative investment.  The Circuit Court for the City of Virginia Beach referred the case to a commissioner in chancery, who found that the Children had received a full accounting and that, despite having commingled UTMA funds with his own property, Jon had only breached his custodial duty to allow the Children to inspect the UTMA records.  James was found not to be in breach of any of his fiduciary duties.  The Children filed an exception to the commissioner’s report with the Circuit Court of the City of Virginia beach.  In review of this report, the circuit court found that the Custodians breached their duties to the Children, and awarded the Children compensatory damages, attorney fees, and costs. The Custodians appealed this decision to the Supreme Court if Virginia.</p> <p style=\"text-align: justify;\">Facts.  In December of 2003, Eric, one of the Children, requested the balance of his UTMA accounts in order to plan for the payment of his college education.  After being informed by his father that the money “might not be available,” Eric accessed his accounts and discovered that the funds had been withdrawn.  The Children then filed a complaint with the circuit court of Virginia Beach and received an accounting from the Custodians.  The accounting showed that most of the Children’s UTMA accounts were closed in 2002, and the funds were transferred to a single Bank of America savings account opened jointly in the names of the Children and Jon.  Jon made several withdrawals from the account, claiming that they were reimbursements for expenditures made by him on behalf of the Children.  Jon also transferred funds to his personal Vangaurd Health Care mutual fund and Fidelity Investments accounts, as well as using $40,000 to purchase U.S. Airways stock immediately before the company sought bankruptcy protection.</p> <p style=\"text-align: justify;\">Supreme Court’s Analysis.  The court applied the relevant standard of care for the time that the actions of the Custodians occurred, which stated “[i]n dealing with custodial property, a custodian shall observe the standard of care that would be observed by a prudent person dealing with such person’s own property and is not limited by any other statue restricting investments by fiduciaries.”  The court also referenced Colorado case law as guidance, finding that the Carlsons had a duty to preserve the principal of the UTMA funds and that Jon’s speculative investments in U.S. Airways stock violated that duty.  (Buder v. Sartore, 774 P.2d 1383 (Colo. 1989).)  Although Jon argued that, since he invested the UTMA money with his own money, he had to have met the foregoing standard of care, the court found that he failed to invest the UTMA assets with the view of preserving the estate.  The duty of fiduciaries with regard to the prudent person rule is evaluated with respect to each individual investment, rather than the performance of the portfolio as a whole.  Therefore, the Custodians were found to be liable to the Children in the amount of $40,000 for the U.S. Airways stock investment.</p> <p style=\"text-align: justify;\">Further, the Virginia Code requires the Custodians to keep records of all transactions with respect to custodial property.  Since Jon admitted to commingling the UTMA funds in the Bank of America account, and then transferring the funds to his own accounts, he has the burden of proving the amount of the commingled funds he personally owns.</p> <p style=\"text-align: justify;\">The Supreme Court held that (1) Jon breached the prudent investor rule for the standard of care for his investments in a company that was on the brink of bankruptcy; (2) both Custodians have the burden of proving each transfer from the UTMA funds was used properly; and (3) the Custodians must pay the children’s attorneys fees.</p> <p style=\"text-align: justify;\">Recommendations.  Although UTMA accounts are widely used, donors should understand the duties and requirements involved before opening an account on behalf of a minor and serving as custodian.  All funds in a UTMA account belong to the minor, and the custodian must take care not to commingle funds or withdraw amounts for personal use.  Also, the custodian must keep detailed and accurate records of all investments, deposits, payments and withdrawals.  Finally, upon attaining the age of majority, the minor must be given all amounts in the account, regardless of whether the amount is considered “too much” by a parent or guardian.  In order to retain added control over funds that are intended for a UTMA account, other methods, such as 529 plans or education trusts, may be preferred.</p> <p style=\"text-align: justify;\"><span style=\"color: black;\"> </span></p>','Children Sue Father and Uncle for Breach of Duty of Care as Custodians of Uniform Transfers to Minors Act (UTMA) Account and Receive Compensatory Damages','','publish','open','open','','children-sue-father-and-uncle-for-breach-of-duty-of-care-as-custodians-of-uniform-transfers-to-minors-act-utma-account-and-receive-compensatory-damages','','','2011-02-15 13:29:55','2011-02-15 13:29:55','',0,'http://www.racklaw.com/new-site/?p=6054',5,'post','',0),(6056,1,'2011-02-16 13:29:54','2011-02-16 13:29:54','<p style=\"text-align: justify;\">Tax Court upholds the IRS’s income tax deficiency determination and penalty assessments made against taxpayer’s for the 2005 tax year in which he filed a zero income return as part of plan to implement a lifetime “get out of income taxes free” Monopoly card.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011-tax-protester.pdf\"><img class=\" alignright size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" style=\"float: right;\" height=\"15\" width=\"15\" /></a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011-tax-protester.pdf\">Download PDF</a></p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\" align=\"center\"><b> </b></p> <p style=\"text-align: justify;\"><strong>Patrick M. Mooney v. Commissioner, (2011) TC Memo 2011-35</strong></p> <p style=\"text-align: justify;\"><strong>Facts. </strong> At the time he filed his petition in the U.S. Tax Court, Patrick M.  Mooney (“Mooney”) lived in Virginia.  Mooney earned a bachelor’s degree in political science from Loyola University in New Orleans, Louisiana, and was previously a high school educator.  Before 2004, Mooney had filed income tax returns since he graduated from college.</p> <p style=\"text-align: justify;\">Mooney operates his own web site www.unlearning.org, on which he has published, among other things, a March 1, 2005, editorial entitled “Unlearning Pays! Hendrickson, Mooney & Others Bring IRS to Heel.”  In that editorial, Mooney wrote: “[A] private sector worker’s earnings are not legally subject to the federal tax on income.  They never have been, and as long as we still have a Constitution, they never will be.”  In that editorial, he also described his plans to request refunds for taxes withheld from his earnings in previous years and to assert that he is not subject to withholding in the current year.  He wrote that his strategy is a “get out of income taxes free” Monopoly card for life.</p> <p style=\"text-align: justify;\">In accordance with the plan described on his web site, Mooney submitted a Form 1040, U.S. Individual Income Tax Return, for his 2005 tax year with zeros in all boxes for reporting income.  He claimed a refund of $2,647.48, which was the amount of Social Security and Medicare taxes that had been withheld from his paychecks.  He attached to the Form 1040 two Forms 4852, Substitute for Form W-2, Wage, and Tax Statement.</p> <p style=\"text-align: justify;\">In his testimony at trial, Mooney stated that his contention that he had zero income in 2005 is based on his belief that he did not participate in any taxable activity since he lives in the Commonwealth of Virginia and works for private corporations.  During 2005, Mooney received $32,207 for services performed for Interstate Industries, Inc. (“Interstate Industries”), and $2,400 for services performed for the Centre, Inc. (the “Centre”).  Mooney submitted to both entities Forms W-4 on which he claimed to be exempt from income tax withholding because he expected to have no federal tax liability.  In consequence, his employers withheld no income tax from his compensation.</p> <p style=\"text-align: justify;\">Accordingly, the IRS assessed an income tax deficiency for 2005, and imposed upon Mooney a failure to pay penalty and a fraudulent failure to file penalty.</p> <p style=\"text-align: justify;\"><strong>Tax Court Ruling.</strong>  In siding with the IRS on all counts, the Tax Court stated that although no single factor may be necessarily sufficient to establish fraud, the existence of several indicia might be persuasive circumstantial evidence of fraud.  Circumstantial evidence that may give rise to a finding of fraudulent intent includes: understatement of income; inadequate records; failure to file tax returns; concealment of assets; failure to cooperate with tax authorities; filing false Forms W- 4; failure to make estimated tax payments; and engaging in illegal activity.</p> <p style=\"text-align: justify;\">In examining Mooney’s record, the Court noted that this case involves many badges of fraud.  Mooney is intelligent, well educated, and properly filed and paid taxes for a number of years before he recently began to claim, based on various tax-protester arguments, that his income is not subject to federal income taxation.  Mooney wrote on his web site about his efforts to avoid paying income taxes, characterizing his plan as a “get out of income taxes free” Monopoly card.  Pursuant to the strategy described on his web site, he failed to report any income on his 2005 Form 1040; yet he acknowledged at trial that he did receive income during 2005.  Mooney received and has read Internal Revenue Service publications discussing tax-protester arguments like the ones he has employed and explaining why such arguments fail.  Despite Mooney being fully informed by the IRS about the frivolous nature of his arguments, his correspondence with the IRS was filled with tax-protester arguments and has not addressed the factual accuracy of the IRS’s determination.  Finally, the Tax Court also noted that Mooney had previously attempted to use similar arguments to dispute his 2004 tax liability before the Court, and was then made aware that it considers such arguments frivolous and groundless.</p> <p style=\"text-align: justify;\">The Tax Court concluded by imposing a $2,000.00 penalty upon Mooney for fraudulently failing to file his 2005 income tax return.  The Court completed its opinion by warning Mooney that if “he persists in raising frivolous arguments before this Court, wasting time and resources that should be devoted to taxpayers with genuine controversies, and continues to refuse to shoulder his fair share of the tax burden, we will not hesitate in the future to impose a significantly higher penalty.  Petitioner should think carefully before he files another frivolous or groundless petition with this Court.”</p> <p style=\"text-align: justify;\">For more on “tax-protester” arguments visit <span style=\"text-decoration: underline;\"><span style=\"color: #3366ff;\"><a href=\"http://www.irs.gov/\">www.irs.gov</a></span></span> or <span style=\"text-decoration: underline;\"><span style=\"color: #3366ff;\"><a href=\"http://www.irs.gov/pub/irs-utl/friv_tax.pdf\">click here</a><a href=\"http://www.irs.gov/pub/irs-utl/friv_tax.pdf\">.</a></span></span></p> <p style=\"text-align: justify;\">To read Mooney’s March 1, 2005 editorial entitled “Unlearning Pays! Hendrickson, Mooney & Others Bring IRS to Heel” <span style=\"text-decoration: underline;\"><span style=\"color: #3366ff;\"><a href=\"http://www.unlearning.org/editor60.htm\">click here</a></span></span>.</p>','Don’t Try This at Home - Another “Tax Protester” Punished by the Tax Court','','publish','open','open','','dont-try-this-at-home-another-tax-protester-punished-by-the-tax-court','','','2011-02-16 13:29:54','2011-02-16 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6056',13,'post','',0),(6058,1,'2011-02-18 13:29:55','2011-02-18 13:29:55','<p>The new health reform law includes provisions of interest to the elderly and their family members including health insurance requirements and annual limits, Medicare benefits and the small business tax credit.</p>  <!--more-->  <p style=\"text-align: right;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011-health-reform.pdf\">Download PDF</a> <a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011-health-reform.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></p> <p style=\"text-align: justify;\"> </p> <p><span style=\"background: yellow none repeat scroll 0% 0%;\"><br /></span></p> <p style=\"text-align: justify;\"><strong>Insurance for Adults with Pre-existing Conditions. </strong> Beginning in 2014, no one will be turned down or charged an increased premium due to a pre-existing health condition (including a disability).  Until that time, the new health care reform law establishes a Pre-Existing Condition Insurance Program in order to make health coverage available to those who have been denied insurance by private insurers due to a pre-existing condition. However, new health insurance applicants must have been uninsured for a minimum of the past six months, and premiums and deductibles may be relatively high.  The program varies by state, as some states created their own plans while others are adopting the federal plan.</p> <p style=\"text-align: justify;\"><strong>Lifetime and Annual Insurance Coverage Limits.</strong>  Health insurance providers often place a cap on the benefits that will be authorized and paid annually, during a patient’s lifetime, or both.  Included under this law, individual and employer policies that are either issued or renewed can no longer cap lifetime payout limits.  Further, annual caps on insurance payments will no longer be allowed in January of 2014 (unless the individual health plan was in effect on March 23, 2010, the time of the enactment of the healthcare bill).  However, some plans could be eligible for a waiver of the annual cap limitations if compliance with the new law would result in a significant increase in premiums or decrease in benefits.</p> <p style=\"text-align: justify;\"><strong>Medicare.</strong>  The changes to Medicare benefits extend the Medicare trust fund for 12 years, to 2029.  Also, the new law will gradually do away with the Part D prescription drug “doughnut hole” issue (in which many beneficiaries’ coverage ceased until a specific out-of-pocket amount was reached).  In order to fund these added benefits, premiums for Part D will also be scaled to income, so that higher income earners will pay additional premiums (beginning at a $12 increase to the regular premium amounts).  Also, approximately 2% of the population will pay increased Medicare taxes.</p> <p style=\"text-align: justify;\"><strong>Small Business Tax Credit. </strong> The new health reform law includes a new small business tax credit for small employers. Companies with less than 25 employees, with an average annual salary of $50,000 or less (not including the owner’s income), that are paying 50% of their employees’ premiums on a group health plan are now eligible for a 35% tax credit for health insurance premiums paid on behalf of their employees.  This credit rises substantially to 50% in 2014.  For more information, see the IRS Small Business Health Care Tax Credit for Small Employers information page located <span style=\"text-decoration: underline;\"><span style=\"color: #3366ff;\"><a href=\"resources/archive/96-health-care-tax-credit-for-small-employers\">here</a></span></span>.</p>','Health Reform Provisions Affecting the Elderly','','publish','open','open','','health-reform-provisions-affecting-the-elderly','','','2011-02-18 13:29:55','2011-02-18 13:29:55','',0,'http://www.racklaw.com/new-site/?p=6058',12,'post','',0),(6063,1,'2011-02-22 13:29:55','2011-02-22 13:29:55','<p style=\"text-align: justify;\">The Tax Court has held that a married couple was not allowed to take a charitable contribution deduction of appreciated stock transferred into their 501(c) entity account because the funds were used to pay their son’s college tuition and expenses.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_self\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011-son-tuition.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011-son-tuition.pdf\"><img class=\" size-full wp-image-5904\" alt=\"pdf-icon\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p><strong><span style=\"font-size: 12pt; color: black;\"> </span></strong></p> <p><strong>Setty Gundanna and Prabhavathi Katta Viralam, (2011) </strong><span style=\"text-decoration: underline;\"><span style=\"color: #3366ff;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/VIRALAM.TC.WPD.pdf\">136 TC No. 8 </a></span></span></p> <p style=\"text-align: justify;\"><strong>Transactional Facts.</strong>  Setty Gundanna Viralam (“Husband”) and Prabhavathi Katta Viralam (“Wife”) were medical doctors and parents of three children.  In 1997, Husband sold his interest in his medical practice for $2,262,000, which resulted in a taxable gain of $2,261,750.  Around this time, Wife joined a financial planning company for doctors called “Xélan,” which provided Husband and Wife with financial planning services, including investment management, pension plans, asset protection and tax reduction strategies, and insurance products.</p> <p style=\"text-align: justify;\">One such financial planning strategy was a recommendation to donate funds to a xélan foundation (the “Foundation”), which was characterized as a “donor advised fund” or “family public charity.”  The Foundation claimed to allow doctors to contribute a portion of their pre-tax earnings to their own family charity tax-deferred account, and then use such funds to pay their family members for working on behalf of the charity.  Since the Foundation “was created to benefit not only charitable causes, but also doctors and their families,” Husband and Wife were also told that their donations would be segregated for investment, and eventual distributions would be made, as recommended by Husband and Wife, for projects such as personal teaching, research, and college scholarship programs.</p> <p style=\"text-align: justify;\">The Foundation also offered Husband and Wife a “student loan program,” in which donated funds could be distributed as a loan for college tuition and expenses.  These types of loans were typically repaid with interest, and usually became due five years after the student graduated.  However, in cases where the student preferred to provide charitable services as payment, they were also allowed to “work off” their student loan debt.  Since Husband and Wife had three children who were planning to attend college, they decided to establish a donor-advised fund for this purpose, designating Husband as the fund’s advisor.</p> <p style=\"text-align: justify;\">In 1998, Husband transferred stocks worth $262,433 (with an aggregate basis of $131,360) into the Foundation account.  Subsequently that same year, the Foundation sold all of the stocks and invested the net proceeds of $224,684, segregating them in Husband’s Foundation account. These Foundation account assets also earned $981 in dividends and interest in 1998.  Upon establishing the donor advised fund, the legal department of the Foundation sent Husband an opinion letter, including advice that donors were “more likely that not” entitled to a charitable contribution deduction for donations made to the Foundation; however, they refused to opine as to the tax effect of each individually offered investment program (including the student loan program).</p> <p style=\"text-align: justify;\">Husband and Wife filed a joint federal income tax return for 1998, and reported a $2,261,750 gain from the sale of Husband’s interest in his medical practice.  They also claimed a charitable contribution deduction of $263,933 (equal to the fair market value of the stocks transferred to the Foundation in 1998, plus related fees); however, acting upon the advice of his accountant, they did not include the proceeds from the stock sales or dividends and interest generated by the Foundation account.</p> <p style=\"text-align: justify;\">Throughout the following years, Husband made distributions ranging from $500 to $5,000 from the donor-advised fund.  In 2001, he distributed $17,247 to the University of Pennsylvania as a loan to his son for tuition and room and board under the Foundation’s student loan program.  Husband made a second distribution to the University of Pennsylvania for his son’s tuition in 2002.  The son agreed to participate in the program allowing him to provide annual charitable services as repayment of his debt.</p> <p style=\"text-align: justify;\">In 2003, Husband repaid the Foundation $70,300 (the total distributions made from the account on the son’s behalf) from an entity that was controlled by him and his son.  The Foundation waived all accrued interest and confirmed that the payment fulfilled the son’s service obligation to the Foundation.</p> <p style=\"text-align: justify;\">On Sept. 16, 2003, the IRS issued a notice of deficiency to Husband and Wife disallowing the charitable contribution deduction claimed for the transfers of stocks to the Foundation in 1998 (and assessed an accuracy-related penalty).</p> <p style=\"text-align: justify;\"><strong>Tax Court’s Ruling. </strong> The IRS argued that Husband and Wife were not entitled to a charitable deduction because: (i) they never surrendered dominion and control over the contributed property; or (ii) they failed to substantiate the deduction as required by <a target=\"_blank\" href=\"http://www.law.cornell.edu/uscode/html/uscode26/usc_sec_26_00000170----000-.html\"><span style=\"text-decoration: underline;\"><span style=\"color: #3366ff;\"> </span></span></a><span style=\"text-decoration: underline; color: #3366ff;\"><a target=\"_blank\" href=\"http://www.law.cornell.edu/uscode/html/uscode26/usc_sec_26_00000170----000-.html\">I.R.C. §170(f)(8)</a></span>.  Husband and Wife countered that their account was a legitimate donor-advised fund since they only were given the authority to “suggest” investment strategies.  Further, they argued that they did not receive any substantial benefit for their contribution of stock, and also that their deduction was properly substantiated.</p> <p style=\"text-align: justify;\">In large part due to the distributions made for his son’s college tuition (totaling 82% of the account), the Tax Court ultimately held that Husband and Wife were not entitled to the charitable deduction because Husband retained dominion and control over the property transferred to the Foundation account.  The Court also noted that Husband could make distributions of account funds to compensate himself or his family members for “good works,” and Foundation approval of such distributions was essentially a formality.</p> <p style=\"text-align: justify;\">The Tax Court upheld the inclusion of $93,324 in long-term capital gain generated by the sales of the stocks, and $981 of interest and dividends from the Foundation account, on Husband and Wife’s 1998 federal income tax return, as well as the assessment of an accuracy-related penalty for negligence on the part of Husband and Wife.</p> <p style=\"text-align: justify;\"><strong>Recommendations.</strong>  In order for charitable contributions to qualify for income tax deductions, (i) the donor must have relinquished dominion and control over the donated property; (ii) the contribution must have been made with donative intent and without the expectation of a substantial benefit in return; and (iii) a contribution equal to or greater than $250 must be substantiated by a contemporaneous written acknowledgment (meeting the appropriate I.R.C. requirements) from the charitable organization.  In determining whether a proposed charitable contribution is deductible, the I.R.S. examines the donor’s conduct and the facts and circumstances surrounding each case.  Accordingly, these requirements should be strictly observed.</p> <p style=\"text-align: justify;\"><span style=\"color: black;\"> </span></p>','No Charitable Contribution Deduction for Taxpayers Using Funds from 501(c) Entity Account to Pay for Son’s Tuition','','publish','open','open','','no-charitable-contribution-deduction-for-taxpayers-using-funds-from-501c-entity-account-to-pay-for-sons-tuition','','','2011-02-22 13:29:55','2011-02-22 13:29:55','',0,'http://www.racklaw.com/new-site/?p=6063',14,'post','',0),(6066,1,'2011-02-24 13:29:55','2011-02-24 13:29:55','<p>Among its many provisions <span style=\"color: #333333;\"><a target=\"_blank\" href=\"featured-post-archive/42-newsflash-4\"><span style=\"color: #808080;\">(see our previous article </span><span style=\"color: #0000ff;\">here</span></a></span>), The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 includes several significant and accommodating terms that have changed the manner in which Supplemental Security Income (SSI) and Medicaid eligibility will be determined.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011-tax-act-changes.pdf\"><img class=\" alignright size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" style=\"float: right;\" height=\"15\" width=\"15\" /></a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/2011-tax-act-changes.pdf\">Download PDF</a></p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\" align=\"center\"><b> </b></p> <p style=\"text-align: justify;\">Pursuant to Section 728 of The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (the “Tax Act”), income tax refunds are no longer considered <i>countable income</i> for SSI or Medicaid eligibility purposes.  As an added benefit, any amount received as a tax refund will not be considered a <i>countable resource</i> for one year following the receipt of the funds, and, as such, SSI and Medicaid recipients will not be required to segregate their tax return refunds from their other countable resources.  This allowance also applies to tax refund amounts received during the year before filing an application for SSI or Medicaid.  Therefore, if an applicant can demonstrate that certain funds in his account are traceable to a tax refund received in the past year, the funds will not be considered a countable resource until one year from the date of receipt providing time in which to spend the funds on medically necessary care or invest in non-countable assets.</p> <p style=\"text-align: justify;\">The Tax Act has also changed the treatment of several other important tax credits, including Making Work Pay, Earned Income, Advanced Earned Income, and Child Tax Credits.  Previously, these tax credits were excluded from countable income for SSI and Medicaid purposes; however, the tax credit income was required to be spent within nine months of receipt.  Instead, under the Tax Act, the one year rule allowed for income tax refunds will now apply to these tax credits (as well as the First-Time Homebuyer Tax Credit).</p> <p style=\"text-align: justify;\">This new law applies to any refunds or credits received after December 31, 2009; therefore, in cases where SSI and Medicaid applicants were initially denied benefits because money received as a tax refund or credit exceeded the countable income and resource limitations, the new law may make them retroactively eligible for such benefits.</p> <p style=\"text-align: justify;\">For a complete text of the relevant provisions, see Section 728 of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, <span style=\"text-decoration: underline;\"><span style=\"color: #3366ff;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/02/BILLS-111hr4853enr.pdf\">here</a></span></span>.</p> <p style=\"text-align: justify;\">The Social Security Administration also created an Emergency Message regarding these changes, which can be viewed <span style=\"text-decoration: underline;\"><span style=\"color: #3366ff;\"><a href=\"https://secure.ssa.gov/apps10/public/reference.nsf/links/02042011024158PM\" target=\"_blank\">here</a></span></span>.</p>','Tax Act Includes Changes to Treatment of Refunds and Tax Credits  for SSI / Medicaid Eligibility','','publish','open','open','','tax-act-includes-changes-to-treatment-of-refunds-and-tax-credits-for-ssi-medicaid-eligibility','','','2011-02-24 13:29:55','2011-02-24 13:29:55','',0,'http://www.racklaw.com/new-site/?p=6066',10,'post','',0),(6068,1,'2011-03-02 13:29:56','2011-03-02 13:29:56','<p>IRS imposes late payment penalty and interest on an estate whose CPA submitted a flawed request for an extension of time to pay estate tax.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/03/2011.3.2-flawed-extension-request.pdf\">Download PDF</a> <a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/03/2011.3.2-flawed-extension-request.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></p> <p style=\"text-align: justify;\"><strong>Baccei v. U.S. (CA 9 02/16/2011)</strong></p> <p style=\"text-align: justify;\"><span style=\"font-size: 10pt;\">IRS imposes late payment penalty and interest on an estate whose CPA submitted a flawed request for an extension of time to pay estate tax.</span></p> <p style=\"text-align: justify;\"><strong>Facts.</strong>  Ronald Baccei served as trustee of the Eda O. Pucci 2004 Revocable Trust.  On September 17, 2005, Eda O. Pucci passed away, and Baccei was named executor of her estate.  Upon his appointment as executor, Baccei hired Dean Bagley, a certified public accountant, to prepare and file a federal estate tax return on behalf of the Pucci estate.  On June 16, 2006, Bagley filed a Form 4768 (Application for Extension of Time to File a Return and/or Pay U.S. Estate Taxes) to extend the June 19, 2006, filing and payment deadline.</p> <p style=\"text-align: justify;\">Form 4768 contains four distinct parts, in addition to a signature line requiring the preparer to verify the accuracy of the information submitted under penalty of perjury.  Before filing Form 4768, Bagley completed only three of the required sections; he did not complete Part III, entitled “Extension of Time to Pay.”  Also, Bagley did not enter an extension period in the field labeled “Extension date requested,” nor did he check the box indicating that he was requesting a payment extension.  Under Part IV of Form 4768, Bagley reported that the amount of estate taxes “estimated to be due” and still owing was $131,327, and he left blank the field labeled “Amount of cash shortage.”</p> <p style=\"text-align: justify;\">In submitting the Form 4768, Bagley enclosed a letter dated June 16, 2006, entitled “Request for extension of time to file and pay U.S. Estate Tax.”  The letter clearly explained that the estate was seeking an extension of time to pay and stated the reason why the estate needed the payment extension.  The letter did not indicate the period for which the estate was requesting the extension.</p> <p style=\"text-align: justify;\">On December 19, 2006, Bagley filed the federal estate tax return on behalf of the Pucci estate, and reported that the estate tax owed actually amounted to $1,684,408.  On February 5, 2007, the IRS notified Baccei that the federal estate tax had not been paid by the June 19, 2006 deadline.  Consequently, the IRS assessed a penalty of $58,954.28, plus $69,801 of interest against the estate.</p> <p style=\"text-align: justify;\">On February 22, 2007, Baccei submitted a payment of $128,755.28 to the IRS, and requested that the IRS abate the late payment penalty and interest, claiming that Bagley “had in fact sent an application for extension of time to file a return, Form 4768, on June 16, 2006.”  The IRS responded that the penalty and interest were properly assessed, as Baccei had filed the return by the extended due date but failed to request an extension of time to pay the tax.  Accordingly, the IRS denied Baccei’s claim for a refund on the basis that Baccei failed to properly request an extension of time to pay the estate taxes owed.</p> <p style=\"text-align: justify;\">Baccei sued for refund in federal district court but lost on summary judgment.  On appeal, he advanced three arguments, each rejected by the Ninth Circuit as explained below.</p> <p style=\"text-align: justify;\"><strong>Substantial compliance doctrine inapplicable. </strong> Baccei argued that the district court erred in holding the substantial compliance doctrine inapplicable to regulations governing requests for extensions of time to pay estate tax.  The Ninth Circuit noted that the doctrine of substantial compliance is an equitable doctrine designed to avoid hardship in cases where a party has done all that can be reasonably expected.  However, the court found that Baccei could not rely on the doctrine to excuse his failure to properly request an extension of time to pay the estate tax because doing so would defeat the policies of the regulations governing requests to extend the time for paying estate tax.  The regulation is designed to provide the IRS with the information necessary to determine whether an extension of time to pay is warranted and, if so, to determine a reasonable length for that extension.  The regulation requires that the period of the extension be stated, and the estate did not comply.</p> <p style=\"text-align: justify;\"><strong>No estoppel.</strong>  Baccei also argued that the federal district court erred in denying his estoppel claim.  Specifically, he claimed that IRS had an obligation to inform him that his payment extension request was deficient, and to provide him with an opportunity to amend his extension application or otherwise mitigate the late payment penalty.  He said the IRS did not fulfill its obligations and may not profit from its “own wrong” by imposing a late payment penalty and assessing interest.</p> <p style=\"text-align: justify;\">The Ninth Circuit noted that in addition to establishing the four traditional elements of estoppel, a party asserting this claim against the IRS must also establish that the IRS engaged in affirmative misconduct beyond mere negligence.  The Court determined that Baccei did not meet this burden because affirmative misconduct requires an affirmative misrepresentation or affirmative concealment of a material fact.  Baccei did not point to any affirmative misconduct by the IRS, just inaction on its part.  The Court held that the IRS’s failure to inform a taxpayer that he has not properly requested an extension is mere inaction that cannot support a claim of equitable estoppel.</p> <p style=\"text-align: justify;\"><strong>No reasonable cause for late payment. </strong> Baccei’s final argument was that his failure to timely pay estate tax was due to reasonable cause.  Baccei argued that he exercised “ordinary business care and prudence” in relying upon his accountant, Bagley, to competently file a payment extension request.  The Ninth Circuit disagreed, holding that Baccei’s reliance upon Bagley to competently file a payment extension request does not constitute reasonable cause excusing Baccei’s failure to timely pay the estate taxes owed.  Although Baccei was entitled to retain an accountant to seek a payment extension, he was responsible for either identifying the payment deadline and ensuring that payment was made before that deadline, or confirming that a payment extension had been properly requested and granted.  By failing to confirm that an extension had been requested and granted before the payment deadline lapsed, Baccei failed to exercise the “ordinary business care and prudence” necessary to establish reasonable cause.</p>','CPA’s Flawed Extension Request Results in Late Payment Penalty and Interest','','publish','open','open','','cpas-flawed-extension-request-results-in-late-payment-penalty-and-interest','','','2011-03-02 13:29:56','2011-03-02 13:29:56','',0,'http://www.racklaw.com/new-site/?p=6068',11,'post','',0),(6070,1,'2011-03-04 13:29:56','2011-03-04 13:29:56','<p>Refunds totaling more than $1.1 billion may be waiting for nearly 1.1 million people who did not file a federal income tax return for 2007.  However, to collect the money, a return for 2007 must be filed with the IRS no later than Monday, April 18, 2011.  The IRS estimates that half of these potential 2007 refunds are $640 or more.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/03/2011.3.4-2007-income-refund.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/03/2011.3.4-2007-income-refund.pdf\"><img class=\" size-full wp-image-5904\" alt=\"pdf-icon\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p><strong><span style=\"font-size: 12pt; color: black;\"> </span></strong></p> <p style=\"text-align: justify;\">Some people may not have filed their 2007 federal income tax return because they had too little income to require filing a tax return, even though they had taxes withheld from their wages or made quarterly estimated payments.  In cases where a return was not filed, the law provides most taxpayers with a three year window of opportunity to claim a refund.  If no return is filed to claim a refund within three years of the original due date of the return, the money becomes property of the U.S. Treasury.</p> <p style=\"text-align: justify;\">For 2007 returns, this window closes on April 18, 2011.  The law requires that the tax return be properly addressed, mailed, and postmarked by that date.  There is no penalty for filing a late return that qualifies for a refund.</p> <p style=\"text-align: justify;\">The IRS reminds taxpayers seeking a 2007 refund that their checks will be held if they have not filed tax returns for 2008 and 2009.  In addition, the refund will be applied to any amounts still owed to the IRS, and may be used to offset unpaid child support or past due federal debts such as student loans.</p> <p style=\"text-align: justify;\">By failing to file a return, taxpayers stand to lose more than a refund of taxes withheld or paid during 2007.  In addition, many low-and-moderate income workers may not have claimed the Earned Income Tax Credit (EITC).  The EITC helps individuals and families whose incomes are below certain thresholds, which in 2007 were $39,783 for those with two or more children, $35,241 for people with one child, and $14,590 for those with no children.</p> <p style=\"text-align: justify;\">Current and prior year tax forms and instructions are available on the Forms and Publications page of IRS.gov or by calling toll-free 1-800-TAX-FORM (1-800-829-3676).  Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for 2007, 2008 or 2009 should request copies from their employer, bank, or other payer.  If these efforts are unsuccessful, taxpayers can get a free transcript showing information from these year-end documents by ordering online at <a target=\"_blank\" href=\"http://www.irs.gov/\">www.irs.gov</a>, by calling 1-800-908-9946, or by filing IRS Form 4506-T (Request for Transcript of Tax Return) with the IRS.</p> <p style=\"text-align: justify;\">Below is an estimate of the number of individuals who did not file a 2007 income tax return, and the value of the potential refund.</p> <table style=\"border: 5px solid #000000; margin-left: auto; margin-right: auto;\" rules=\"all\" border=\"5\" cellpadding=\"5\" cellspacing=\"5\"> <tbody> <tr> <td class=\"text\" style=\"text-align: center;\"><span style=\"color: #333333;\"><strong>State</strong></span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"color: #333333;\"><strong>  Individuals    <br /></strong></span></td> <td class=\"text\"> <p style=\"text-align: center;\"><span style=\"color: #333333;\"><strong>Median<br />   Potential Refund    <br /></strong></span></p> </td> <td class=\"text\"> <p style=\"text-align: center;\"><span style=\"color: #333333;\"><strong>Total Potential<br />   Refund ($000)*    <br /></strong></span></p> </td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Alabama</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$17,600</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$634</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$15,649</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Alaska</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">5,200</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$688</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$6,545</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Arizona</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">31,000</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$543</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$29,217</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Arkansas</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">9,100</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$606</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$8,111</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">California</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">124,000</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$597</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$129,205</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Coloroda</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">20,900</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">%588</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$21,591</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Connecticut</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">11,900</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$714</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$14,769</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Delaware</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">4,000</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$658</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$4,121</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">District of Columbia     <br /></span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">4,400</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$629</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$4751</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Florida</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">74,500</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$665</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$87,293</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Georgia</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">36,800</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$590</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$34,475</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Hawaii</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">7,600</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$717</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$8,960</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Idaho</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">4,600</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$540</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$4,340</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Illinois</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">38,800</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$692</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$44,168</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Indiana</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">20,200</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$679</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$19,864</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Iowa</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">9,500</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$668</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$8,411</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Kansas</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">10,400</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$621</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$9,601</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Kentucky</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">11,200</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$660</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$10,449</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Loisiana</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">19,500</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$663</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$20,327</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Maine</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">3,600</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$606</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$4,398</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Maryland</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">25,100</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$645</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$27,727</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Massachusetts</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">23,000</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$701</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$26,881</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Michigan</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">30,800</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$663</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$31,943</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Minnesota</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">14,000</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$604</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$13,786</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Mississippi</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">9,400</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$585</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$8,400</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Missouri</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">20,300</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$604</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$18,588</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Montana</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">3,400</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$607</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$3,185</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Nebraska</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">4,700</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$620</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$4,509</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Nevada</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">15,000</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$630</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$15,575</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">New Hampshire</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">3,900</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$741</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$4,960</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">New Jersey</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">31,000</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$705</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$36,504</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">New Mexico</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">7,900</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$594</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$7,510</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">New York</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">62,600</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$706</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$78,405</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">North Carolina</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">29,300</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$565</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$26,385</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">North Dakota</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">1,600</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$635</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$1,877</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Ohio</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">33,200</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$620</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$30,240</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Oklahoma</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">15,200</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$620</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$14,280</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Oregon</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">17,600</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$521</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$15,309</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Pennsylvania</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">34,600</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$686</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$35,317</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Rhode Island</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">3,100</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$644</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$3,380</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">South Carolina</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">12,400</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$561</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$11,132</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">South Dakota</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">2,000</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$639</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$1,937</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Tennessee</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">17,200</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$633</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$17,049</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Texas</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">91,700</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$692</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$104,801</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Utah</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">7,600</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$560</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$8,392</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Vermont</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">1,700</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$672</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$1,694</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Virginia</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">29,800</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$629</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$31,380</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Washington</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">28,200</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$702</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$34,692</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">West Virginia</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">3,500</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$686</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$3,484</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Wisconsin</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">12,900</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$593</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$11,609</span></td> </tr> <tr> <td class=\"text\"><span style=\"font-size: 10pt; color: #333333;\">Wyoming</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">2,700</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$788</span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"font-size: 10pt; color: #333333;\">$3,350</span></td> </tr> <tr> <td class=\"text\" style=\"text-align: right;\"><span style=\"color: #333333; font-size: 10pt;\"><strong>Grand Total</strong></span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"color: #333333; font-size: 10pt;\"><strong>1,060,200</strong></span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"color: #333333; font-size: 10pt;\"><strong>$640</strong></span></td> <td class=\"text\" style=\"text-align: center;\"><span style=\"color: #333333; font-size: 10pt;\"><strong>$1,120,566</strong></span></td> </tr> </tbody> </table> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\"><span style=\"color: black;\"> </span></p>','IRS Has $1.1 Billion for People Who Have Not Filed a 2007 Income Tax Return','','publish','open','open','','irs-has-11-billion-for-people-who-have-not-filed-a-2007-income-tax-return','','','2011-03-04 13:29:56','2011-03-04 13:29:56','',0,'http://www.racklaw.com/new-site/?p=6070',9,'post','',0),(6072,1,'2011-03-07 13:29:56','2011-03-07 13:29:56','<p style=\"text-align: justify;\">Trial court rules that the state could recover the value of life-time Medicaid benefits from a piece of real estate that the Medicaid recipient co-owned with her son.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/03/2011.3.7-estate-of-lovan.pdf\"><img class=\" alignright size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" style=\"float: right;\" height=\"15\" width=\"15\" /></a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/03/2011.3.7-estate-of-lovan.pdf\">Download PDF</a></p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\" align=\"center\"><b> </b></p> <p style=\"text-align: justify;\"><strong>In re Estate of Lovan. (Iowa Ct. App., No. 1-038 / 10-1314, Feb. 23, 2011).</strong></p> <p style=\"text-align: justify;\"><strong>Facts. </strong> Lo Lovan and her son, Sammy Lovan, purchased a house as tenants in common.  On several occasions, Mrs. Lovan and her son refinanced the mortgage, both executing all subsequent mortgage documents and continuing to own the property as tenants in common.</p> <p style=\"text-align: justify;\">During her lifetime, Mrs. Lovan applied for and received Medicaid benefits.  Although Mrs. Lovan met the asset and income requirements for Medicaid eligibility, the Medicaid program is permitted to recover amounts paid on her behalf from her estate (if the estate is not insolvent, as is the case with many Medicaid recipients).  Accordingly, upon her death, the state filed a claim against her estate to recover the amount of benefits provided to her during her lifetime.</p> <p style=\"text-align: justify;\">Sammy Lovan, her son, argued that the house was not part of his mother’s estate, and therefore, not subject to the Medicaid reimbursement claim made by the state.  He explained that his mother signed the mortgage documents with him in order to help him receive financing; however, he personally paid all of the mortgage payments and additional residential expenses without the assistance of his mother.</p> <p style=\"text-align: justify;\"><strong>Holding. </strong> The probate court held that Mrs. Lovan had a one-half interest in the house, as tenants in common with her son, which cleared the way for the state to file its Medicaid reimbursement claim against one-half of the home’s value; Mr. Lovan appealed the decision.  The Iowa Court of Appeals agreed with the probate court, finding that the son did not provide clear and convincing evidence to overcome the presumption that he owned the property as tenants in common with his mother.  In affirming the probate court’s decision, the court of appeals determined that, while the son may have initially required his mother’s signature to obtain a loan, she should not have continued to execute documents associated with the subsequent refinancing.</p> <p style=\"text-align: justify;\"><strong>Recommendation. </strong> The inevitable forced sale of the home by Sammy to reimburse Medicaid for Mrs. Lovan’s lifetime benefits could have been avoided if she properly transferred her assets prior to applying for Medicaid.  There are many strategies which can be implemented in order to protect the assets of a person who intends to apply for Medicaid benefits, including the retention of exempt assets which cannot be recovered by the state after the Medicaid recipient passes away.  (The full text of the income and asset rules and regulations of the Virginia Medicaid Manual can be found <a href=\"http://www.dss.virginia.gov/benefit/medical_assistance/manual.cgi\">here</a>.)</p>','State Can Recover Life-Time Medicaid Benefits From Jointly Owned Real Estate','','publish','open','open','','state-can-recover-life-time-medicaid-benefits-from-jointly-owned-real-estate','','','2011-03-07 13:29:56','2011-03-07 13:29:56','',0,'http://www.racklaw.com/new-site/?p=6072',7,'post','',0),(6074,1,'2011-03-08 13:29:56','2011-03-08 13:29:56','<p style=\"text-align: justify;\">In its latest effort to help struggling taxpayers, on February 24, 2011, the Internal Revenue Service announced a series of new steps to help people get a fresh start with their tax liabilities.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/03/2011.3.8-effort-struggling-taxpayers.pdf\">Download PDF</a> <a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/03/2011.3.8-effort-struggling-taxpayers.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></p> <p style=\"text-align: justify;\">The goal of this effort is to help individuals and small businesses meet their tax obligations, without adding unnecessary burden to taxpayers.  Specifically, the IRS is announcing new policies and programs to help taxpayers pay back taxes and avoid tax liens.  The changes include:</p> <ul> <li style=\"text-align: justify;\"> Significantly increasing the dollar threshold when tax liens are generally issued, <br />    resulting in fewer tax liens.</li> <li style=\"text-align: justify;\">Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill. </li> <li style=\"text-align: justify;\">Withdrawing liens in most cases where a taxpayer enters into a Direct Debit Installment <br />    Agreement.</li> <li style=\"text-align: justify;\">Creating easier access to Installment Agreements for more struggling small <br />    businesses.</li> <li style=\"text-align: justify;\">Expanding a streamlined Offer in Compromise program to cover more taxpayers.</li> </ul> <p style=\"text-align: justify;\">This is another in a series of steps to help struggling taxpayers.  In 2008, the IRS announced lien relief for people trying to refinance or sell a home.  In 2009, the IRS added new flexibility for taxpayers facing payment or collection problems.  Last year, the IRS held about 1,000 special open houses to help small businesses and individuals resolve tax issues with the agency.</p> <p style=\"text-align: justify;\"><strong>Tax Lien Thresholds.</strong>  A federal tax lien gives the IRS a legal claim to a taxpayer’s property for the amount of an unpaid tax debt.  Since the government is not the only creditor to whom the taxpayer usually owes money, filing a Notice of Federal Tax Lien is necessary to establish priority rights against certain other creditors.</p> <p style=\"text-align: justify;\">The IRS will significantly increase the dollar thresholds when liens are generally filed.  The new dollar amount takes into account inflationary changes since the number was last revised.  Currently, the IRS automatically files liens at certain dollar levels for people with past-due balances.</p> <p style=\"text-align: justify;\">A lien informs the public that the U.S. government has a claim against all property, and any rights to property, of the taxpayer.  This includes property owned at the time the notice of lien is filed and any property acquired thereafter.  A lien can affect a taxpayer’s credit rating, so it is critical to arrange the payment of taxes as quickly as possible.</p> <p style=\"text-align: justify;\"><strong>Tax Lien Withdrawals. </strong> The IRS will also modify procedures that will make it easier for taxpayers to obtain lien withdrawals.  If the taxpayer so requests, the IRS will now withdraw a lien upon full payment of tax.  In order to speed the withdrawal process, the IRS will also streamline its internal procedures to allow collection personnel to withdraw the liens.</p> <p style=\"text-align: justify;\"><strong>Direct Debit Installment Agreements and Liens. </strong> The IRS is making other fundamental changes to liens in cases where a taxpayer enters into a Direct Debit Installment Agreement (DDIA).  For taxpayers with unpaid assessments of $25,000 or less, the IRS will now allow lien withdrawals under several scenarios:</p> <ul> <li>Lien withdrawals for taxpayers entering into a Direct Debit Installment Agreement.</li> <li>The IRS will withdraw a lien if a taxpayer on a regular Installment Agreement converts to <br />    a Direct Debit Installment Agreement. </li> <li>The IRS will also withdraw liens on existing Direct Debit Installment agreements upon <br />    taxpayer request.</li> </ul> <p style=\"text-align: justify;\">Liens will be withdrawn after a probationary period demonstrating that direct debit payments will be honored.  Taxpayers can use the Online Payment Agreement application on <a href=\"http://www.irs.gov/\">www.irs.gov</a> to set-up with Direct Debit Installment Agreements.</p> <p style=\"text-align: justify;\"><strong>Installment Agreements and Small Businesses. </strong> The IRS will also make streamlined Installment Agreements available to more small businesses.  Small businesses with $25,000 or less in unpaid tax can participate, will have 24 months to pay, and will need to enroll in a Direct Debit Installment Agreement to participate.</p> <p style=\"text-align: justify;\">The streamlined Installment Agreements will be available for small businesses that file either as an individual or as a business.  Small businesses with an unpaid assessment balance greater than $25,000 would qualify for the streamlined Installment Agreement if they pay down the balance to $25,000 or less.</p> <p style=\"text-align: justify;\"><strong>Offers in Compromise.</strong>  An offer-in-compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed.  Generally, the IRS will not accept an offer if it believes the taxpayer can pay the liability in full as a lump sum or through a payment agreement.  The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.</p> <p style=\"text-align: justify;\">The IRS is also expanding a new streamlined Offer in Compromise (OIC) program to cover a larger group of struggling taxpayers.  This streamlined OIC is being expanded to allow taxpayers with annual incomes up to $100,000 to participate.  In addition, participants must have a tax liability of less than $50,000, doubling the current limit of $25,000 or less.</p> <p style=\"text-align: justify;\">For more information on dealing with income tax delinquencies, visit the Taxation section of our law library at <a href=\"resources/law-library\">http://www.racklaw.com/resources/law-library</a></p>','IRS Announces New Effort to Help Struggling Taxpayers Get a Fresh Start','','publish','open','open','','irs-announces-new-effort-to-help-struggling-taxpayers-get-a-fresh-start','','','2011-03-08 13:29:56','2011-03-08 13:29:56','',0,'http://www.racklaw.com/new-site/?p=6074',8,'post','',0),(6076,1,'2011-03-10 13:29:56','2011-03-10 13:29:56','<p>Estate may be subject to a negligence penalty for failing to disclose, on an estate tax return, the decedent’s life-time gifts.<span style=\"background: yellow none repeat scroll 0% 0%;\"> </span></p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/03/2011.3.10-penalty-for-negligent.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/03/2011.3.10-penalty-for-negligent.pdf\"><img class=\" size-full wp-image-5904\" alt=\"pdf-icon\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p><strong><span style=\"font-size: 12pt; color: black;\"> </span></strong></p> <p style=\"text-align: justify;\"><strong>Haggar v. U.S., 107 AFTR 2d, 2011-488.</strong></p> <p style=\"text-align: justify;\"><strong>Facts.</strong> At the time of his death, William Haggar, who had a daughter from a prior relationship named Sandra Havard, was married to Bonnie Haggar.  William knew some tax law, and typically managed all of the finances during his marriage to Bonnie.  In 1998, William gave his daughter a gift of $200,000, and gave her two children an additional gift of $60,000.  He told his daughter that he would handle the taxes associated with the gifts and that she would not need to file any tax return.  In the same year, William also made a gift of $40,000 to Bonnie’s two children.</p> <p style=\"text-align: justify;\">Bonnie knew about the gifts to William’s daughter, and she signed a gift tax return on which she consented to gift-splitting (although she signed the return without explanation from William).  The gift tax return was filed by a certified public accountant (CPA), and Bonnie did not receive a copy.</p> <p style=\"text-align: justify;\">In 2004, William died with a taxable estate, naming Bonnie and Sandra to serve as the representatives of his estate.  They hired an attorney and CPA to assist them with the preparation of the estate tax return and delivered all of William’s tax records to them.  The 1998 gift tax return was not included in the documents given to the attorney and CPA.</p> <p style=\"text-align: justify;\">When Bonnie and Sandra were asked if William had ever made any gifts, they both answered no.  Therefore, the CPA marked “no” in response to question 7a in Part 4 of the estate tax return regarding whether prior gift tax returns had been filed.  Bonnie and Sandra signed and filed the estate tax return.</p> <p style=\"text-align: justify;\">In August of 2006, the IRS examined the estate tax return and, in determining that the estate failed to disclose the prior gifts, assessed additional estate tax, interest, and an accuracy-related penalty of 20% of the portion of the underpayment attributable to the negligence.  The estate paid the additional federal estate tax and interest owed to the IRS, but argued that the penalty was erroneously assessed because Bonnie and Sandra had acted in good faith and there was reasonable cause for the underpayment.</p> <p style=\"text-align: justify;\">The IRS filed a motion for summary judgment which would have enabled it to collect the negligence penalty and cut off the reasonable cause defense of Bonnie and Sandra.</p> <p style=\"text-align: justify;\"><strong>The Court’s Decision.</strong>  Under Code Sec. 7491(c), the IRS bears the burden of production with regard to penalties and must come forward with sufficient evidence indicating that it is appropriate to impose penalties.  The district court held that the IRS met this burden, since William’s daughter was the recipient of the $200,000 gift and his wife signed the gift tax return only six years prior to his death, at which time both defendants told the CPA that William had not made any lifetime gifts.</p> <p style=\"text-align: justify;\">Therefore, the burden of establishing a defense shifted to Bonnie and Sandra, who argued that, although they had actual knowledge of the 1998 gifts, they nonetheless acted in good faith when they incorrectly informed the estate attorney and CPA about the lifetime gifts.  Since the issue of good faith and reasonable cause was disputed, neither the IRS nor the defendants were granted summary judgment.  The credibility of Bonnie and Sandra was held to be a key factor in weighing the evidence, which the Court determined was an issue of material fact that could only be decided after a full hearing.  Accordingly, the propriety of the negligence penalty was set for trial.</p> <p style=\"text-align: justify;\"><strong>Recommendation. </strong> As demonstrated in this case, copies of filed gift tax returns (and any other tax returns) should be permanently retained with a taxpayer’s financial records. These tax returns can provide crucial information for attorneys and CPAs regarding lifetime gifts, which will effect whether an estate tax return needs to be filed and if so, the amount of estate tax that may be owed to the IRS.  Doing so potentially saves tens of thousands of dollars in needless IRS penalties, and attorney and accountant fees.</p> <p style=\"text-align: justify;\"><span style=\"color: black;\"> </span></p>','Estate May Be Assessed Penalty for Negligent Failure to Disclose  Lifetime Gifts Made by Decedent','','publish','open','open','','estate-may-be-assessed-penalty-for-negligent-failure-to-disclose-lifetime-gifts-made-by-decedent','','','2011-03-10 13:29:56','2011-03-10 13:29:56','',0,'http://www.racklaw.com/new-site/?p=6076',6,'post','',0),(6088,1,'2011-03-11 13:29:56','2011-03-11 13:29:56','<p>A discretionary support trust for the benefit of a Medicaid applicant is deemed a countable asset for eligibility purposes.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/03/2011.3.11-biagetti.pdf\"><img class=\" alignright size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" style=\"float: right;\" height=\"15\" width=\"15\" /></a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/03/2011.3.11-biagetti.pdf\">Download PDF</a></p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\" align=\"center\"><b> </b></p> <p style=\"text-align: justify;\"><strong>Biagetti v. R.I. Dept. of Human Serv. (R.I. Super. Ct., No. PC 09-7370, Feb. 25, 2011).</strong></p> <p style=\"text-align: justify;\"><strong>Facts.</strong>  In 1998, Jeanne M. Biagetti created a revocable living trust.  The trust provided that Ms. Biagetti would serve as the sole trustee of her trust until she became incapacitated or disabled, at which time her son would serve as successor trustee.  The trust terms also provided that, if Ms. Biagetti became disabled, the successor trustee was required to pay the net income of the trust to her for her health and welfare; however, the trustee was granted the discretion to make distributions of principal to Ms. Biagetti.</p> <p style=\"text-align: justify;\">In 2009, Ms. Biagetti applied for Medicaid benefits and was denied because the assets available to her from her trust were considered a countable resource by the state.  The hearing officer ruled that, since the trustee was not given sole discretion to make distributions from the trust, the trust is a support trust and therefore an available asset, for eligibility purposes.</p> <p style=\"text-align: justify;\">Ms. Biagetti appealed the hearing officer’s decision, arguing that the once revocable trust became irrevocable upon her disability, since (by the terms of the trust) she was no longer able to make changes to the trust.</p> <p style=\"text-align: justify;\"><strong>The Court’s Decision. </strong> The Rhode Island Superior Court affirmed the hearing officer’s decision, holding that Ms. Biagetti’s trust was an available asset because it was a support trust.  According to the court, “as a result of the lack of sole discretion on the part of the trustee and the requirement that Ms. Biagetti is paid the net income and supported, this trust is a support trust.”  Given that the trust is a support trust, it is irrelevant whether the trust is revocable or irrevocable.  Therefore, Ms. Biagetti was required to spend down the assets in the support trust in order to meet the resource limit for Medicaid eligibility.</p> <p style=\"text-align: justify;\"><strong>Recommendation.</strong>  Although a support trust is considered a countable resource for Medicaid eligibility purposes, there are certain types of trusts that are not treated as countable resources for a person applying for Medicaid benefits.  If a person with a disability has or may receive assets in excess of the Medicaid resource limit, the assets can be transferred to a properly established special needs trust.  A special needs trust is designed to protect and distribute funds in such a way that they will improve the quality of life of the trust beneficiary without causing ineligibility for public benefits, such as Medicaid.</p>','Medicaid Applicant\'s Support Trust Considered a Countable Asset','','publish','open','open','','medicaid-applicants-support-trust-considered-a-countable-asset','','','2011-03-11 13:29:56','2011-03-11 13:29:56','',0,'http://www.racklaw.com/new-site/?p=6088',5,'post','',0),(6090,1,'2011-03-17 13:29:56','2011-03-17 13:29:56','<p style=\"text-align: justify;\">Daughter, acting as Power of Attorney for her mother, breached fiduciary duty to her mother by refusing to surrender life insurance policy in order to qualify her mother for Medicaid.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/03/2011.3.17-poa-liable.pdf\">Download PDF</a> <a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/03/2011.3.17-poa-liable.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\"><strong>Shaw v. Covenant Care Waldron Home. (Ind.  Ct. App., No. 73A04-1005-SC-317, March 2, 2011) (unpublished).</strong></p> <p style=\"text-align: justify;\"><strong>Facts.</strong>  Mrs. Shaw appointed her daughter, Joni, to serve as her attorney-in-fact.  As Ms. Shaw’s agent, Joni signed an admission agreement in order to have her mother admitted to a nursing home and submitted a Medicaid application so that her mother could receive medical benefits.  The Medicaid application was denied because Ms. Shaw had resources in excess of the Medicaid limit as she owned a life insurance policy with a cash surrender value.  Joni refused to surrender the policy and Mrs. Shaw was never approved for Medicaid benefits.  Joni also withdrew funds from her mother’s bank account and deposited them into her personal account.</p> <p style=\"text-align: justify;\">After Mrs. Shaw passed away, Joni’s brother, who was the designated beneficiary of the life insurance policy, gave Joni $8,000 from the proceeds of the policy.  The estate owed an unpaid balance of $5,709.40 to Mrs. Shaw’s nursing home, which amount Joni refused to pay from her mother’s estate.  The nursing home sued for breach of contract and breach of fiduciary duty, arguing that an attorney-in-fact who breaches a duty to the principal is liable to third parties as though he or she were the principal.  The small claims court of Indiana held in favor of the nursing home, and Joni appealed the decision.</p> <p style=\"text-align: justify;\"><strong>Court’s Ruling.</strong>  The Indiana Court of Appeals affirmed the decision of the small claims court.  Joni was found to have breached her fiduciary duty to her mother by refusing to surrender the life insurance policy in order to qualify her mother for Medicaid (and later personally benefiting from the same policy), transferring funds from her mother’s account into her personal account and refusing to pay the debts of her mother’s estate.  By electing to personally benefit from her mother’s assets, to the detriment of Mrs. Shaw, Joni did not uphold her fiduciary duty to her mother and was not able to disregard the debts of her mother’s estate.</p>','Daughter’s Breach of Fiduciary Duty to Mother Makes Daughter Liable to Nursing Home','','publish','open','open','','daughters-breach-of-fiduciary-duty-to-mother-makes-daughter-liable-to-nursing-home','','','2011-03-17 13:29:56','2011-03-17 13:29:56','',0,'http://www.racklaw.com/new-site/?p=6090',12,'post','',0),(6092,1,'2011-03-21 13:29:55','2011-03-21 13:29:55','<p style=\"text-align: justify;\">The most popular way to reduce the deficit, according to 81% of Americans?  Put a surtax on federal income taxes for those who make more than $1 million per year.  -- NBC/Wall St. Journal Poll, March 2, 2011</p> <p><span style=\"background: yellow none repeat scroll 0% 0%;\"> </span></p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/03/2011.3.21-schakowsky.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/03/2011.3.21-schakowsky.pdf\"><img class=\" size-full wp-image-5904\" alt=\"pdf-icon\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p><strong><span style=\"font-size: 12pt; color: black;\"> </span></strong></p> <p style=\"text-align: justify;\">On March 16, 2011, Rep. Jan Schakowsky (D-IL), member of President Obama’s 18-member Fiscal Commission, introduced the Fairness in Taxation Act, which would create new tax brackets for millionaires and billionaires.  Original co-sponsors include co-chairs of the Congressional Progressive Caucus, Rep. Raul Grijalva (D-AZ) and Rep. Keith Ellison (D-MN), as well as Rep. Jesse Jackson, Jr. (D-IL), Rep. Donna Edwards (D-MD), Rep. Bob Filner (D-CA), Rep. Jerry Nadler (D-NY), Rep. Steve Cohen (D-TN), Rep. John Yarmuth (D-KY), and Rep. Peter DeFazio (D-OR).  In support of the Fairness in Taxation Act, Rep. Schakowsky posted the following explanation on her <span style=\"text-decoration: underline;\"><span style=\"color: #3366ff;\"><a href=\"http://schakowsky.house.gov/index.php?option=com_content&view=article&id=2877:schakowsky-introduces-bill-to-tax-millionaires-and-billionaires&catid=22:2011-press-releases\">website</a></span></span>.</p> <p style=\"text-align: justify;\">Income inequality in America is the worst we’ve seen it since 1928.  Wages have stagnated for middle and lower income families despite enormous gains in productivity.  Where has all the money gone?</p> <p style=\"text-align: justify;\">“In the United   States today, the richest 1% owns 34% of our nation’s wealth – that’s more than the entire bottom 90%, who own just 29% of the country’s wealth,” said Rep. Schakowsky.  “And the top one-hundredth of 1% now makes an average of $27 million per household per year.  The average income for the bottom 90% of Americans? $31,244.  It’s time for millionaires and billionaires to pay their fair share, which is why I introduced the Fairness in Taxation Act. This isn’t about punishment or revenge.  It’s about fairness.  It’s about avoiding budget cuts that harm middle class families and those who aspire to it.  We can choose to cut education, job creation and health care, or we can choose to ask those who can contribute more to do so.”</p> <p style=\"text-align: justify;\">The current top tax bracket begins at $373,000 in income and fails to distinguish between the “well off” and billionaires – like the top 20 hedge fund managers whose average income last year was over $1 billion.</p> <p style=\"text-align: justify;\"><strong>The Fairness in Taxation Act asks enacts new tax brackets for income starting at $1 million and ends with a $1 billion bracket.  The new brackets would be:</strong></p> <p style=\"text-align: justify;\"><strong>$1-10 million: 45%</strong><br /><strong>$10-20 million: 46%</strong><br /><strong>$20-100 million: 47%</strong><br /><strong>$100 million to $1 billion: 48%</strong><br /><strong>$1 billion and over: 49%</strong></p> <p style=\"text-align: justify;\"><strong>The bill would also tax capital gains and dividend income as ordinary income for those taxpayers with income over $1 million.  If enacted in 2011, the Fairness in Taxation Act would raise more than $78 billion.</strong></p> <p style=\"text-align: justify;\"><span style=\"text-decoration: underline;\">Support for Schakowsky’s Fairness in Taxation Act:</span></p> <p style=\"text-align: justify;\">“I think very wealthy people like me should pay substantially higher taxes, since we have done exceedingly well in the last few decades,” said <strong>Katharine Myers, a millionaire</strong> from Pennsylvania whose income comes from royalties from the Myers-Briggs personality test, created by her mother-in-law, which she has managed with Peter Myers since the 1980s.  “Our taxpayer-funded government contributed to my success.”  Myers has been a supporter of United for a Fair Economy and its Responsible Wealth project for many years.</p> <p style=\"text-align: justify;\">“It’s time we treated multi-millionaires the same way we treat working families – by creating a tax bracket to match their income,” <strong>said Rep. Raúl M. Grijalva (D-AZ),</strong> co-chair of the Congressional Progressive Caucus.  “There’s no reason to treat the wealthiest one percent of the country any more specially than anyone else, and right now that’s exactly what our tax system is doing.  The Republican war on working families means cutting from the middle and handing the savings to the top.  Instead, let’s have everyone pay their fair share to create jobs and get the economy moving again.”</p> <p style=\"text-align: justify;\">“Millionaires and billionaires should be giving to charity not getting it,” said <strong>Rep. Keith Ellison (D-MN),</strong> co-chair of the Congressional Progressive Caucus.  “The middle class is shrinking and deficits are rising because Republicans are giving a pass to special interests who aren’t paying their fair share.  This bill is part of a plan to level the playing field.”</p> <p style=\"text-align: justify;\">“A tax system where families earning several thousand dollars are taxed at the same rate as millionaires is unfair, and unsustainable,” said <strong>Rep. Donna Edwards (D-MD)</strong>.  “The Fairness in Taxation Act is a common sense solution to eliminating this inequality and balancing the federal budget.  At a time when House Republicans are demanding that working families, teachers, and firefighters bear the burden of reducing the deficit, millionaires should be required to contribute their fair share.”</p> <p style=\"text-align: justify;\"><span style=\"text-decoration: underline;\">Groups that have endorsed Schakowsky’s Fairness in Taxation Act:</span></p> <p style=\"text-align: justify;\"><strong>United for a Fair Economy, Citizens for Tax Justice, Citizen Action Illinois, U.S. Action, Campaign for America’s Future, Wealth for the Common Good, and The Agenda Project.</strong></p> <p style=\"text-align: justify;\">Congresswoman Schakowsky has shown that there is another way,” said <strong>Steve Wamhoff, tax expert from Citizens for Tax Justice. </strong> “Her proposal would make the federal income tax more progressive by introducing higher rates for taxpayers with income in excess of $1 million.  Millionaires have benefited disproportionately from the tax cuts enacted over the past decade, so it seems entirely reasonable that they share in the sacrifices needed to get our fiscal house in order.”</p> <p style=\"text-align: justify;\">“The budget cuts being debated in Washington shamefully require middle class families to pay the price for the recklessness of the Wall Street bankers and hedge fund managers who broke our economy,” said <strong>Brian Miller, Executive Director of United for a Fair Economy. </strong> “Instead of punishing middle class families and de-funding America, the Fairness in Taxation Act asks those who have benefitted so heavily from the economic bounce of Wall Street to share responsibility for getting our nation’s finances on track.”</p> <p style=\"text-align: justify;\">“Any sensible program for deficit reduction must begin with changing the massive tax cuts for the very wealthy,” said <strong>Roger Hickey, co-director of the Campaign for America’s Future.</strong>  “Those tax give-aways were a major cause of our current deficit.  In an era of excessive inequality we should end Bush era tax cuts for the wealthiest Americans.  We need progressive revenues not just to bring down deficits, but also to finance investments in job and sustainable growth.  The introduction of the Fairness in Taxation Act is an important step that will be popular with the American people.”</p> <p style=\"text-align: justify;\"><span style=\"color: black;\"> </span></p>','Rep. Jan Schakowsky Introduces Bill to Tax Millionaires and Billionaires','','publish','open','open','','rep-jan-schakowsky-introduces-bill-to-tax-millionaires-and-billionaires','','','2011-03-21 13:29:55','2011-03-21 13:29:55','',0,'http://www.racklaw.com/new-site/?p=6092',11,'post','',0),(6094,1,'2011-03-21 13:29:55','2011-03-21 13:29:55','<p style=\"text-align: justify;\">A Medicaid home health services recipient may not deduct the expenses paid for additional in-home services if those services were coverable by Medicaid.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/03/2011.3.21-personal-care-deduction.pdf\"><img class=\" alignright size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" style=\"float: right;\" height=\"15\" width=\"15\" /></a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/03/2011.3.21-personal-care-deduction.pdf\">Download PDF</a></p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\" align=\"center\"><b> </b></p> <p style=\"text-align: justify;\"><strong>In re Jean Brett. (Vt., No. 2010-201, Feb. 25, 2011).</strong></p> <p style=\"text-align: justify;\"><strong>Facts. </strong> Jean Brett was approved for five days per week of home-based long-term care services through a Vermont Medicaid waiver program.  The terms of the program benefits required Jean to share a portion of the cost of the home-based services, as determined by her income level.  Since her daughter provided additional care for the remaining two days of each week, and the value of these services was deducted from Ms. Brett’s countable income, her portion of the care costs was reduced to a mere $45 per month.</p> <p style=\"text-align: justify;\">However, in July of 2009, the state agency determined that the two additional days of home-based long-term care were not medically necessary for Ms. Brett.  Accordingly, the value of the two days of services provided by her daughter was no longer deducted from her countable income, and her share of the costs substantially increased to $1,155 per month.  Ms. Brett appealed the state agency’s determination and the matter was sent to a review board.</p> <p style=\"text-align: justify;\">The review board determined that the services provided by Ms. Brett’s daughter were medically necessary; however, such services could have been provided by Medicaid if properly requested.  Therefore, the board held that the value of the additional services were not deductible from Ms. Brett’s income.  Ms. Brett appealed this decision, arguing that, since the services were not paid for by Medicaid before July of 2009, they should be classified as deductible “noncovered” expenses.</p> <p style=\"text-align: justify;\"><strong>Court’s Decision.</strong>  The Supreme Court of Vermont affirmed the review board’s determination that Ms. Brett could not take a deduction for services that could have otherwise been provided by Medicaid.  The court explained that, if Ms. Brett was permitted to deduct these additional in-home service expenses, she would become “the architect of benefit administration, rather than the agency in which the Legislature vested such authority.”</p> <p style=\"text-align: justify;\"><strong>Alternate Strategies.</strong>  Although strictly enforced, the Medicaid rules do make certain allowances for benefit recipients.  For example, in Virginia, a Personal Care Services Agreement can both preserve the Medicaid applicant’s assets and compensate family members for the fair market value of home-based care services.  However, such agreements must be carefully drafted and properly implemented in order to withstand the scrutiny of Medicaid case workers.</p>','No Deduction for Self-Provided Home Care Services That Medicaid Could Provide','','publish','open','open','','no-deduction-for-self-provided-home-care-services-that-medicaid-could-provide','','','2011-03-21 13:29:55','2011-03-21 13:29:55','',0,'http://www.racklaw.com/new-site/?p=6094',10,'post','',0),(6096,1,'2011-03-23 13:29:54','2011-03-23 13:29:54','<p style=\"text-align: justify;\">A district court has held that almost $12 million paid from an estate to a charity under a settlement agreement between the decedent\'s son and the charity qualified for an estate tax charitable deduction even though the bequest was not included in decedent’s Last Will and Testament.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/03/2011.3.22-charitable-deduction.pdf\">Download PDF</a> <a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/03/2011.3.22-charitable-deduction.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\"><strong>Estate of Antonio J. Palumbo, (DC PA 03/09/2011) 107 AFTR 2d at 560.</strong></p> <p style=\"text-align: justify;\"><strong>Facts.</strong> In 1974, Antonio J. Palumbo established the A.J. and Sigismunda Palumbo Charitable Trust (the “Charitable Trust”).  Mr. Palumbo subsequently executed additional wills, codicils and trust agreements.  At the time of his passing on December 16, 2002, his last will and testament executed in 1999, along with three modifying codicils (the “Will”), was currently in effect.</p> <p style=\"text-align: justify;\">The Will (and several of the codicils) named the Charitable Trust as the beneficiary of the residuary estate; however, the most recent codicil did not include the Charitable Trust as a beneficiary of the residuary estate.  Based on the inconsistency of the decedent’s documents, the estate and the IRS stipulated that there was no express residuary dispositive provision in the most recent codicil due to a scrivener’s error by the drafting attorney.  Since the Will did not contain a residuary distribution provision, the decedent’s son claimed that he was the sole beneficiary of the intestate estate.  Meanwhile, the trustee of the Charitable Trust claimed that it was the beneficiary of the residuary estate since the lack of residuary clause was caused by scrivener\'s error.  Each party retained counsel and negotiated a settlement agreement regarding the distribution of the residuary estate.</p> <p style=\"text-align: justify;\">According to the settlement agreement, the Charitable Trust was to receive $11,721,141 and the decedent’s son was to inherit $5,600,000 and real property.  The settlement agreement was approved by court order on July 10, 2003 in Elk County, Pennsylvania.  The estate then filed a claim for a federal estate tax charitable deduction for the portion of the residuary estate paid to the Charitable Trust.</p> <p style=\"text-align: justify;\">The IRS rejected the deduction since the gift to the charity was from a settlement agreement and not actually included in the dispositive provisions of the Will.  The estate filed a claim in district court to pursue its claim for the substantial charitable deduction.</p> <p style=\"text-align: justify;\"><strong>District Court’s Holding. </strong> Despite the arguments made by the IRS and the drafting attorney’s admission to the unintentional exclusion of the proper dispositive provisions in the Will, the court held in favor of the estate since the applicable Code section regarding the deduction was intended to encourage charitable giving.  I.R.C. § 2055.  The court determined that, while Pennsylvania typically only looks to the “four corners” of a document to determine its terms, there is long-standing case law in support of following the intent of the testator in order to avoid creating an intestate estate when a person has executed a will.  The court assumes that, upon the execution of a will, the testator intended to dispose of his entire estate, rather than leaving a portion of his assets to be distributed according to the laws of intestate succession.</p> <p style=\"text-align: justify;\">In this case, all documents executed prior to the Will included a gift of the residuary estate to the Charitable Trust.  The parties agreed on the decedent’s intent and the lack of the proper language in the Will, which led to the settlement negotiations.  Since the decedent intended to leave a large gift to the Charitable Trust upon his death, and the drafting attorney admitted to the mistake, the IRS must allow the estate to receive the charitable deduction.</p>','Settlement Paid from Estate Qualifies for Charitable Deduction','','publish','open','open','','settlement-paid-from-estate-qualifies-for-charitable-deduction','','','2011-03-23 13:29:54','2011-03-23 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6096',11,'post','',0),(6098,1,'2011-03-30 13:29:54','2011-03-30 13:29:54','<p style=\"text-align: justify;\">An Indiana appeals court rules that the state’s Medicaid lien on settlement proceeds should be based on the state’s actual payments rather than on the total amount billed by the medical provider.</p>  <!--more-->  <p> </p> <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/03/2011.4.4-medicaid-reimbursement.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/03/2011.4.4-medicaid-reimbursement.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p style=\"text-align: justify;\"><strong><span style=\"color: black; font-size: 12pt;\"> </span><em>Southwest Fiduciary v. Willingham, Ind. App. Ct., Nos. 1 CA-CV 10-0300, 1 CA-CV 10-0301, March 10, 2011</em></strong>.</p> <p style=\"text-align: justify;\"><strong>Facts.</strong>  Medicaid recipients Rhoda Lundy and James Flynn were both injured in unrelated car accidents, and a portion of their medical expenses incurred due to these accidents were paid by Medicaid.  Ms. Lundy and Mr. Flynn both sued third parties who were involved in the accidents to recover damages allegedly caused by them.  </p> <p style=\"text-align: justify;\">In filing claims for medical-expenses against the third parties, both Ms. Lundy and Mr. Flynn requested reimbursement for the entire amounts billed by all medical providers, and did not limit their respective settlement claims to the <span style=\"text-decoration: underline;\">actual</span> amounts paid out-of-pocket. </p> <p style=\"text-align: justify;\">Upon learning of the settlements to be awarded to Ms. Lundy and Mr. Flynn, the state Medicaid agency filed liens against these amounts.  Medicaid representatives requested that their liens be determined based on the total amounts billed by the medical providers, rather than the actual amounts that Medicaid paid on behalf of each claimant.   </p> <p style=\"text-align: justify;\">The trial court in Indiana held that each lien would be reduced to the actual amounts paid by Medicaid rather than the total medical expenses billed to Ms. Lundy and Mr. Flynn.  Since the cases were similar in facts, the cases were consolidated on appeal by the state. </p> <p style=\"text-align: justify;\"><strong>Court’s Ruling</strong>.  The Indiana Court of Appeals affirmed the trial court’s decision, finding that the state could not enforce its lien against any part of a Medicaid recipient’s settlement award that was not directly attributable to the actual payments made by the state on behalf of the recipient.  The court further explained that the share of the settlement award that is reimbursable to Medicaid should be calculated based on the amount the state actually paid for medical care and services on behalf of the recipient, not the inflated amounts on invoices from medical providers and hospitals that can later be negotiated and reduced.</p>','Medicaid Reimbursement Claim by State Limited to Benefits Actually Paid','','publish','open','open','','medicaid-reimbursement-claim-by-state-limited-to-benefits-actually-paid','','','2011-03-30 13:29:54','2011-03-30 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6098',10,'post','',0),(6100,1,'2011-04-11 13:29:54','2011-04-11 13:29:54','<p style=\"text-align: justify;\">State Medicaid agency is entitled to complete reimbursement of medical  expenses, without offset for attorneys’ fees, from personal injury  settlement awarded to Medicaid recipient and transferred into a special  needs trust.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/04/2011.4.11-medicaid-recover-settlement.pdf\"><img class=\" alignright size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" style=\"float: right;\" height=\"15\" width=\"15\" /></a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/04/2011.4.11-medicaid-recover-settlement.pdf\">Download PDF</a></p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\" align=\"center\"><b> </b></p> <p style=\"text-align: justify;\"><strong>Special Needs Trust for K.C.S. v. Folkemer.  (D. Maryland, No. C8:10-CV-1077-AW, March 28, 2011).</strong></p> <p style=\"text-align: justify;\"><strong>Facts. </strong> A female minor identified as “K.C.S.” suffered multiple injuries during her birth, resulting in her lifetime need for constant medical care.  Between 2004 and 2009, the Maryland Department of Health and Mental Hygiene paid $298,585.75 toward her care; however, in 2009, K.C.S was awarded $3 million from a personal injury settlement with her doctors.  In the final settlement agreement, the awarded funds were not specifically allocated among past medical expenses, pain and suffering, or future medical expenses.  Her attorney charged a contingency fee of $1 million for legal services, and the remaining $2 million was placed in a Special Needs Trust for the benefit of K.C.S.  Upon learning of this award, the state initiated proceedings for its recovery for the full amount spent on her care during the previous five years, and K.C.S., by her guardians, requested a declaratory judgment preventing the state’s recovery from the Special Needs Trust.  Since there was no discrepancy regarding the facts of the case, both parties filed motions for summary judgment.</p> <p style=\"text-align: justify;\">K.C.S. argued that the Maryland Medicaid recovery statute is in violation of federal law since it authorizes the state to seek recovery directly from her settlement award, rather than seeking recovery directly from the doctors.  K.C.S. alternatively argued that, if the state was allowed to recover its expenses from her settlement award, the amount should be calculated from the portion of her award that was given towards her past medical expenses, including a pro-rata set-off for attorneys’ fees attributable to the settlement.  In opposition, the state argued that K.C.S. had automatically assigned her rights to any recovery or settlement to the state by accepting the state’s medical assistance and payments, and that the state should be allowed to recover the amounts actually paid on her behalf.</p> <p style=\"text-align: justify;\"><strong>Court’s Decision.</strong>  The U.S. District Court for Maryland granted the state’s motion for summary judgment, and held that the state is entitled to full recovery without offset for attorneys’ fees.  Although the settlement agreement did not address the portion of the award attributable to past medical expenses, the court found that the state was not prevented from recovering the actual amount paid on behalf of K.C.S. because “it was inevitable that the damage award represented payments for both past and future medical costs. The fact that these two compensation categories were placed in the same award should not result in the Department being prohibited from recouping amounts for past awards. Again, there is no indication from the record that [the state is] attempting to recover anything more than expenses for past medical care.”  Further, the court also held that the Maryland statute authorizing such recovery was implemented specifically to prevent the state from being responsible for attorneys’ fees associated with recovery actions.</p>','State Can Recover Medicaid Payments from Personal Injury Settlement Award','','publish','open','open','','no-deduction-for-self-provided-home-care-services-that-medicaid-could-provide-2','','','2011-04-11 13:29:54','2011-04-11 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6100',9,'post','',0),(6102,1,'2011-05-12 13:29:54','2011-05-12 13:29:54','<p style=\"text-align: left;\">Estate allowed to claim an estate tax charitable deduction for estate funds distributed to a charitable trust pursuant to a settlement agreement reached after negotiations over contested will.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/05/2011.5.12-charitable-deduction.pdf\">Download PDF</a> <a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/05/2011.5.12-charitable-deduction.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></p> <p style=\"text-align: justify;\"> </p> <p><strong>Estate of Antonio J. Palumbo, (DC PA 03/09/2011) 107 AFTR 2d ¶ 560.</strong></p> <p style=\"text-align: justify;\"><strong>Facts.</strong>  In 1974, Antonio J. Palumbo established the A.J. and Sigismunda Palumbo Charitable Trust (the “Charitable Trust”).  Subsequently, Mr. Palumbo executed various estate planning documents, including wills and trusts with testamentary provisions.  Upon his death in December of 2002, his Will of July 6, 1999 (and its three codicils) was in effect.  The 1999 Will included a provision that all taxes were to be paid from the residuary estate.  Further, the Will identified and named the Charitable Trust as a remainder beneficiary throughout the Will and the three codicils.  However, after analyzing the Will, the estate and IRS agreed that, due to a scrivener’s error, the Will did not include an express residuary provision.  (Each prior will executed by Mr. Palumbo did include a residuary provision.)</p> <p style=\"text-align: justify;\">Since the Will did not include a residuary provision, Mr. Palumbo\'s son claimed that the Will was invalid and the entire residuary estate should pass to him pursuant to the laws of intestacy as the sole surviving heir. In opposition, the Trustee of the Charitable Trust contacted Mr. Palumbo\'s son and filed a claim against the residuary estate since the missing clause was due to a scrivener\'s error.</p> <p style=\"text-align: justify;\">Mr. Palumbo\'s son and the Trustee of the Charitable Trust negotiated a settlement agreement with respect to the disposition of the residuary estate.  According to the terms of the settlement agreement, the Charitable Trust would receive a portion of the residuary estate amounting to $11,721,141 and Mr. Palumbo\'s son would receive $5,600,000 and certain real property.  Upon filing a joint petition, the settlement agreement was approved on July 10, 2003 by Order of the Orphans\' Court Division of the Court of Common Pleas of Elk County, Pennsylvania.  After executing the settlement agreement, the estate filed a claim for a federal estate tax charitable deduction in the amount of $11,721,141 for the distribution made to the Charitable Trust.  The IRS notified the estate that the charitable deduction would be disallowed since the transfer was actually made by Mr. Palumbo\'s son by way of the settlement agreement, and not directly from Mr. Palumbo’s estate through the 1999 Will.  The estate then sued in district court, arguing that it should be entitled to a charitable deduction under Internal Revenue Code § 2055.</p> <p style=\"text-align: justify;\"><strong>District Court’s Decision.</strong>  The court allowed the charitable deduction due to the facts of the case and legislative history, which demonstrated that IRC § 2055 was designed to encourage charitable gifts.  The facts demonstrated that Mr. Palumbo intended (through many versions of estate planning documents) to leave the residuary estate to the Charitable Trust.  Further, the attorney who drafted the 1999 Will admitted (in the resulting malpractice case) that he had unintentionally forgotten to include the residuary provision.  The court also concluded that the settlement negotiations were held at arms-length, the final agreement was court approved, and there was no evidence of any collusion among the parties to the agreement.</p>','Estate is Allowed Charitable Deduction for Distribution Made Pursuant to Settlement Agreement','','publish','open','open','','estate-is-allowed-charitable-deduction-for-distribution-made-pursuant-to-settlement-agreement','','','2011-05-12 13:29:54','2011-05-12 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6102',8,'post','',0),(6105,1,'2011-05-13 13:29:55','2011-05-13 13:29:55','<p style=\"text-align: justify;\">Father claims his children converted his assets and fraudulently misrepresented their intention to establish a living trust for his benefit so that he could qualify for Medicaid benefits; however, statute of limitations bars a lawsuit by father.</p>  <!--more-->  <p> </p> <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/05/2011.5.13-denied-fraud-claim.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/05/2011.5.13-denied-fraud-claim.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p><strong><span style=\"text-decoration: underline;\"><span style=\"color: #0000ff;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/05/64371-1.unp.doc.pdf\">Rozzano v. Preston</a></span></span> (Wash. Ct. App., Div. 1, No. 64371-1-I, April 4, 2011) (unpublished).</strong></p> <p style=\"text-align: justify;\"><strong>Facts.</strong>  In 1994, Frank Rozzano met with his attorney to discuss potential strategies for Medicaid planning and long-term care.  The attorney suggested a plan in which Mr. Rozzano would gift his assets to his children, who would then use the assets to fund a living trust for their father’s benefit.  By removing these assets from his estate, Mr. Rozzano would become eligible for Medicaid and other needs-based benefits after the expiration of the applicable look-back period.  In 1996, Mr. Rozzano made the gifts to his children; however, Mr. Rozzano was warned that, upon transferring the assets to his children, he would no longer retain any control over the gifted assets.</p> <p style=\"text-align: justify;\">The children never created the living trust, but they did provide financial support to their father, including purchasing his residence, and paying for various travel expenses, dental appointments and his wedding to his new wife.  On certain occasions throughout the years, the children denied requests for money from their father.</p> <p style=\"text-align: justify;\">Mr. Rozzano had a stroke in 2005, and thereafter had some memory loss regarding the previous transfer of assets to his children for the purpose of creating the living trust.  Following the stroke, the children frequently denied their father’s requests for funds, including refusing to fund his regular fishing trips.  In response to these actions, Mr. Rozzano hired a different attorney to complete a Termination and Revocation of the assignment of interest (i.e., the gift) previously executed in 1996.  The children were provided notice of the Revocation, with a demand for the return of the assets, including an accounting of all expenditures.</p> <p style=\"text-align: justify;\">In July of 2008, Mr. Rozzano filed a lawsuit against his children alleging claims of fraud and misrepresentation, undue influence, conversion and breach of trust and fiduciary duty.  The children filed a motion for summary judgment, which was granted by the trial court since all of the claims were barred by the three-year statute of limitations. Mr. Rozzano appealed.</p> <p style=\"text-align: justify;\"><strong>Court’s Decision. </strong> The Court of Appeals of Washington affirmed the trial court’s decision.  The Court of Appeals determined that, since Mr. Rozzano had actual knowledge that the trust was not established and the children were exercising their control over the funds more than three years before he filed suit, all of his claims were barred by the statute of limitations.</p>','Court Denies Father’s Fraud-Based Claim to Recover  Assets Gifted to Children for Medicaid Planning Purposes','','publish','open','open','','court-denies-fathers-fraud-based-claim-to-recover-assets-gifted-to-children-for-medicaid-planning-purposes','','','2011-05-13 13:29:55','2011-05-13 13:29:55','',0,'http://www.racklaw.com/new-site/?p=6105',7,'post','',0),(6107,1,'2011-05-17 13:29:55','2011-05-17 13:29:55','<p>Missouri’s claim for reimbursement of Medicaid benefits from the estate of a deceased Medicaid recipient was denied because government computerized records were deemed insufficient evidence to assert the claim.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/05/2011.5.17-computerized-records.pdf\"><img class=\" alignright size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" style=\"float: right;\" height=\"15\" width=\"15\" /></a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/05/2011.5.17-computerized-records.pdf\">Download PDF</a></p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\" align=\"center\"><b> </b></p> <p><strong>In the Estate of Strayer v. State (Mo. Ct. App., No. WD 72707, April 19, 2011).</strong></p> <p style=\"text-align: justify;\">Facts.  Ms. Joanna Strayer qualified for and received Medicaid benefits from the state of Missouri until her death in 2005.  Upon her death, the state filed a claim against her estate in order to seek reimbursement of $52,931.33 in benefits that were supposedly paid to Ms. Strayer during her lifetime.  At the claim hearing, the state submitted ten pages of computerized records as evidence of the benefit amounts paid to Ms. Strayer during her lifetime.</p> <p style=\"text-align: justify;\">In response to the presentment of the computerized evidence, the representative for the Estate of Joanna Strayer objected and argued that the court should deny the claim against the Estate since the state had not met its burden of proof for recovery of the funds.  The court denied the claim by the state, determining that the computerized records alone were insufficient to support the claim because, although they included cash amounts, they did not indicate that amounts listed represented benefits actually paid to Ms. Strayer.  The court further held that it was \"left to speculate as to what the random numbers set forth in the bare records represent[ed].\" The state appealed.</p> <p style=\"text-align: justify;\">Court’s Decision.  The Missouri Court of Appeals, Western District, affirmed the court’s holding to deny the claim for reimbursement, holding that \"[t]he State\'s computerized records without testimony as to the meaning of the data contained therein or other evidence certifying that payment was made on [Ms.] Strayer\'s behalf did not constitute competent and substantial evidence of payment.\"</p>','Missouri’s Medicaid Recovery Claim Based Solely on Computerized Records Is Denied','','publish','open','open','','missouris-medicaid-recovery-claim-based-solely-on-computerized-records-is-denied','','','2011-05-17 13:29:55','2011-05-17 13:29:55','',0,'http://www.racklaw.com/new-site/?p=6107',6,'post','',0),(6109,1,'2016-02-25 13:29:54','2016-02-25 13:29:54','<p>Rev. Rul. 2011-13, 2011-23 IRB</p>  <!--more-->  <p style=\"text-align: right;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/05/2011.5.27-applicable-federal-rates.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/05/2011.5.27-applicable-federal-rates.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p style=\"text-align: center;\"><span style=\"color: #000000;\"><strong><span style=\"font-size: 12pt;\"> </span></strong></span></p> <table style=\"margin-left: auto; margin-right: auto;\" align=\"center\" border=\"3\" cellpadding=\"3\" height=\"497\" width=\"483\"> <caption> <p><span style=\"color: #000000;\"><strong>Table 1 (Section 1274(d) Rate) Period for Compounding<br /></strong></span></p> </caption>  <tbody> <tr bgcolor=\"7093DB\"> <th><br /></th><th style=\"text-align: center;\"><span style=\"color: #000000;\">Annual</span></th><th style=\"text-align: center;\"><span style=\"color: #000000;\">Semiannual</span></th><th style=\"text-align: center;\"><span style=\"color: #000000;\">Quarterly</span></th><th style=\"text-align: center;\"><span style=\"color: #000000;\">Month</span></th> </tr> <tr> <td colspan=\"5\" style=\"text-align: center;\"><span style=\"color: #000000;\">Short-Term</span></td> </tr> <tr bgcolor=\"7093DB\"> <td><strong><span style=\"color: #333333;\">AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.46%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.46%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.46%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.46%</span></td> </tr> <tr> <td><strong><span style=\"color: #333333;\">110% AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.51%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.51%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.51%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.51%</span></td> </tr> <tr bgcolor=\"7093DB\"> <td><strong><span style=\"color: #333333;\">120% AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.55%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.55%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.55%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.55%</span></td> </tr> <tr> <td><strong><span style=\"color: #333333;\">130% AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.60%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.60%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.60%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.60%</span></td> </tr> <tr bgcolor=\"7093DB\"> <td colspan=\"5\" style=\"text-align: center;\"><span style=\"color: #000000;\">Mid-Term</span></td> </tr> <tr cellpading=\"10\"> <td><strong><span style=\"color: #333333;\">AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.27%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.26%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.25%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.25%</span></td> </tr> <tr bgcolor=\"7093DB\"> <td><strong><span style=\"color: #333333;\">110% AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.51%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.49%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.48%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.48%</span></td> </tr> <tr> <td><strong><span style=\"color: #333333;\">120% AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.73%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.71%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.70%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.69%</span></td> </tr> <tr bgcolor=\"7093DB\"> <td><strong><span style=\"color: #333333;\">130% AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.96%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.94%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.93%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.92%</span></td> </tr> <tr> <td><strong><span style=\"color: #333333;\">150% AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">3.42%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">3.39%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">3.38%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">3.37%</span></td> </tr> <tr bgcolor=\"7093DB\"> <td><strong><span style=\"color: #333333;\">175% AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">4.00%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">3.96%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">3.94%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">3.93%</span></td> </tr> <tr> <td colspan=\"5\" style=\"text-align: center;\"><span style=\"color: #000000;\">Long-Term</span></td> </tr> <tr bgcolor=\"7093DB\"> <td><strong>AFR</strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">4.05%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">4.01%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">3.99%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">3.98%</span></td> </tr> <tr> <td><strong><span style=\"color: #333333;\">110% AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">4.46%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">4.41%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">4.39</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">4.37%</span></td> </tr> <tr bgcolor=\"7093DB\"> <td><strong><span style=\"color: #333333;\">120% AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">4.87%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">4.81%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">4.78%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">4.76%</span></td> </tr> <tr> <td><strong><span style=\"color: #333333;\">130% AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">5.28%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">5.21%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">5.18%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">5.15%</span></td> </tr> </tbody> </table> <table style=\"width: 475px; height: 246px; margin-left: auto; margin-right: auto;\" border=\"3\" cellpadding=\"3\" height=\"197\" width=\"466\"> <caption> <p style=\"text-align: center;\"> </p> <p> </p> <p><span style=\"color: #000000;\"><strong>Table 2 (Section 1288(b) Rate) Period for Compounding</strong></span></p> </caption>  <tbody> <tr cellpading=\"5\" bgcolor=\"7093DB\"> <th><br /></th><th><span style=\"color: #000000;\">Annual</span></th><th><span style=\"color: #000000;\">Semiannual</span></th><th><span style=\"color: #000000;\">Quarterly</span></th><th><span style=\"color: #000000;\">Month</span></th> </tr> <tr> <td><strong><span style=\"color: #333333;\">Short-term </span></strong><br /><strong><span style=\"color: #333333;\">adjusted AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.70%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.70%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.70%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.70%</span></td> </tr> <tr bgcolor=\"7093DB\"> <td><strong><span style=\"color: #333333;\">Mid-term </span></strong><br /><strong><span style=\"color: #333333;\">adjusted AFR</span></strong><br /></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.83%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.82%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.82%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.81%</span></td> </tr> <tr> <td> <p><strong><span style=\"color: #333333;\">Long-term</span></strong><br /><strong><span style=\"color: #333333;\">adjusted AFR</span></strong></p> </td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">4.17%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">4.13%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">4.11%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">4.09%</span></td> </tr> </tbody> </table> <table style=\"margin-left: auto; margin-right: auto;\" border=\"3\" height=\"107\" width=\"425\"> <caption> <p> </p> <p> </p> <p><span style=\"color: #000000;\"><strong>Table 5 (Section 7520 Rate)</strong></span></p> </caption>  <tbody> <tr> <td> <p style=\"text-align: left;\"><span style=\"color: #333333;\">Applicable federal rate for determining the <br />present value of an annuity, an interest <br />for life or term of years, or a remainder or <br />reversionary interest</span></p> </td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.8%</span></td> </tr> </tbody> </table>','Applicable Federal Rates for June 2011','','publish','open','open','','applicable-federal-rates-for-june-2011','','','2016-02-25 13:29:54','2016-02-25 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6109',5,'post','',0),(6112,1,'2011-05-26 13:29:54','2011-05-26 13:29:54','<p style=\"text-align: justify;\">On May 18, 2011, the <a href=\"http://www.treas.gov/tigta/\" target=\"_Current\">Treasury Inspector General for Tax Administration</a> released <a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/05/201141038fr.pdf\" target=\"_blank\">Processes Were Not Established to Verify Eligibility for Residential Energy Credits</a> (2011-41-038), citing numerous examples of taxpayer abuse and IRS failures.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/05/2011.5.26-energy-tax-credit.pdf\">Download PDF</a> <a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/05/2011.5.26-energy-tax-credit.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\">The American Recovery and Reinvestment Act of 2009 (Recovery Act) modified the law related to energy credits to encourage the purchase of energy efficient property and renewable sources of energy for use in a home.  More than 6.8 million individuals claimed more than $5.8 billion in Residential Energy Credits on Tax Year 2009 tax returns processed through December 31, 2010.  The audit was initiated because TIGTA is required to monitor the IRS’s implementation of Recovery Act provisions, and was designed to assess the effectiveness of the IRS’s process to identify erroneous Residential Energy Credits.  Following are a few “lowlights” of TIGTA’s report:</p> <p style=\"text-align: justify;\">The IRS cannot verify whether individuals claiming Residential Energy Credits are entitled to them at the time their tax returns are processed.</p> <p style=\"text-align: justify;\">The IRS does not require individuals to provide any third-party documentation supporting the purchase of qualifying home improvement products and/or costs associated with making energy efficiency improvements and whether these qualified purchases and/or improvements were made to their principal residence.</p> <p style=\"text-align: justify;\">171 individuals claiming $453,220 claimed a credit that exceeded the maximum allowable amount of $1,500 for all filing statuses reporting only one principal residence (or $3,000 for married filing jointly in certain circumstances).</p> <p style=\"text-align: justify;\">Based on a review of a statistically valid sample of 150 tax returns, TIGTA was unable to confirm homeownership for 45 (30%) of the taxpayers.  Homeownership is required to claim Residential Energy Credits.</p> <p style=\"text-align: justify;\">TIGTA identified 362 ineligible individuals who were allowed to erroneously claim $404,578 in Residential Energy Credits on their tax returns.  These individuals, including 262 prisoners and 100 individuals under the age of 18 (26 were under age 14), were allowed to erroneously claim these credits because the IRS did not develop a process to identify prisoners or individuals who are too young to buy a home.</p>','30% IRS Error Rate in $6b Home Energy Tax Credit, Including Claims by Prisoners','','publish','open','open','','30-irs-error-rate-in-6b-home-energy-tax-credit-including-claims-by-prisoners','','','2011-05-26 13:29:54','2011-05-26 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6112',14,'post','',0),(6114,1,'2011-09-23 13:29:54','2011-09-23 13:29:54','<p> Although their accountant had embezzled funds and was solely responsible for completing payroll, Court deems that the company owners are personally responsible for unpaid employment taxes because they were also “responsible persons.”</p>  <!--more-->  <div></div> <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/06/2011.6.2-responsible-person-penalty.pdf\"><img class=\" alignright size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" style=\"float: right;\" height=\"15\" width=\"15\" /></a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/06/2011.6.2-responsible-person-penalty.pdf\">Download PDF</a></p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\"><strong>Oppliger v. U.S. (CA 8 3/29/11), 107 AFTR 2d ¶2011-631</strong></p> <p style=\"text-align: justify;\"><strong>Facts.</strong> James and Gayle Oppliger formed Double O, Inc. (“Double O”), a trucking business, and Livestock Feed Company, LLC (“LFC”) in 1992 and 1997, respectively.  They served as the sole owners and primary officers of Double O, and as the sole members of LFC.  In 1996, the Oppligers hired Mary Kerkman to perform accounting and bookkeeping services for both companies.  The Oppligers delegated to Kerkman the tasks of filing employment tax returns and paying payroll taxes, and Kerkman provided the Oppligers with weekly reports that informed them of the financial status of the companies.  </p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\">On April 3, 2002, Kerkman committed suicide.  The next day, an IRS revenue officer contacted the Oppligers to inform them that LFC employment taxes were not paid to the government for 13 consecutive quarters and Double O employment taxes were not paid for 17 quarters.  The Oppligers claimed that this was when they first learned that Double O and LFC had not been paying employment taxes, and subsequently learned that Kerkman had also embezzled $10,000 from the companies.</p> <p style=\"text-align: justify;\">The IRS considered the Opplinger’s “responsible persons,” and assessed penalties directly against them for LFC’s unpaid employment taxes in the amount of $2,363,704.25, and Double O’s unpaid employment taxes in the amount of $27,013.21, and the Oppilgers filed for relief.</p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\"><strong>District Court’s Decision.</strong>  The Oppligers argued that they were not liable for the unpaid taxes because, when the IRS informed them of the outstanding tax responsibilities, they had bank balances of only $3,426.29 and $4,632.73 due to the embezzlement, and also had outstanding checks on both of the accounts. They claimed that their potential liability as responsible persons was limited to the unencumbered funds available on the date of the assessment and asserted that when they reassumed control of their companies, unencumbered funds did not exist to pay the taxes owed.</p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\">The district court granted summary judgment to the IRS, since they found that there were no genuine issues of material fact regarding whether the Oppligers were classified as responsible persons under I.R.C. § 6672.  The district court further determined that the Oppligers willfully failed to pay the employment taxes because they admitted that, after IRS informed them of their outstanding tax liabilities, they paid employees and third parties over $5 million in compensation.  The Oppligers appealed the ruling of the district court.</p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\"><strong>Appellate Court’s Decision.</strong> The Eighth Circuit affirmed the district court’s ruling and held that the Oppligers were responsible persons under I.R.C. § 6672 because they had the status, duty, and authority to pay the taxes. The Eighth Circuit refuted the Oppligers’ claim that their accountant’s misconduct deprived them of the opportunity to make informed decisions by noting that whether their accountant may have been a responsible person under I.R.C. § 6672 is immaterial to the Oppligers’ liability since they were both responsible persons for purposes of the penalty.</p> <p style=\"text-align: justify;\">Further, the Eighth Circuit concluded that the Oppligers had willfully failed to pay the taxes. In this case, the Oppligers were responsible persons during each of the quarters in which they failed to pay the employment taxes. Accordingly, the Oppligers’ decision to pay employees and other creditors in lieu of the IRS constituted a willful failure to pay taxes as a matter of law.</p>','IRS Imposes Responsible Person Penalty on Company Owners for their Accountant’s Failure to Deposit Payroll Taxes','','publish','open','open','','irs-imposes-responsible-person-penalty-on-company-owners-for-their-accountants-failure-to-deposit-payroll-taxes','','','2011-09-23 13:29:54','2011-09-23 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6114',13,'post','',0),(6117,1,'2011-06-01 13:29:54','2011-06-01 13:29:54','<p>A personal care services agreement requiring a lump sum pre-payment that included services already provided by the Medicaid applicant’s nursing home is an uncompensated transfer for Medicaid eligibility purposes. </p>  <!--more-->  <p style=\"text-align: right;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/06/2011.6.1-caregiver-agreement.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/06/2011.6.1-caregiver-agreement.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p><span style=\"color: #000000;\"><strong><span style=\"font-size: 12pt;\"> </span></strong></span></p> <p style=\"text-align: justify;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/06/04261102mpb.pdf\">Austin v. Indiana Family and Social Services Administration</a> (Ind.App.Ct., No. 64A04-1008-MI-514, April 26, 2011).</p> <p style=\"text-align: justify;\"><strong>Facts.</strong>  Ms. Austin, aunt of James Mack, was cared for by James and his wife Julianne from 2002 until September of 2007 when she moved into a nursing home.  James and Julianne were previously appointed as Ms. Austin’s attorneys-in-fact, and executed a lump-sum caregiver agreement on her behalf two months after she moved into the nursing home.  The agreement detailed an arrangement whereby James and Julianne agreed to provide caregiver services to Ms. Austin for the rest of her life, and Ms. Austin would pay James and Julianne an upfront, non-refundable lump sum of $35,000 (calculated in accordance with Ms. Austin’s life expectancy).  The services to be performed included laundry, shopping, food preparation, grooming, attending family meetings and negotiating with health-care professionals.</p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\">Immediately after the caregiver contract was in place, Ms. Austin applied for Medicaid benefits.  Her application was approved; however, she was assessed an 8 month uncompensated transfer penalty (during which time she would not receive Medicaid benefits) calculated based on the payment of $35,000 to James and Julianne earlier that month.  Ms. Austin appealed the decision.</p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\"><strong>Appeals Court Decision.</strong>  Both the Indiana Family and Social Services Administration (IFSSA) and the Court of Appeals of Indiana upheld the 8-month ineligibility penalty, holding that a transfer made pursuant to a valid personal care services agreement is considered made for fair market value if the caretaker “is or has been actually providing valuable services to a nursing home resident that substantially exceed the services provided by the nursing home.”  According to this standard, the payments made in accordance with the agreement were an uncompensated transfer since James and Julianne intended to provide services that Ms. Austin was already receiving at the nursing home.  In order to avoid the penalty, the services provided should have been “substantially in excess of what the nursing home provided.”</p>','Caregiver Agreement Including Services Provided by Nursing Home is a Disqualifying Transfer for Medicaid Eligibility Purposes','','publish','open','open','','caregiver-agreement-including-services-provided-by-nursing-home-is-a-disqualifying-transfer-for-medicaid-eligibility-purposes','','','2011-06-01 13:29:54','2011-06-01 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6117',12,'post','',0),(6119,1,'2011-06-10 13:29:54','2011-06-10 13:29:54','<p style=\"text-align: justify;\">On May 23, 2011, the Tax Court has again held that transferable conservation easement income tax credits that a partnership received as a result of its charitable contribution donation, which it then sold, were capital assets subject to a short-term holding period.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/06/2011.6.10-sale-of-state.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/06/2011.6.10-sale-of-state.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\"><strong>William M. McNeil, et ux. v. Commissioner, T.C.M 2011-109</strong></p> <p style=\"text-align: justify;\"><strong>Facts. </strong> William McNeil and Catherine McNeil were the only members of McNeil Ranch, LLC (the “McNeil Ranch”).  In 2003, McNeil Ranch sold a conservation easement in a bargain sale to the American Farmland Trust and to Ducks Unlimited.  The sale of the 2003 easements gave rise to a Colorado conservation easement credit of $260,000 to McNeil Ranch.  On December 18, 2003, McNeil Ranch sold $231,600 of its available $260,000 state conservation easement credit for $178,332 (“2003 transferred credit”).</p> <p style=\"text-align: justify;\">In 2005, McNeil Ranch sold an additional conservation easement in a bargain sale to Ducks Unlimited.  The sale of the 2005 easement gave rise to a Colorado conservation easement credit of $156,800.  On December 15, 2005, McNeil Ranch sold all of the $156,800 state conservation easement credit for $133,280 (“2005 transferred credit”).</p> <p style=\"text-align: justify;\">All of the income, deductions, and credits reported on McNeil Ranch’s 2003 and 2005 income tax returns flowed through the company to the McNeils’ joint 2003 and 2005 individual income tax returns.  The McNeils reported the net gain from the 2003 and 2005 transferred credits as long-term capital gain.</p> <p style=\"text-align: justify;\">On audit, the IRS determined that the sale of the conservation easement credits resulted in ordinary income and not capital gain because the credits were merely a substitute for ordinary income (i.e., a substitute for a refund from Colorado that would have been ordinary income).  The McNeils sought relief in Tax Court.</p> <p style=\"text-align: justify;\"><strong>Tax Court’s Decision. </strong> Relying on its previous decision in George H. Tempel, et ux. v. Commissioner, 136 T.C. No. 15 (2011) dealing with the same Colorado tax credit, the Tax Court held that the tax credits sold by McNeil Ranch were capital assets.  The Tax Court rejected the IRS’s contention that the credits should be treated as ordinary income, reasoning that under I.R.C. § 1221(a), a capital asset includes property held by the taxpayer (with exceptions for eight specifically excluded categories, none of which were state tax credits such as those at issue).</p> <p style=\"text-align: justify;\">The Tax Court also held that the McNeils’ holding period in their Colorado tax credits was insufficient to qualify for long-term capital gain treatment.  The holding period in their credits began at the time the credits were granted and ended when they were sold.  Therefore, the capital gains from the sale of the credits were short-term.</p> <p style=\"text-align: justify;\">As in Tempel, the Tax Court rejected the taxpayers’ contention that their holding periods in their land and state tax credits were one and the same because they were both part of the bundle of their real property rights.  The Tax Court reasoned that a taxpayer had no property rights in a conservation easement contribution state tax credit until the donation was complete and the credits were granted.  Accordingly, the credits never were, nor did they become, part of the taxpayers’ real property rights.</p>','Sale of State Income Tax Credits Results in Short-Term Capital Gain','','publish','open','open','','sale-of-state-income-tax-credits-results-in-short-term-capital-gain','','','2011-06-10 13:29:54','2011-06-10 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6119',11,'post','',0),(6122,1,'2011-06-10 13:29:55','2011-06-10 13:29:55','<p style=\"text-align: justify;\">A minimum of 3,700 American Recovery and Reinvestment Act contract and grant recipients owed an estimated $750 million in “known unpaid federal taxes” as of September 30, 2009, the Government Accountability Office (“GAO”) said in a report released on May 24, 2011.</p>  <!--more-->  <p style=\"text-align: right;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/06/2011.6.10-recipients-owe-taxes.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/06/2011.6.10-recipients-owe-taxes.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p><span style=\"color: #000000;\"><strong><span style=\"font-size: 12pt;\"> </span></strong></span></p> <p style=\"text-align: justify;\">The American Recovery and Reinvestment Act enacted on February 17, 2009 (the “Recovery Act”), appropriated $275 billion to be distributed for federal contracts, grants and loans in an effort to stimulate U.S. economic activity.  As of March 25, 2011, $191 billion of this $275 billion had been paid out.  As part of ensuring the proper administration of the appropriated funds, the GAO was asked to conduct this study to determine if Recovery Act contract and grant recipients have unpaid federal taxes.  What the GAO study reveals is nothing short of astonishing.</p> <p style=\"text-align: justify;\">According to the study, the 3,700 grant recipients received more than $24 billion in Recovery Act funds and represent approximately 5% of the contractors and grant recipients.  The delinquent parties include prime recipients, sub-recipients and vendors.  “Federal law does not prohibit the awarding of contracts or grants to entities because they owe federal taxes and does not permit IRS to disclose taxpayer information, including unpaid federal taxes, to federal agencies unless the taxpayer consents,” the GAO said.  “The estimated amount of known unpaid federal taxes is likely understated because IRS databases do not include amounts owed by recipients who have not filed tax returns or understated their taxable income and for which IRS has not assessed tax amounts due,” the GAO added.  In addition, the GAO’s analysis does not include Recovery Act contract and grant recipients who are noncompliant with or not subject to Recovery Act reporting requirements.</p> <p style=\"text-align: justify;\">The full report can be found at <a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/06/d11485.pdf\" target=\"new\">http://www.gao.gov/new.items/d11485.pdf</a> .</p>','Thousands of Recovery Act Contract and Grant Recipients  Owe Hundreds of Millions in Federal Taxes','','publish','open','open','','thousands-of-recovery-act-contract-and-grant-recipients-owe-hundreds-of-millions-in-federal-taxes','','','2011-06-10 13:29:55','2011-06-10 13:29:55','',0,'http://www.racklaw.com/new-site/?p=6122',10,'post','',0),(6124,1,'2011-06-02 13:29:55','2011-06-02 13:29:55','<p style=\"text-align: justify;\">The Internal Revenue Service today <a href=\"http://www.irs.gov/newsroom/article/0,,id=240239,00.html\" target=\"_blank\">announced</a> that it has released a listing of approximately 275,000 (6,274 of which are in Virginia) organizations that under federal law have automatically lost their tax-exempt status because they have not filed annual reports as legally required for the past three years.</p>  <!--more-->  <div></div> <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/06/2011.6.10-irs-identifies-organizations.pdf\"><img class=\" alignright size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" style=\"float: right;\" height=\"15\" width=\"15\" /></a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/06/2011.6.10-irs-identifies-organizations.pdf\">Download PDF</a></p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\">If an organization appears on the <a href=\"http://www.irs.gov/charities/article/0,,id=240099,00.html\" target=\"_blank\">list of auto-revoked organizations</a> it is because IRS records indicate the organization has an income tax return filing requirement and has not filed the required returns or notices for 2007, 2008 and 2009.  The IRS has issued guidance on how organizations can apply for reinstatement of their tax-exempt status, including retroactive reinstatement.</p> <p style=\"text-align: justify;\">In addition, the IRS announced transition relief for certain smaller tax-exempt groups – those with annual gross receipts of $50,000 or less for 2010 and eligible to file Form 990-N, the e-Postcard.  The relief allows eligible revoked groups to gain retroactive tax-exempt status and pay a reduced application fee of $100 rather than the typical $400 fee.  More information, including <a href=\"http://www.irs.gov/charities/article/0,,id=221600,00.html\" target=\"_blank\">FAQs</a> and a <a href=\"http://www.irs.gov/pub/irs-tege/auto_revocation_fs_060811.pdf\" target=\"_blank\">Fact Sheet</a>, can be found on the <a href=\"http://www.irs.gov/charities/article/0,,id=239696,00.html\" target=\"_blank\">IRS website</a>.</p>','IRS Identifies Organizations that Have Lost Tax-Exempt Status –  Special Steps Announced to Help Revoked Groups','','publish','open','open','','irs-identifies-organizations-that-have-lost-tax-exempt-status-special-steps-announced-to-help-revoked-groups','','','2011-06-02 13:29:55','2011-06-02 13:29:55','',0,'http://www.racklaw.com/new-site/?p=6124',8,'post','',0),(6127,1,'2011-06-16 13:29:55','2011-06-16 13:29:55','<p style=\"text-align: justify;\">Taxpayers, including tax-exempt organizations, with foreign accounts whose aggregate value exceeded $10,000 at any time during 2010 must file Treasury Department Form <a href=\"http://www.irs.gov/pub/irs-pdf/f90221.pdf\">TD F 90-22.1</a> by June 30, 2011.</p>  <!--more-->  <div></div> <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/06/2011.6.16-fbar-due-june.pdf\"><img class=\" alignright size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" style=\"float: right;\" height=\"15\" width=\"15\" /></a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/06/2011.6.16-fbar-due-june.pdf\">Download PDF</a></p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\">The Form TD F 90-22.1 is filed with the Treasury Department and, because it is not a tax form, the June 30 deadline applies, even if a taxpayer obtains an extension of time to file their income tax return.  Details on this filing requirement are in <a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/06/p4261.pdf\" target=\"_blank\">Publication 4261</a>, Do You Have a Foreign Financial Account?</p>','Report of Foreign Bank and Financial Accounts (FBAR) Due June 30','','publish','open','open','','report-of-foreign-bank-and-financial-accounts-fbar-due-june-30','','','2011-06-16 13:29:55','2011-06-16 13:29:55','',0,'http://www.racklaw.com/new-site/?p=6127',8,'post','',0),(6129,1,'2011-06-30 13:29:55','2011-06-30 13:29:55','<p style=\"text-align: justify;\">Court determines that nursing home may evict an elderly resident due to unpaid balance owed regardless of pending Medicaid appeal.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/06/2011.6.30-court-supports-eviction.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/06/2011.6.30-court-supports-eviction.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\"><strong>King v. Butler Rest Home, Inc. (Ky. Ct. App., No. 2010-CA-001467-MR, June 17, 2011).</strong></p> <p style=\"text-align: justify;\">Facts. In June of 2009, nursing home resident Geneva King applied for Medicaid benefits and immediately ceased making private payments to her nursing home.  Upon review of her application, Medicaid denied Ms. King\'s application for benefits and Ms. King reapplied.  Medicaid again denied the application.  During the entire application process, Ms. King accrued an outstanding balance of $41,683 due to the nursing home.  Upon learning of the second denial of Medicaid benefits, the nursing home notified Ms. King that she would be discharged from the home to her daughter\'s residence in one month for nonpayment.</p> <p style=\"text-align: justify;\">Ms. King appealed her involuntary discharge from the nursing home to the state\'s Medicaid agency.  An administrative law judge (“ALJ”) agreed with the nursing home’s position and allowed the discharge.  Ms. King then appealed the decision in court, requesting an injunction in order to prevent the home from forcing her to leave before Medicaid made a decision regarding her pending appeal of the second benefit denial.</p> <p style=\"text-align: justify;\">Court’s Decision.  Initially, the court granted Ms. King a temporary injunction against the nursing home, but then dissolved the injunction and upheld the decision of the ALJ.  Again, Ms. King appealed, arguing that state Medicaid regulations and the Centers for Medicare and Medicaid Services\' State Operations Manual prohibited the nursing home from discharging her prior to her receiving a final decision from Medicaid on her appeal of the denial of benefits.</p> <p style=\"text-align: justify;\"><span style=\"font-size: 11pt; line-height: 115%;\">The Court of Appeals of Kentucky affirmed the ALJ\'s decision and upheld the involuntary discharge of Ms. King from the nursing home for nonpayment.  While the nursing home did allow Ms. King to continue to live at the home during two applications and two denials, while accruing a bill of over $40,000, the appeals court found no requirement in the Medicaid regulations or the Manual that the Medicaid appeals process must be completely exhausted for a benefits claim to be considered \"denied.</span></p>','Court Supports Eviction of Nursing Home Resident During Medicaid Appeal','','publish','open','open','','court-supports-eviction-of-nursing-home-resident-during-medicaid-appeal','','','2011-06-30 13:29:55','2011-06-30 13:29:55','',0,'http://www.racklaw.com/new-site/?p=6129',7,'post','',0),(6131,1,'2011-06-30 13:29:55','2011-06-30 13:29:55','<p style=\"text-align: justify;\">IRS privately ruled that flexible premium deferred annuity contracts purchased by a trust, of which each of the trust beneficiaries is the named annuitant of the contract in proportion to his residuary share of the trust, will be considered owned by natural persons, so that the distribution of the contracts to the beneficiaries will not be treated as a gratuitous transfer.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/06/2011.6.30-gratuitous-transfer.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/06/2011.6.30-gratuitous-transfer.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p><strong>PLR 201124008.</strong></p> <p style=\"text-align: justify;\"><strong>Facts.</strong>  Husband established a grantor trust (Trust) and named as beneficiaries his Wife and their six descendants. Husband and Wife served as co-trustees during Husband\'s life.  Upon the death of Husband, Wife became the sole trustee and divided the Trust into subtrusts A, B, and C.</p> <p style=\"text-align: justify;\">Subtrust A was allocated an amount based on the allowed estate tax exemption and marital deduction.  Subtrust C was allocated an amount based on the estate tax exemption, provided the amount was not used for the payment of taxes, debts, or administration expenses of Husband\'s estate.  Once all taxes, debts, and expenses have been paid, the assets of Subtrust C were to be distributed to Subtrust B, for administration.</p> <p style=\"text-align: justify;\">During her life, and in her capacity as trustee, Wife was authorized to pay or use the property of Subtrust B for the benefit of herself and others who were partly or wholly dependent upon her.  Upon her death, the property of Subtrust B was directed to be divided and distributed among the descendant-beneficiaries in the proportions stated in the Subtrust B.</p> <p style=\"text-align: justify;\">In seeking the private letter ruling, Wife proffered to the IRS that:</p> <p style=\"text-align: justify;\">as trustee, she intended to purchase flexible premium deferred annuity contracts and name each of the descendant-beneficiaries as the annuitant on one annuity contract, in proportion to each beneficiary\'s residuary share of Trust;</p> <p style=\"text-align: justify;\">the material provisions of each contract were  substantially the same, except for the dates of annuitization;</p> <p style=\"text-align: justify;\">the Trust will be the owner and beneficiary of the contracts during Wife\'s life;</p> <p style=\"text-align: justify;\">the Trust is anticipated to have sufficient assets to fund its expenses and make nominal distributions to Wife, so there should not be any need for the Trust to take a distribution from the annuity contracts; and</p> <p style=\"text-align: justify;\">Upon the final distribution of the Trust, each beneficiary will be distributed the contract for which that beneficiary is the annuitant. This distribution is anticipated to occur before the contract\'s annuity starting date.</p> <p>IRS\' Decision.  Under Internal Revenue <a target=\"_blank\" href=\"http://www.law.cornell.edu/uscode/26/usc_sec_26_00000072----000-.html\">Code Section 72(u)</a>, an annuity contract will not be treated as an annuity contract if it is held by a person who isn\'t a \"natural person.\"  Instead, the income on the contract for any tax year of the policyholder will be treated as ordinary income received or accrued by the owner during that tax year (i.e., there is no deferral of income).  In issuing this ruling, the IRS determined that the annuity contracts owned by Wife\'s Trust are considered owned by natural persons for <a target=\"_blank\" href=\"http://www.law.cornell.edu/uscode/26/usc_sec_26_00000072----000-.html\">Code Sec. 72(u)</a> purposes.</p>','Distribution of Annuity Contracts from Trust to Beneficiaries Ruled Not a Gratuitous Transfer','','publish','open','open','','distribution-of-annuity-contracts-from-trust-to-beneficiaries-ruled-not-a-gratuitous-transfer','','','2011-06-30 13:29:55','2011-06-30 13:29:55','',0,'http://www.racklaw.com/new-site/?p=6131',6,'post','',0),(6133,1,'2011-07-08 13:29:54','2011-07-08 13:29:54','<p style=\"text-align: justify;\">The Fourth Circuit has joined the Third and Seventh Circuits in finding that Treasury Regulation Section 1.6015(b), which imposes a two-year limitations period upon taxpayers to request equitable relief under the innocent spouse provisions of the Internal Revenue Code, is a valid regulation.  Internal Revenue Code Section 6015(f) is ambiguous as to the applicable statute of limitations, and therefore the Treasury Regulation is a reasonable interpretation of the statute.</p>  <!--more-->  <div></div> <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/07/2011.7.8-innocent-spouse.pdf\"><img class=\" alignright size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" style=\"float: right;\" height=\"15\" width=\"15\" /></a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/07/2011.7.8-innocent-spouse.pdf\">Download PDF</a></p> <p style=\"text-align: justify;\"> </p> <p><strong>Jones v. Commissioner, ---F.3d---, 107 A.F.T.R.2d 2011-2475 (4th Cir. 2011).</strong></p> <p style=\"text-align: justify;\"><strong>Facts.</strong>  Robert and Octavia Jones separated in September 2000.  Pursuant to the couple’s separation agreement, Robert and Octavia filed a joint income tax return for tax year 2000.  Robert prepared the couple’s return and claimed a loss from his business, resulting in a refund.  The IRS subsequently performed an audit of the return and assessed additional tax and interest of $7,630.  Robert entered into an installment agreement to pay the additional amounts due, but defaulted on the agreement when he filed for bankruptcy in April 2005.  The IRS notified both Robert and Octavia of the default in August 2005, and commenced a collection action.   The notice of default issued to Robert and Octavia also notified them of the IRS’ intent to levy on property.  When Octavia received notification from her bank in January 2008 of an IRS levy on her bank account, she promptly filed IRS Form 8857 and requested innocent spouse relief under the equitable relief provisions of Internal Revenue Code Section 6015(f).  The IRS denied her request, however, because Octavia submitted the request for relief after expiration of the two-year limitations period found in Treasury Regulation Section 1.6015(b)(1).  Octavia filed a petition with the U.S. Tax Court in July 2008 and challenged the denial of her request, arguing that the Treasury Regulation imposing the two year limitations period was invalid.</p> <p style=\"text-align: justify;\"><strong>U.S. Tax Court Ruling.</strong>  The IRS Commissioner and Octavia stipulated that Octavia would be entitled to relief under Internal Revenue Code Section 6015(f), but for her submission of the request more than two years after the IRS began collection efforts.  The Commissioner and Octavia submitted cross-motions for summary judgment on the issue.  The Tax Court granted Octavia’s motion and determined the regulation to be invalid for the reasons outlined in Lantz v. Commissioner, 132 T.C. 131 (2009), despite the Seventh Circuit’s reversal of the Tax Court’s decision in Lantz v. Commissioner, 607 F.3d 479 (7th Cir. 2010).  The Tax Court specifically concluded that Congress’ failure to provide a limitations period in IRC § 6015(f) was intentional, considering the limitations period expressly imposed in IRC §§ 6015(b) and (c), and therefore the regulation imposing such a limitations period was invalid.  The Commissioner appealed the Tax Court’s decision to the Fourth Circuit.</p> <p style=\"text-align: justify;\"><strong>Fourth Circuit Ruling.  </strong>On appeal, the Fourth Circuit reversed the decision of the Tax Court and concluded that the regulation was, in fact, valid.  In reaching this decision, the Court applied the two-prong standard established by Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) and found Internal Revenue Code § 6015(f) to be ambiguous as to any relevant limitations period.  Because the statute was ambiguous, the Court was required to determine whether the Treasury Regulation “was a reasonable approach to resolving the statute’s ambiguity.”  The Fourth Circuit concluded that it was, and upheld the regulation establishing a two-year limitations period for requesting equitable relief as a permissible interpretation of IRC § 6015(f).  Its decision is consistent with the holdings of the Seventh Circuit in Lantz, as well as the Third Circuit in Mannella v. Commissioner, 631 F.3d 115 (2011).</p> <p style=\"text-align: justify;\">Given the harsh impact the limitations period has on victims of domestic violence seeking equitable relief, the regulation is currently under review by the IRS, and the National Taxpayer Advocate has recommended revising it to eliminate the two-year statute of limitations for requesting equitable relief.</p>','Treasury Regulation Imposing Two Year Limitations Period for Request of Equitable Relief as Innocent Spouse Upheld','','publish','open','open','','treasury-regulation-imposing-two-year-limitations-period-for-request-of-equitable-relief-as-innocent-spouse-upheld','','','2011-07-08 13:29:54','2011-07-08 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6133',5,'post','',0),(6135,1,'2011-07-15 13:29:54','2011-07-15 13:29:54','<p style=\"text-align: justify;\">The U.S. Tax Court has allowed a deduction for medical care expenses for amounts paid to in-home caregivers for full-time assistance provided to an elderly client diagnosed with dementia in her home.  Such payments were considered qualified long-term care services under Internal Revenue Code Section 7702B(c), and thus satisfied the requirements of Internal Revenue Code Section 213.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/07/2011.7.14-payments-to-caregivers.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/07/2011.7.14-payments-to-caregivers.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p style=\"text-align: justify;\"> </p> <p><strong>Estate of Lillian Baral, Deceased v. Commissioner, 137 T.C. No. 1 (July 5, 2011).</strong></p> <p style=\"text-align: justify;\"><strong>Facts.</strong>  Lillian Baral appointed her brother, David Baral, as her attorney-in-fact for her personal and financial affairs.  Lillian’s primary care physician diagnosed her with dementia, and prescribed two medications generally prescribed for patients diagnosed with dementia or suspected Alzheimer’s disease.  Lillian had difficulty complying with her medication regime and was hospitalized in 2004.  She was hospitalized again a few months later.  Following her second hospital admission, Lillian’s physician evaluated her to assess whether she was properly taking her prescribed medications and whether she could safely live alone in order to develop a long-term care plan.  His findings indicated that Lillian was confused and experienced difficulties communicating orally.  His records also indicated that she required assistance with activities of daily living, could not be left alone (as she was at risk of falling), and she required supervision due to her memory deficit and baseline homecare services.  Her physician ultimately determined that Lillian required supervision 24 hours a day for medical and safety reasons as a result of her diminished capacity, and recommended a company to provide these services.  David retained the company to provide the required services to Lillian, but subsequently terminated the company and directly hired one of its care providers to assist Lillian.  The provider assisted Lillian with bathing, dressing, taking medication, transferring to a wheelchair, and transporting to her physicians.  He also hired a second caregiver to provide assistance when Lillian’s primary provider was unavailable.  Neither of the caregivers were licensed health care providers.  David paid the providers with Lillian’s funds, and reimbursed them for expenses paid on behalf of Lillian as well as paid for medical care provided by her physicians and the hospital.  Lillian did not receive reimbursement from insurance or other third party for these expenses.</p> <p style=\"text-align: justify;\">Lillian did not file a federal income tax return for 2007, nor did David, as her attorney-in-fact, file a return on her behalf.  The IRS prepared a substitute for return and determined that Lillian was entitled to a personal exemption and the standard deduction.  As a result, there was an income tax deficiency of $17,681.  David petitioned the U.S. Tax Court and challenged the deficiency.</p> <p style=\"text-align: justify;\"><strong>U.S. Tax Court Ruling. </strong> In his petition, David alleged that that Lillian was not required to file a return because she suffered from severe dementia, and the IRS had the burden of proof to establish that she was required to file.  The IRS moved for summary judgment.  David object to the motion for summary judgment, and asserted that Lillian was entitled to deduct amounts paid for medical care from her adjusted gross income.  The Tax Court granted partial summary judgment in favor of the IRS and determined that Lillian’s dementia did not relieve her from the requirement to file and pay income tax.  The Tax Court also determined that Lillian had the burden of proof to establish the deficiency was incorrect.  Accordingly, the remaining issue to be determined was whether Lillian was entitled to deduct the amounts paid to her caregivers and her physicians as medical care expenses.</p> <p style=\"text-align: justify;\">The Tax Court concluded that Lillian was entitled to deduct the amounts paid to the caregivers and her physicians as medical expenses under Internal Revenue Code Section 213.  Section 213 provides for an itemized deduction for expenses paid for medical care, which is defined as amounts paid for diagnosing, curing, mitigating, treating and preventing disease, amounts paid for transportation primarily for and essential to medical care, qualified long-term care services, or amounts paid insurance covering medical care or qualified long-term care insurance contacts.  Qualified long-term care services are those services necessary for diagnostic, preventive, therapeutic, curing, treating, mitigating and rehabilitation purposes, as well as maintenance and personal care services required by a chronically ill individual and provided in accordance with a care plan prescribed by a licensed health care provider.  Internal Revenue Code Section 7702B(c)(3) defines “maintenance or personal care services” as services whose primary purpose is to provide needed assistance “with any of the disabilities as a result of which the individual is a chronically ill individual (including the protection from threats to health and safety due to severe cognitive impairment.)” Emphasis added.</p> <p style=\"text-align: justify;\">The Tax Court determined that Lillian qualified as chronically ill, and therefore satisfied the requirements of Internal Revenue Code Section 7702B(c)(2), as she required substantial supervision to protect her from threats to her health and safety due to severe cognitive impairment and her physician had certified her as requiring such assistance.  Further, the services provided to Lillian by her caregivers were “necessary maintenance and personal care services” provided pursuant to a care plan prescribed by a licensed health care practitioner as a result of Lillian’s diminished capacity.  The Tax Court consequently allowed Lillian a deduction for those amounts paid to the caregivers and her physicians as medical care expenses that exceeded 7.5% of her adjusted gross income, but denied the deduction for the expenses reimbursed to the caregivers for failure to substantiate that such expenses were for medical care expenses.   </p>','Payments to Caregivers Assiting Taxpayer Suffering From Dementia is Deductible','','publish','open','open','','payments-to-caregivers-assiting-taxpayer-suffering-from-dementia-is-deductible','','','2011-07-15 13:29:54','2011-07-15 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6135',14,'post','',0),(6137,1,'2011-07-20 13:29:54','2011-07-20 13:29:54','<p style=\"text-align: justify;\">An issue currently under negotiation in the widely debated tax reform is the possible elimination of the mortgage interest deduction.  Currently, itemizing taxpayers can deduct their mortgage interest on up to $1 million of a qualified principal (and, in some cases, a second) residence; meanwhile, those who rent a home are not granted a similar deduction.  Itemizing taxpayers can also deduct interest on up to $100,000 of home equity debt.  According to various estimates, this deduction cost the Treasury Department between $80 and $103 billion in 2010, and its value over the next 10 years is anticipated to surpass $1 trillion.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/07/2011.7.20-tax-reform-proposals.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/07/2011.7.20-tax-reform-proposals.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\">  <br /></a></p> <p style=\"text-align: justify;\"><strong>Arguments in Favor of and Against the Mortgage Interest Deduction.</strong>  Proponents of the mortgage interest deduction argue that it encourages home ownership and makes it affordable (and in some cases, possible) to taxpayers who would otherwise not be able to own a home.  Critics respond that, rather than encouraging home ownership, the deduction actually encourages middle-class and wealthy taxpayers to take on more debt and buy larger homes than they otherwise would.  Further, critics make the assumption that the deduction tends to benefit taxpayers with larger incomes who likely would have purchased a home regardless of the deduction.</p> <p style=\"text-align: justify;\">Another complaint of critics is that the deduction artificially drives up home prices; however, this same argument is cited by those who favor the deduction, who observe that eliminating the deduction could further impact home prices in an already depressed market by forcing current homeowners out of their homes and creating a market that would make it even more difficult to sell real property.</p> <p style=\"text-align: justify;\">The mortgage interest deduction is also criticized as being an “upside-down” subsidy, in that it tends to provide greater benefit to taxpayers with higher incomes. The amount of interest paid by lower- and moderate-income taxpayers is less likely to be sufficiently high to make it worthwhile to forego the standard deduction, so they are less likely to receive any benefit from it.</p> <p style=\"text-align: justify;\"><strong>Proposals.</strong>  Many proposals have been advanced regarding the mortgage interest deduction. Due to the widespread popularity of the deduction (as well as the strength of the real estate lobby), it appears unlikely that it would be repealed outright.  In general, the proposals have focused on converting the deduction to a credit, capping the maximum mortgage amount, and limiting the credit to a primary residence.</p> <ul> <li>The President\'s Fiscal Commission proposed a 12% nonrefundable credit on up to a $500,000 mortgage, with no credit for a second residence or for home equity.</li> <li>The Debt Reduction Task Force would have a 15% refundable tax credit capped at $25,000 (while other proposals suggest a 20% credit).</li> <li>Another proposal is to simply have a fixed credit for owning a home as opposed to having a mortgage.</li> <li>President Obama\'s 2012 budget proposal, as well as his 2011 proposal, suggested capping itemized deductions, including mortgage interest, for taxpayers in the top two tax brackets (33% and 35%). Under this proposal, these taxpayers would only be able to reduce their tax liability by a maximum of 28%.</li> </ul> <p style=\"text-align: justify;\">(The Joint Committee on Taxation estimates that President Obama\'s proposal to limit upper-income taxpayers\' itemized deductions to 28% would yield $293,261 million over the 2011 through 2021 period.)</p> <p style=\"text-align: justify;\">Economic effect. Given the amount of income “saved” or revenue “lost” due to the deduction (depending on the stance of the taxpayer), the effects of reforming or repealing the provision could be significant.</p> <p style=\"text-align: justify;\">If the deduction was repealed entirely, the Urban-Brookings Tax Policy Center (TPC) estimates that the average tax bill of those who claim the mortgage interest deduction would increase by $710.  However, this increase would inevitably vary widely among taxpayers.  Those earning $30,000 to $40,000 per year would end up paying an average increase of $70, whereas those making over $1 million would pay an average increase of $4,000.</p> <p style=\"text-align: justify;\">According to the TPC, replacing the current mortgage interest deduction with a 20% nonrefundable credit, limiting mortgages eligible for the credit to $500,000, and limiting the credit to primary residences would only have a nominal or positive effect on the majority of the tax bills of those who claim the deduction.  (Of course, those who would face the largest increase are taxpayers in the top tax brackets with the largest mortgages.)</p> <p style=\"text-align: justify;\">The economic effect of replacing the deduction with a flat credit for home owners, regardless of whether their home debt-financed, would obviously depend on the amount of the credit. In general, credits are considered more progressive than deductions, and the benefit of a flat credit to higher-income taxpayers would presumably be less than that under the current regime. However, the incentive towards home ownership would remain intact.</p> <p style=\"text-align: justify;\">Conclusion.  Although it seems unlikely that the mortgage interest deduction will be repealed in its entirety, it is quite possible that this significant tax deduction could be reduced or limited in some way. The context of the massive and impending debt crisis may be the determining factor which forces lawmakers to make decisions regarding this issue.</p>','Tax Reform: Proposals to Reform or Eliminate the Mortgage Interest Deduction','','publish','open','open','','tax-reform-proposals-to-reform-or-eliminate-the-mortgage-interest-deduction','','','2011-07-20 13:29:54','2011-07-20 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6137',13,'post','',0),(6139,1,'2011-07-15 13:29:54','2011-07-15 13:29:54','<p style=\"text-align: justify;\">WealthCounsel Quarterly July 2011 Volume 5 No.3. featuring an article written by Rack & Moccia associate Jennifer L. Moccia.</p>  <!--more-->  <div></div> <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/07/7.15.2011-jlm-wealth-counsel.pdf\"><img class=\" alignright size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" style=\"float: right;\" height=\"15\" width=\"15\" /></a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/07/7.15.2011-jlm-wealth-counsel.pdf\">Download PDF</a></p> <p style=\"text-align: justify;\"> </p> <p style=\"text-align: justify;\">As the rates of divorce and remarriage climb, those with recently blended families may be witnessing the emergence of troublesome estate planning issues.  The interests of a new spouse and child can create conflict with a parent’s desire to provide fairly for children from a previous relationship, causing unforeseen complications, misunderstandings, and damage to the blended family unit.  For those family members without a clear understanding of their new rights and obligations, the following scenarios provide examples of common planning problems and potential solutions to these issues.  <a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/07/7.15.2011-jlm-wealth-counsel.pdf\"><span style=\"color: #800000;\"><em>For the remainder of the article click here</em></span></a></p>','Estate Planning Considerations for Blended Families','','publish','open','open','','estate-planning-considerations-for-blended-families','','','2011-07-15 13:29:54','2011-07-15 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6139',12,'post','',0),(6141,1,'2011-07-20 13:29:54','2011-07-20 13:29:54','<p style=\"text-align: justify;\">The IRS has privately ruled that a disclaimer of retirement benefits filed by the Administratrix of the estate of a deceased woman was a qualified disclaimer since the benefits, left to the woman upon the death of her husband, were not accepted by her during her lifetime.</p>  <!--more-->  <div></div> <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/07/2011.7.14-unaccepted-retirement-benefits.pdf\"><img class=\" alignright size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" style=\"float: right;\" height=\"15\" width=\"15\" /></a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/07/2011.7.14-unaccepted-retirement-benefits.pdf\">Download PDF</a></p> <p style=\"text-align: justify;\"> </p> <p><strong>PLR 201125009.</strong></p> <p style=\"text-align: justify;\"><strong>Facts. </strong> Husband died, testate, survived by his Wife and their three children.  Upon his death, Husband held several investments in various retirement accounts, including a traditional IRA and two 403(b) accounts at Brokerage Firm A, and an additional 403(b) account at Brokerage Firm B.  The beneficiary designation forms for the retirement accounts listed Wife as the primary beneficiary of the accounts, and a testamentary trust established under Husband’s will as the contingent beneficiary.  At the time of his death, Husband was receiving RMDs from his retirement accounts, which amounts were deposited directly into their personal bank account (owned jointly with rights of survivorship by Husband and Wife).  Subsequent to his death, several RMDs were deposited into the same personal account.</p> <p style=\"text-align: justify;\">Wife later passed away, and the court appointed Daughter to serve as Administratrix of Wife’s estate.  Daughter closed the personal bank account, transferred the balance into an Estate Account, and successfully petitioned the court to allow her to disclaim Wife’s interest in the retirement accounts.  Therefore, the Estate Account held the proceeds from the RMD which were distributed in the personal bank account after Husband’s death.  Wife received no other distributions from the retirement accounts.</p> <p style=\"text-align: justify;\"><strong>IRS Treatment of RMDs.</strong>  The IRS determined that Wife was deemed to have accepted the RMDs which were directly deposited into jointly owned bank account after Husband’s death, as well as the income attributable to these RMDs.  However, the IRS allowed Daughter, on behalf of Wife’s estate, to make a qualified disclaimer of the substantial balance remaining in the retirement accounts since Wife did not accept the assets during her lifetime.</p>','Post-death Disclaimer of Unaccepted Retirement Benefits Approved by IRS','','publish','open','open','','post-death-disclaimer-of-unaccepted-retirement-benefits-approved-by-irs','','','2011-07-20 13:29:54','2011-07-20 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6141',11,'post','',0),(6143,1,'2011-08-03 13:29:54','2011-08-03 13:29:54','<div style=\"text-align: justify;\"><span style=\"line-height: 115%;\">The IRS has privately ruled that flexible premium deferred annuity contracts purchased by a trust, of which each of the trust beneficiaries is the named annuitant of the contract n proportion to his residuary share of the trust, will be considered owned by natural persons, so that the distribution of the contracts to the beneficiaries will not be treated as a gratuitous transfer.</span></div>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/08/2011.8.3-distribution-of-annuity.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/08/2011.8.3-distribution-of-annuity.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\">  <br /></a></div> <p style=\"text-align: justify;\"><span style=\"text-decoration: underline;\"><strong>PLR201124008</strong></span></p> <p style=\"text-align: justify;\"><strong>Facts. </strong>Husband established a grantor trust (the “Trust”) and named his Wife and their six descendants as beneficiaries of the Trust.  Husband and Wife served as co-trustees during Husband\'s life and, upon the death of Husband, Wife became the sole trustee.  Wife divided the Trust into Subtrusts A, B, and C, pursuant to the terms of the Trust.  Subtrust A was allocated an amount based on the allowed estate tax exemption and marital deduction.  Subtrust B was allocated an amount based on the estate tax exemption, provided the amount was not used for the payment of taxes, debts, or administration expenses of Husband\'s estate.  Once all taxes, debts, and expenses have been paid, the assets of Subtrust B were to be distributed to Subtrust C, which contained all of the remaining trust property. </p> <p style=\"text-align: justify;\">During the time that Wife is serving as trustee of the Trust, she is authorized to distribute the property in Subtrust C for the benefit of herself and others who she considered dependent upon her for support (subject to an ascertainable standard).  Upon her death, the Trust directs that the property of Subtrust C is to be divided and distributed among the children of Husband and Wife. </p> <p style=\"text-align: justify;\">While serving as trustee, Wife intends to purchase flexible premium deferred annuity contracts and name each of the children as the annuitant on one annuity contract, in proportion to each beneficiary\'s residuary share of Trust.  The material provisions of each contract will be substantially the same, except for differing dates of annuitization, and the Trust will be the owner and beneficiary of the contracts during Wife\'s lifetime.  The Trust is expected to have sufficient assets to fund its expenses and make nominal distributions to Wife, and there should not be any need for Trust to take a distribution from the annuity contracts.  Upon the final distribution of the Trust, each beneficiary will receive an outright distribution of the contract purchase on behalf of the beneficiary.  This distribution is anticipated to occur before the contract\'s annuity starting date. </p> <p style=\"text-align: justify;\">According to Internal Revenue Code Section 72(u), an annuity contract will not be treated as such if it is held by a person who is not a “natural person.”  Therefore, if the Trust is not considered a “natural person,” the income on the contract for any tax year of the policyholder would be treated as ordinary income received or accrued by the owner during that tax year and, when transferred for less than full and adequate consideration, is treated as receiving a nonannuity payment equal to the excess of: (i) the cash surrender value of the contract at the time of transfer, over (ii) his investment in the contract.  In order to determine whether the Trust would be treated as a “natural person,” Wife requested a private letter ruling from<br />the IRS. </p> <p style=\"text-align: justify;\"><strong>IRS’ Decision.</strong>  In a private letter ruling, the IRS determined that the annuity contracts are considered owned by natural persons for the purposes of Internal Revenue Code Section 72(u), and that the distribution of the contracts by the Trust to the beneficiaries will not be treated as an assignment of an annuity contract for less than full and adequate consideration.   This rule is intended to prohibit taxpayers from avoiding the required distribution rules by continuing tax deferral beyond the life of an individual taxpayer. Here, since the transfer of the contracts from Trust to the beneficiaries does not have the effect of avoiding the required distribution rules, the distribution of the contracts will not be treated as an assignment for less than full consideration.</p>','Distribution of Annuity Contracts from Trust to Beneficiaries - Not Treated as Gratuitous Transfer','','publish','open','open','','distribution-of-annuity-contracts-from-trust-to-beneficiaries-not-treated-as-gratuitous-transfer-2','','','2011-08-03 13:29:54','2011-08-03 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6143',10,'post','',0),(6145,1,'2016-02-25 13:29:54','2016-02-25 13:29:54','Rev. Rul. 2011-22, 2011-41 IRB\r\n\r\n<!--more-->\r\n<p style=\"text-align: right;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/09/2011.9.22-applicable-federal-rates.pdf\" target=\"_blank\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/09/2011.9.22-applicable-federal-rates.pdf\" target=\"_blank\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" width=\"15\" height=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\">\r\n</a></p>\r\n<p style=\"text-align: center;\"><span style=\"color: #000000;\"><strong><span style=\"font-size: 12pt;\"> </span></strong></span></p>\r\n\r\n<table style=\"margin-left: auto; margin-right: auto;\" border=\"3\" width=\"483\" cellpadding=\"3\" align=\"center\"><caption><span style=\"color: #000000;\"><strong>Table 1 (Section 1274(d) Rate) Period for Compounding\r\n</strong></span>\r\n\r\n</caption>\r\n<tbody>\r\n<tr bgcolor=\"#7093db\">\r\n<th></th>\r\n<th style=\"text-align: center;\"><span style=\"color: #000000;\">Annual</span></th>\r\n<th style=\"text-align: center;\"><span style=\"color: #000000;\">Semiannual</span></th>\r\n<th style=\"text-align: center;\"><span style=\"color: #000000;\">Quarterly</span></th>\r\n<th style=\"text-align: center;\"><span style=\"color: #000000;\">Month</span></th>\r\n</tr>\r\n<tr>\r\n<td style=\"text-align: center;\" colspan=\"5\"><span style=\"color: #000000;\">Short-Term</span></td>\r\n</tr>\r\n<tr bgcolor=\"#7093db\">\r\n<td><strong><span style=\"color: #333333;\">AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.16%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.16%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.16%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.16%</span></td>\r\n</tr>\r\n<tr>\r\n<td><strong><span style=\"color: #333333;\">110% AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.18%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.18%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.18%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.18%</span></td>\r\n</tr>\r\n<tr bgcolor=\"#7093db\">\r\n<td><strong><span style=\"color: #333333;\">120% AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.19%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.19%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.19%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.19%</span></td>\r\n</tr>\r\n<tr>\r\n<td><strong><span style=\"color: #333333;\">130% AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.21%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.21%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.21%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.21%</span></td>\r\n</tr>\r\n<tr bgcolor=\"#7093db\">\r\n<td style=\"text-align: center;\" colspan=\"5\"><span style=\"color: #000000;\">Mid-Term</span></td>\r\n</tr>\r\n<tr>\r\n<td><strong><span style=\"color: #333333;\">AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.19%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.19%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.19%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.19%</span></td>\r\n</tr>\r\n<tr bgcolor=\"#7093db\">\r\n<td><strong><span style=\"color: #333333;\">110% AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.31%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.31%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.31%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.31%</span></td>\r\n</tr>\r\n<tr>\r\n<td><strong><span style=\"color: #333333;\">120% AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.44%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.43%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.43%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.43%</span></td>\r\n</tr>\r\n<tr bgcolor=\"#7093db\">\r\n<td><strong><span style=\"color: #333333;\">130% AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.56%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.55%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.55%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.55%</span></td>\r\n</tr>\r\n<tr>\r\n<td><strong><span style=\"color: #333333;\">150% AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.80%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.79%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.79%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.79%</span></td>\r\n</tr>\r\n<tr bgcolor=\"#7093db\">\r\n<td><strong><span style=\"color: #333333;\">175% AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">2.09%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">2.08%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">2.07%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">2.07%</span></td>\r\n</tr>\r\n<tr>\r\n<td style=\"text-align: center;\" colspan=\"5\"><span style=\"color: #000000;\">Long-Term</span></td>\r\n</tr>\r\n<tr bgcolor=\"#7093db\">\r\n<td><strong>AFR</strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">2.95%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">2.93%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">2.92%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">2.91%</span></td>\r\n</tr>\r\n<tr>\r\n<td><strong><span style=\"color: #333333;\">110% AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.25%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.22%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.21%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.20%</span></td>\r\n</tr>\r\n<tr bgcolor=\"#7093db\">\r\n<td><strong><span style=\"color: #333333;\">120% AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.55%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.52%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.50%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.49%</span></td>\r\n</tr>\r\n<tr>\r\n<td><strong><span style=\"color: #333333;\">130% AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.85%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.81%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.79%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.78%</span></td>\r\n</tr>\r\n</tbody>\r\n</table>\r\n<table style=\"width: 475px; height: 246px; margin-left: auto; margin-right: auto;\" border=\"3\" width=\"466\" cellpadding=\"3\"><caption><span style=\"color: #000000;\"><strong>Table 2 (Section 1288(b) Rate) Period for Compounding</strong></span>\r\n\r\n</caption>\r\n<tbody>\r\n<tr bgcolor=\"#7093db\">\r\n<th></th>\r\n<th><span style=\"color: #000000;\">Annual</span></th>\r\n<th><span style=\"color: #000000;\">Semiannual</span></th>\r\n<th><span style=\"color: #000000;\">Quarterly</span></th>\r\n<th><span style=\"color: #000000;\">Month</span></th>\r\n</tr>\r\n<tr>\r\n<td><strong><span style=\"color: #333333;\">Short-term </span></strong>\r\n<strong><span style=\"color: #333333;\">adjusted AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.32%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.32%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.32%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.32%</span></td>\r\n</tr>\r\n<tr bgcolor=\"#7093db\">\r\n<td><strong><span style=\"color: #333333;\">Mid-term </span></strong>\r\n<strong><span style=\"color: #333333;\">adjusted AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.27%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.27%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.27%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.27%</span></td>\r\n</tr>\r\n<tr>\r\n<td><strong><span style=\"color: #333333;\">Long-term</span></strong>\r\n<strong><span style=\"color: #333333;\">adjusted AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.51%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.48%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.46%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.46%</span></td>\r\n</tr>\r\n</tbody>\r\n</table>\r\n<table style=\"margin-left: auto; margin-right: auto;\" border=\"3\" width=\"425\"><caption><span style=\"color: #000000;\"><strong>Table 3 </strong></span>\r\n\r\n<span style=\"color: #000000;\"><strong>Rates Under Section 382 for October 2011\r\n</strong></span>\r\n\r\n</caption>\r\n<tbody>\r\n<tr>\r\n<td>Adjusted federal long-term rate for the current month</td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.51%</span></td>\r\n</tr>\r\n<tr>\r\n<td>Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal long-term rates for the current month and the prior two months)</td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.82%</span></td>\r\n</tr>\r\n</tbody>\r\n</table>\r\n<table style=\"margin-left: auto; margin-right: auto;\" border=\"3\" width=\"425\"><caption><span style=\"color: #000000;\"><strong>Table 4 </strong></span>\r\n\r\n<span style=\"color: #000000;\"><strong>Appropriate Percentages Under Section 42(b)(2)**</strong></span>\r\n\r\n</caption>\r\n<tbody>\r\n<tr>\r\n<td>Appropraite percentage for the 70% present value low-income housing credit</td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">7.48%</span></td>\r\n</tr>\r\n<tr>\r\n<td>Appropriate percentage for the 30% present value low-income housing credit</td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.20%</span></td>\r\n</tr>\r\n</tbody>\r\n</table>\r\n<span style=\"color: #000000;\"><strong>Table 5 (Section 7520 Rate)</strong></span>\r\n<p style=\"text-align: left;\"><span style=\"color: #333333;\">Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest</span></p>\r\n<span style=\"color: #333333;\">1.4%</span>','Applicable Federal Rates for October 2011','','publish','open','open','','applicable-federal-rates-for-august-2011','','','2016-08-30 12:55:59','2016-08-30 12:55:59','',0,'http://www.racklaw.com/new-site/?p=6145',9,'post','',0),(6147,1,'2011-08-03 13:29:53','2011-08-03 13:29:53','<div style=\"text-align: justify;\"><span style=\"color: #0000ff;\"> </span></div>  <!--more-->  <div></div> <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/08/2011.8.3-2009-tax-return.pdf\"><img class=\" alignright size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" style=\"float: right;\" height=\"15\" width=\"15\" /></a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/08/2011.8.3-2009-tax-return.pdf\">Download PDF</a></div> <p style=\"text-align: justify;\">Publication 1304, Statistics of Income – 2009 – Individual Income Tax Returns, is now available in electronic format through the IRS website at: <br /><a href=\"http://www.irs.gov/taxstats/indtaxstats/article/0,,id=134951,00.html\">http://www.irs.gov/taxstats/indtaxstats/article/0,,id=134951,00.html</a></p> <p style=\"text-align: justify;\">The publication includes sections on changes in law, explanation of terms, and the description of the sample, as well as data for tax provisions in the American Recovery and Reinvestment Act of 2009.  Tables from Publication 1304 present data for the number of returns filed, sources of income, exemptions, itemized deductions, and tax computations. Data in the tables are presented by size of adjusted gross income, marital status, age, type of tax computation, and rate at which tax was computed.</p>','2009 Individual Income Tax Return Data Now Available','','publish','open','open','','2009-individual-income-tax-return-data-now-available','','','2011-08-03 13:29:53','2011-08-03 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6147',8,'post','',0),(6149,1,'2011-08-15 13:29:54','2011-08-15 13:29:54','<p style=\"text-align: justify;\">On August 11th, the last three members of the Joint Select Committee on Deficit Reduction (JSC) were appointed by House Minority Leader Nancy Pelosi (D-CA).  The duties of the JSC are to “provide recommendations and legislative language that will significantly improve the short-term and long-term fiscal imbalance of the Federal Government.”</p>  <!--more-->  <p style=\"text-align: right;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/08/2011.8.15-joint-select-committee.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/08/2011.8.15-joint-select-committee.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p> </p> <p style=\"text-align: justify;\">On August 11th, the last three members of the Joint Select Committee on Deficit Reduction (JSC) were appointed by House Minority Leader Nancy Pelosi (D-CA).  The duties of the JSC are to “provide recommendations and legislative language that will significantly improve the short-term and long-term fiscal imbalance of the Federal Government.”</p> <p style=\"text-align: justify;\">On August 11th, the last three members of the Joint Select Committee on Deficit Reduction (JSC) were appointed by House Minority Leader Nancy Pelosi (D-CA).  They are Representatives Chris Van Hollen (D-MD), Xavier Becerra (D-CA), and James Clyburn (D- SC).  The other nine committee members who were announced on August 9th, are:</p> <ul> <li>Senator Patty Murray (D-WA),</li> <li>Senate Finance Committee Chair Max Baucus (D-MT),</li> <li>Senate Foreign Relations Committee Chair John Kerry (D-MA),</li> <li>Senator John Kyl (R-AZ),</li> <li>Senator Pat Toomey (R-PA),</li> <li>Senator Rob Portman (R-OH),</li> <li>Ways & Means Chair Dave Camp (R-MI),</li> <li>Commerce Chair Fred Upton (R-MI), and</li> <li>Representative Jeb Hensarling (R-TX).</li> </ul> <p style=\"text-align: justify;\">The Budget Control Act of 2011, which was signed into law by President Obama on August 2, 2011, included an initial $1 trillion of deficit reduction over fiscal years 2012 through 2021 with no corresponding revenue hikes.  The Act also created the Joint Select Committee, whose members must devise ways to reduce the deficit by an additional $1.5 trillion over fiscal years 2012 through 2021.  In identifying these savings, the duties of the JSC are to “provide recommendations and legislative language that will significantly improve the short-term and long-term fiscal imbalance of the Federal Government.”  The JSC will hold its first meeting no later than September 16, 2011.</p> <p style=\"text-align: justify;\">It is hard to say what, if anything, the JSC might recommend by way of tax changes; however,  based on past proposals, it is possible that:</p> <p style=\"text-align: justify;\">Businesses may have to give up certain tax breaks, such as accelerated depreciation under Code Sec. 168, the domestic production activities deduction under Code Sec. 199, and the election under Code Sec. 472 to use the last-in, first-out (LIFO) inventory accounting method.  Industries (such as oil and gas) may have to give up some of their tax preferences.  In return, corporations may wind up with a modestly lower top rate.</p> <p style=\"text-align: justify;\">In the international arena, a territorial tax regime may be adopted, there may be a repatriation holiday to induce multinationals to bring home overseas profits, and there may be crackdowns on transfer pricing tax strategies.</p> <p style=\"text-align: justify;\">There could be a new round of loophole closers, such as a crackdown on “carried interest.”</p> <p style=\"text-align: justify;\">Individuals may find cutbacks in key tax breaks, such as the mortgage interest deduction, in exchange for flattened and lowered tax rates.</p> <p style=\"text-align: justify;\">Other issues the JSC will have to deal with include:</p> <p style=\"text-align: justify;\">The post-2012 expiration of the Bush-era income tax cuts (including the current rate schedules, and low tax rates for long-term capital gains),</p> <p style=\"text-align: justify;\">The expiration of the Bush-era rules for estate and gift taxation, and</p> <p style=\"text-align: justify;\">The transfer tax rules in the 2010 Tax Relief Act, effective for estates of decedents dying, gifts made, or generation-skipping transfers made after Dec. 31, 2012.</p> <p style=\"text-align: justify;\">After signing the Budget Control Act of 2011 into law, the President reiterated his call for a balanced plan that includes revenue changes as well as spending cuts.  He remarked that “since you can’t close the deficit with just spending cuts, we’ll need a balanced approach where everything is on the table.  Yes, that means making some adjustments to protect health care programs like Medicare so they’re there for future generations.  It also means reforming our tax code so that the wealthiest Americans and biggest corporations pay their fair share.  And it means getting rid of taxpayer subsidies to oil and gas companies, and tax loopholes that help billionaires pay a lower tax rate than teachers and nurses .... Everyone is going to have to chip in. It’s only fair.  That’s the principle I’ll be fighting for during the next phase of this process.”</p> <p style=\"text-align: justify;\">In their August 2nd press releases about the Budget Control Act of 2011, neither House Speaker Boehner (R-OH) nor Senate Republican Leader Mitch McConnell (R-KY) mentioned the possibility of tax reform as part of the deficit reduction package.</p>','Joint Select Committee on Deficit Reduction Ready to Start Work','','publish','open','open','','joint-select-committee-on-deficit-reduction-ready-to-start-work','','','2011-08-15 13:29:54','2011-08-15 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6149',7,'post','',0),(6150,1,'2011-08-30 13:29:52','2011-08-30 13:29:52','<div style=\"text-align: justify;\"> <p>The IRS has approved a court’s modification to a trust containing a drafting error that could have triggered significant transfer tax to the surviving spouse. As a result of the modification, the surviving spouse will not be considered to (1) possess a general power of appointment over the trust at his death, (2) have released a power during his life, or (3) have made a deemed gift of an interest in the trust.</p> </div>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"pdfs/featured_posts/2011.8.30-irs-allows-modification.pdf\">Download PDF</a><a href=\"pdfs/featured_posts/2011.8.30-irs-allows-modification.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\">  <br /></a></div> <p><strong>PLR 201132017.</strong></p> <p style=\"text-align: justify;\"><strong>Facts. </strong> Husband and Wife created an inter vivos revocable trust (Trust), drafted by Attorney A, and served as the original trustees of the Trust.  The terms of the Trust provided that, upon the death of the first spouse to die, the Trust assets would be divided among the Marital Trust, the By-Pass Trust and the Survivor\'s Trust.  The Trustee was directed to pay the debts of the surviving spouse, expenses, and death taxes due by reason of the surviving spouse\'s death from the assets allocated to the By-Pass Trust.  Wife died, survived by her Husband and their three children.  Husband was appointed to serve as the Executor of Wife\'s estate, and continued to serve as the sole Trustee of the Survivor\'s Trust, the By-Pass Trust, and the Marital Trust.</p> <p style=\"text-align: justify;\">Husband consulted Attorney B (who had not drafted the Trust), who discovered an error in the article directing the Trustee to charge debts, expenses and death taxes against the By-Pass Trust, as the provision should have referred to the Survivor\'s Trust.  In sworn affidavits, Husband and Attorney A represented that it was the Husband and Wife\'s intent in the establishment of the Trust to minimize their estate taxes, including maximizing the use of the unified credit. Accordingly, the By-Pass Trust should have been drafted by Attorney A to ensure that the assets in the By-Pass Trust would not be included in the surviving spouse\'s gross estate, and that the surviving spouse would not have any property or other rights to the Trust property that would cause the assets to be included in the surviving spouse\'s gross estate upon her death.</p> <p style=\"text-align: justify;\">In order to correct the error in the Trust and to accurately reflect the intent of Husband and Wife, Husband, as Trustee, filed a petition with a state court seeking authorization to modify Trust. Husband stated in the petition that it was at all times his intent and desire that the assets of the By-Pass Trust be administered so as to avoid taxation at the surviving spouse\'s death. He argued that the reference to the By-Pass Trust was a scrivener\'s error, and the state court agreed and modified the trust in the manner sought.</p> <p style=\"text-align: justify;\"><strong>IRS’ Ruling.</strong>  The IRS determined that the documentation submitted by Husband strongly indicated that he and Wife did not intend to have any control over the assets held in the By-Pass Trust, and that the provision of the Trust directing the Trustee to charge surviving spouse\'s debts, expenses and death taxes from the By-Pass Trust was the result of a scrivener\'s error.  In reforming the By-Pass Trust, the state court found that the modification of Trust was an equitable reformation of Trust under common law and a state statute providing that when through fraud or mutual mistake of the parties, or a mistake of one party, a written contract does not truly express the intention of the parties, it may be revised on the application of the party aggrieved.</p> <p style=\"text-align: justify;\">Therefore, the IRS concluded that the state court order modifying the trust instrument based on a scrivener\'s error was consistent with applicable state law that would be applied by the highest court of that state.  The court-modified version of the Trust did not provide surviving spouse with a general power of appointment, under Section 2041(b) of the Internal Revenue Code, over the assets of the By-Pass Trust.  Consequently, the IRS concluded that the value of the assets in the By-Pass Trust will not be included in surviving spouse\'s gross estate upon his death.</p> <p style=\"text-align: justify;\">The IRS also determined that the modification will not (1) constitute the exercise or release of a general power of appointment by surviving spouse within the meaning of Code Sec. 2514(b) , or (2) be treated as a deemed transfer of an interest in Trust by surviving spouse for gift tax purposes under Code Sec. 2501.</p>','IRS Allows Court-Approved Trust Modification to Prevent Drafting Error','','publish','open','open','','irs-allows-court-approved-trust-modification-to-prevent-drafting-error','','','2011-08-30 13:29:52','2011-08-30 13:29:52','',0,'http://www.racklaw.com/new-site/?p=6150',6,'post','',0),(6152,1,'2011-08-30 13:29:54','2011-08-30 13:29:54','<p style=\"text-align: justify;\">The IRS has privately ruled that flexible premium deferred annuity contracts purchased by a trust, of which each of the trust beneficiaries is the named annuitant of the contract in proportion to his residuary share of the trust, will be considered owned by natural persons, so that the distribution of the contracts to the beneficiaries will not be treated as a gratuitous transfer.</p>  <!--more-->  <div></div> <div></div> <div style=\"text-align: right;\"></div> <div style=\"text-align: right;\"></div> <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/08/2011.8.30-distribution-not-gratuitous.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/08/2011.8.30-distribution-not-gratuitous.pdf\"><img class=\" alignright size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" style=\"float: right;\" height=\"15\" width=\"15\" /></a></div> <p> </p> <p><b>PLR 201124008.</b></p> <p><strong>Facts. </strong> Husband established a grantor trust (the “Trust”) and named his Wife and their six descendants as beneficiaries of the Trust.  Husband and Wife served as co-trustees during Husband\'s life and, upon the death of Husband, Wife became the sole trustee.  Wife divided the Trust into Subtrusts A, B, and C, pursuant to the terms of the Trust.  Subtrust A was allocated an amount based on the allowed estate tax exemption and marital deduction.  Subtrust B was allocated an amount based on the estate tax exemption, provided the amount was not used for the payment of taxes, debts, or administration expenses of Husband\'s estate.  Once all taxes, debts, and expenses have been paid, the assets of Subtrust B were to be distributed to Subtrust C, which contained all of the remaining trust property.</p> <p>During the time that Wife is serving as trustee of the Trust, she is authorized to distribute the property in Subtrust C for the benefit of herself and others who she considered dependent upon her for support (subject to an ascertainable standard).  Upon her death, the Trust directs that the property of Subtrust C is to be divided and distributed among the children of Husband and Wife.</p> <p>While serving as trustee, Wife intends to purchase flexible premium deferred annuity contracts and name each of the children as the annuitant on one annuity contract, in proportion to each beneficiary\'s residuary share of Trust.  The material provisions of each contract will be substantially the same, except for differing dates of annuitization, and the Trust will be the owner and beneficiary of the contracts during Wife\'s lifetime.  The Trust is expected to have sufficient assets to fund its expenses and make nominal distributions to Wife, and there should not be any need for Trust to take a distribution from the annuity contracts.  Upon the final distribution of the Trust, each beneficiary will receive an outright distribution of the contract purchase on behalf of the beneficiary.  This distribution is anticipated to occur before the contract\'s annuity starting date.</p> <p>According to Internal Revenue Code Section 72(u), an annuity contract will not be treated as such if it is held by a person who is not a “natural person.”  Therefore, if the Trust is not considered a “natural person,” the income on the contract for any tax year of the policyholder would be treated as ordinary income received or accrued by the owner during that tax year and, when transferred for less than full and adequate consideration, is treated as receiving a nonannuity payment equal to the excess of: (i) the cash surrender value of the contract at the time of transfer, over (ii) his investment in the contract.  In order to determine whether the Trust would be treated as a “natural person,” Wife requested a private letter ruling from the IRS.</p> <p><strong>IRS’ Decision.</strong>  In a private letter ruling, the IRS determined that the annuity contracts are considered owned by natural persons for the purposes of Internal Revenue Code Section 72(u), and that the distribution of the contracts by the Trust to the beneficiaries will not be treated as an assignment of an annuity contract for less than full and adequate consideration.  This rule is intended to prohibit taxpayers from avoiding the required distribution rules by continuing tax deferral beyond the life of an individual taxpayer. Here, since the transfer of the contracts from Trust to the beneficiaries does not have the effect of avoiding the required distribution rules, the distribution of the contracts will not be treated as an assignment for less than full consideration. </p>','Distribution of Annuity Contracts from Trust to Beneficiaries Not Treated as Gratuitous Transfer','','publish','open','open','','distribution-of-annuity-contracts-from-trust-to-beneficiaries-not-treated-as-gratuitous-transfer','','','2011-08-30 13:29:54','2011-08-30 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6152',5,'post','',0),(6154,1,'2015-08-31 13:29:54','2015-08-31 13:29:54','<p style=\"text-align: justify;\">Tax Court concludes that taxpayer recognized taxable income on the surrender of his life insurance policy when the insurance company applied the policy’s maturity value to the outstanding balance of his policy loans.</p>  <!--more-->  <p style=\"text-align: right;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/08/2011.8.31-taxpayer-constructive-distribution.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/08/2011.8.31-taxpayer-constructive-distribution.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p> </p> <p style=\"text-align: justify;\"><strong>James Ledger, et ux. v. Commissioner, TC Memo 2011-183.</strong></p> <p style=\"text-align: justify;\"><strong>Facts.</strong>  In April of 1974, James Ledger (Ledger) purchased a life insurance policy from Prudential Insurance Co. of America (Prudential).  The policy was payable on the earlier of his death or his reaching age 65.  The face amount of the policy was $31,448, the maturity value considered for gain was $61,722, and the endowment maturity value was $42,403.  Monthly premium payments were $100.</p> <p style=\"text-align: justify;\">In October of 1978, Ledger borrowed $2,000 against the policy.  Over approximately the next 27 years, he took out 13 additional loans against the policy.  As of May 27, 2005, his final loan balance and accrued interest against the policy totaled $56,220.</p> <p style=\"text-align: justify;\">The policy matured on April 12, 2006, with a gross maturity value of $61,788, and a maturity value considered for gain value of $61,772.  Prudential paid Ledger $5,568 (which was the gross maturity value less final loan balance).  Prudential determined Ledger\'s investment in the contract at the time of maturity to be $20,780, and that policy\'s premiums were paid using the annual dividends from 1996 to 2005.</p> <p style=\"text-align: justify;\">For the 2006 tax year, Prudential issued Ledger a Form 1099-R (Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.) that identified taxable distributions of $40,992 (calculated as maturity value considered for gain less cost basis).  A letter sent by Prudential to Ledger explained how it calculated his cost basis and taxable distributions in the policy.</p> <p style=\"text-align: justify;\">On December 15, 2008, the IRS issued a notice of deficiency to Ledger, determining a $7,184 deficiency in income tax and a Code Sec. 6662(a) accuracy-related penalty of $1,433 for the 2006 tax year.  Ledger challenged IRS in Tax Court, contending that he should not be taxed on any distribution from Prudential in 2006 because he had already paid taxes on all funds issued to him under the policy.</p> <p style=\"text-align: justify;\"><strong>Applicable Law.</strong>  An amount received under a life insurance contract that is not received as an annuity is included in gross income to the extent it exceeds the investment in the contract.  See Code Secs. 72(e)(1)(A); 72(e)(5)(A) and 72(e)(5)(C).  On any given date, the investment in the contract equals the aggregate amount of premiums or other consideration paid for the contract before that date, less the aggregate amount received under the contract before that date to the extent that amount was excludable from gross income.   Code Sec. 72(e)(6).</p> <p style=\"text-align: justify;\">For federal income tax purposes, loans against a life insurance contract\'s cash value are treated as true loans from the insurance company to the policyholder with the policy serving as collateral. Thus, using a policy\'s proceeds to satisfy a loan has the same effect as paying the proceeds directly to the policyholder.  Minnis v. Commisioner, 71 TC 1049 (1979); Sanders v. Commissioner, TC Memo 2010-279.</p> <p style=\"text-align: justify;\"><strong>Conclusion.</strong>  The Tax Court concluded that Ledger received $40,992 as a constructive distribution, taxable as income in his 2006 tax year. The evidence indicated that upon termination in 2006, the policy\'s cash value for tax purposes was $61,772, and Ledger\'s investment in the policy was $20,780.</p> <p style=\"text-align: justify;\">When Prudential terminated Ledger\'s policy in 2006, it applied the policy\'s maturity value to the outstanding balance on the policy loans.  This was the economic equivalent of Prudential paying Ledger the policy proceeds, including the untaxed inside buildup, with Ledger using most of those proceeds to pay off the policy loans. The constructive distribution was a payment of the policy proceeds and as such was gross income to Ledger to the extent the distribution exceeded his investment in the contract.</p>','Taxpayer Recognizes Taxable Income on Surrender of Life Insurance Policy','','publish','open','open','','taxpayer-recognizes-taxable-income-on-surrender-of-life-insurance-policy','','','2015-08-31 13:29:54','2015-08-31 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6154',12,'post','',0),(6156,1,'2011-09-19 13:29:54','2011-09-19 13:29:54','<div style=\"text-align: justify;\"> <p>The transfer of a house owned by a Medicaid applicant to her caregiver son immediately preceding her application for benefits is not considered an uncompensated transfer subject to a Medicaid penalty period because it falls within the child caregiver exception.</p> </div>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/09/2011.9.19-caregiver-exception-transfer.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/09/2011.9.19-caregiver-exception-transfer.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\">  <br /></a></div> <p style=\"text-align: justify;\"><strong>V.P. v. Dept. of Human Services (N.J. Sup. Ct., App. Div., No. A-2362-09T1, Sept. 2, 2011).</strong></p> <p style=\"text-align: justify;\"><strong>Facts.</strong>  Mother lived with her Son in Mother’s residence until she suffered a stroke and required the full-time care of a nursing home.  Prior to applying for Medicaid benefits, Mother transferred her residence to her Son and then applied to the state.  The state of New Jersey found that Mother impermissibly transferred her home and was, therefore, subject to a penalty period (based on the value of the transfer) before she would be allowed to receive Medicaid benefits.</p> <p style=\"text-align: justify;\">Mother appealed the state’s decision, arguing that her house should not be considered a countable asset because the transfer fell within the child caregiver exception to the uncompensated transfer rule.  At the appeal hearing, several family members and Mother\'s doctor testified that Son regularly assisted Mother when she needed to walk, bathe, and cook, among other necessary activities.</p> <p style=\"text-align: justify;\">Reversal of Administrative Law Judge’s (ALJ) Decision. The ALJ determined that the witnesses were credible and held that the child caregiver exception applied to Mother’s case. However, the state\'s Medicaid director rejected the decision of the ALJ and determined that Mother only required normal support services, resulting in the transfer not being eligible for the child caregiver exception. Mother appealed.</p> <p style=\"text-align: justify;\"><strong>Ruling of the New Jersey Superior Court. </strong> The Appellate Division of the New Jersey Superior Court reversed the decision of the Medicaid director, holding that Mother is entitled to Medicaid benefits with no penalty period for the transfer of the residence to Son. According to the Superior Court, \"the credible evidence in the record supports the ALJ\'s finding that [Mother] needed, and [Son] provided, special care and attention essential to her health and safety.\"</p>','Child Caregiver Exception Permitted for Transfer of House of Medicaid Applicant to Son','','publish','open','open','','child-caregiver-exception-permitted-for-transfer-of-house-of-medicaid-applicant-to-son-2','','','2011-09-19 13:29:54','2011-09-19 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6156',12,'post','',0),(6158,1,'2016-02-25 13:29:54','2016-02-25 13:29:54','<p style=\"text-align: justify;\">The Court of Federal Claims has held that the majority owner, CEO, and principal financier of a publishing corporation was responsible for its nonpayment of payroll tax, and willfully failed to pay over the funds to the government.  Although he did not exercise day-to-day control over the entity, he clearly had the capacity to do so.  He also drew on company funds in an attempt to recoup cash he advanced to the entity during the same time he knew payroll taxes were unpaid.</p>\r\n<!--more-->\r\n<p style=\"text-align: right;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/09/2011.9.23-responsible-person-penalty.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/09/2011.9.23-responsible-person-penalty.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" width=\"15\" height=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\">\r\n</a></p>\r\n&nbsp;\r\n\r\n<strong>Jenkins v. U.S., 108 AFTR 2d 2011-_____, 09/15/2011</strong>\r\n<p style=\"text-align: justify;\"><strong>Trust Fund Recovery Penalty. </strong> Code Sec. 6672 imposes the trust fund recovery penalty on any person who: (1) is responsible for collecting, accounting for, and paying over payroll taxes; and (2) willfully fails to perform this responsibility.  The amount of the penalty is equal to the amount of the tax that was not collected and paid.  The penalty is imposed on a “responsible person,” i.e., anyone in a business entity who has the duty to collect, account for, or pay over the tax.  In determining whether there is “willfulness,” the courts have focused on whether a taxpayer had knowledge about the non-payment of the payroll taxes, or showed reckless disregard with respect to whether the payments were being made.</p>\r\n<p style=\"text-align: justify;\"><strong>Facts.  </strong>In 1992, Timothy Jenkins and Gary Puckrein founded Dialogue Diaspora, Inc. (“DDI”), a corporation which published American Visions magazine and promoted African-American culture.  Jenkins was a majority stockholder, CEO, CFO, and publisher.  He also was a major financial backer of DDI.  He rented space to DDI, advanced money to it under a loan agreement secured by a factor\'s lien, and made a series of advances to DDI or American Visions totaling over $250,000.  Puckrein was DDI President and editor of American Visions andwas primarily responsible for the day-to-day management of the business from 1992 to 1994.</p>\r\n<p style=\"text-align: justify;\">Early in 1995, Jenkins and Puckrein had a major falling out, and in April of that year, Jenkins learned that DDI had been experiencing employment tax problems with the IRS and had entered into an installment agreement for the payment of those taxes.  DDI did not stay compliant with the installment agreement and, in June of 1995 after having learned Puckrein was secretly operating a competing company, Jenkins changed the locks on DDI\'s premises, called a board meeting, and ousted Puckrein.  On July 5, 1995, Jenkins wrote a check on DDI\'s bank account for $16,668 made payable to himself and his wife (the last of 13 such checks), cashed the check and deposited the proceeds into one of his personal bank accounts.  Jenkins said that he wrote this check to himself based on the loan/factoring agreement and admitted that, at the time he wrote it, he knew about the unpaid IRS liability.</p>\r\n<p style=\"text-align: justify;\">After taking various procedural steps, the IRS collected $264,097.56 from Jenkins by levying on his individual retirement account and Social Security benefits.  Jenkins then filed a claim for refund seeking in an attempt to recover the levied assets.  The IRS disallowed Jenkins’ refund claim and, in turn, Jenkins filed a suit for refund in the Court of Federal Claims.</p>\r\n<p style=\"text-align: justify;\"><strong>Court of Federal Claims Finds in Favor of the IRS.</strong>  Ruling in favor of the IRS, the Court held that Jenkins was a responsible person who willfully failed to collect, account for, or remit the withholding taxes.  Jenkins held various positions of significant authority within DDI, sat on the company\'s board and, together with his wife, owned at least 50% of the company\'s stock.  In addition, he had the ability to sign checks on DDI\'s primary bank account and the ability to withdraw funds from those accounts. Because of his stake in the corporation and his role as a director, Jenkins also had the ability to precipitate reorganizations of the corporation\'s leadership.  Moreover, he held an additional entrepreneurial stake in DDI via his role in financing the company and leasing the building that was used as its principal place of business.  Owing to his multi-faceted role within the corporation and his role as a financier of first resort, the Court held that Jenkins plainly had the leverage and authority to “avoid the default” and demand that the corporation not squander the taxes it withheld from its employees.  Although he claimed not to have exercised day-to-day decision making authority regarding DDI\'s tax obligations, Jenkins clearly possessed the effective power to do so.  The Court pointed out that it was well-accepted that a person need not actually perform an entity\'s tax functions (withhold and pay over payroll tax deposits) in order to be a responsible person under Code Sec. 6672.</p>\r\n<p style=\"text-align: justify;\">The Court also held that Jenkins willfully failed to collect, account for, and remit the withholding taxes owed by DDI.  There was little doubt that Jenkins had an earnest desire for DDI to pay the past due and current taxes it owed the IRS, but only if the payment did not adversely impact his own ability to recoup moneys owed to him by DDI.  It was in pursuit of the latter goal, and certainly not the former, that Jenkins wrote himself a check for $16,668.45 (the last of at least 13 checks) in an attempt to recover his investment in DDI.  The Court determined that every time he signed one of these checks, he should have wondered, in light of DDI\'s history of delinquency, its modest size, and the lack of improvement in its bottom line, whether history was repeating itself and he was signing over to creditors (and himself) money that belonged to the United States.</p>','Responsible Person Penalty Upheld Against Majority Owner and Financier of Company','','publish','open','open','','responsible-person-penalty-upheld-against-majority-owner-and-financier-of-company','','','2016-08-30 12:55:40','2016-08-30 12:55:40','',0,'http://www.racklaw.com/new-site/?p=6158',11,'post','',0),(6160,1,'2011-10-17 13:29:54','2011-10-17 13:29:54','<div style=\"text-align: justify;\"> <p>In order to help raise awareness about important estate planning issues, Rack & Moccia is joining WealthCounsel in a public relations campaign to showcase National Estate Planning Awareness Week.</p> </div>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/10/2011.10.17-nep-intro.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/10/2011.10.17-nep-intro.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\">  </a> <p style=\"text-align: justify;\">According to a 2010 industry trends survey of estate planners conducted by WealthCounsel, nearly 70% of the respondents indicated that Americans fail to plan because they lack awareness as to why they should plan.  At Rack & Moccia, we are passionate about building awareness of the importance of thoughtful estate planning and we are committed to educating the public about the negative consequences of what can happen to a family when a properly designed estate plan is not in place.</p> <p style=\"text-align: justify;\">Rack & Moccia will be posting a series of articles addressing selected issues facing the surviving families of several recent – and well-publicized – deaths.  While many people are under the impression that formal “estate planning” is only for the wealthy, frequently, it is the numerous non-tax complications that arise unexpectedly after the death of a loved one that cause the most problems.</p> <p style=\"text-align: justify;\">These awareness articles will examine the estates of Jimi Hendrix, Anna Nicole Smith, Leona Helmsley and others, address the issues created by faulty (or non-existent) estate plans and provide preventative recommendations on how you can avoid these devastating problems.</p> <p style=\"text-align: justify;\">We invite you to read these articles, consider the issues and talk to your friends and family about the importance of estate planning to prevent family chaos after death, avoid lengthy and expensive probate, maintain privacy, prevent heirs from mismanaging their inheritance, provide for special needs beneficiaries and preserve assets for generations to come.</p> </div>','National Estate Planning Awareness Week 2011','','publish','open','open','','child-caregiver-exception-permitted-for-transfer-of-house-of-medicaid-applicant-to-son','','','2011-10-17 13:29:54','2011-10-17 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6160',10,'post','',0),(6162,1,'2011-10-18 13:29:54','2011-10-18 13:29:54','<p style=\"text-align: justify;\">Musician Jimi Hendrix died on September 18, 1970; shockingly, his estate was involved in litigation for over 34 years.  How could this possibly happen?  He died without a Will (and with millions of dollars).</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/10/2011.10.18-jimi-hendrix.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/10/2011.10.18-jimi-hendrix.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p style=\"text-align: justify;\">When someone dies without a Will, state law typically determines who will receive an inheritance and how much each heir will receive.  The results are rarely ideal – and, depending on the laws in effect, can be downright appalling.  In Jimi’s case, his potential heirs included two children born out of wedlock, his father, his brother, a girlfriend with whom he was cohabitating at the time of his death, a woman who claimed to be his fiancée and his step-sister.</p> <p style=\"text-align: justify;\">Initially, Jimi’s father, Al Hendrix, legally denied the claims of his “illegitimate” children and became the sole heir of his son’s estate.  In some circumstances, if children are not specifically included in a Will (or if there is no Will), the children are completely disinherited – a result which many parents find extremely unsettling.  Upon receiving the multi-million dollar estate, Jimi’s father sold the rights to his son’s music to a Panamanian tax shelter that, in return, paid Jimi’s father a fixed annual annuity payment.  The rights to Jimi’s image and likeness were sold to a different company.</p> <p style=\"text-align: justify;\">Later, in 1993, Al Hendrix claimed to know nothing of these sales, and successfully sued for return of the rights to Jimi’s music and likeness; however, the saga did not end with this lawsuit.  In 2002, upon the death of Al Hendrix, the family discovered that Al had disinherited Jimi’s brother, Leon and left his estate – including all of Jimi’s assets – to his adoptive daughter, Janie, who he also named to serve as Trustee over his Trust.  Leon then proceeded to sue Janie in 2004, claiming that she exerted undue influence over Al and pressured him to exclude Leon from the Will.  Leon’s attorney fees and court costs ended up costing him over $3 million.</p> <p style=\"text-align: justify;\">Since filing a lawsuit against Janie, Leon and seven other potential beneficiaries posed numerous issues for the court.  Ultimately, Janie was found to have mismanaged the Trust assets – but not before revealing to the court that Leon was a former drug addict.  In light of these discoveries, the court disinherited Leon and removed Janie as Trustee.</p> <p style=\"text-align: justify;\">Although the resulting litigation was complicated, the solution is very simple.  If Jimi had a Will or Trust in place when he died, his multi-million dollar estate (and his family) would not have been wrapped up in litigation for over three decades.  Those rumored to be closest to Jimi during his lifetime, including his mother, did not receive anything and, with proper estate planning, Jimi could have left his vast estate to those who he wanted to enjoy his legacy – not those who the state decided should inherit a windfall.</p>','The Estate of James Marshall “Jimi” Hendrix','','publish','open','open','','the-estate-of-james-marshall-jimi-hendrix','','','2011-10-18 13:29:54','2011-10-18 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6162',9,'post','',0),(6165,1,'2011-10-25 13:29:53','2011-10-25 13:29:53','<p style=\"text-align: justify;\">At age 26, Anna Nicole Smith married J. Howard Marshall II, 89 year old billionaire and Texas oil tycoon, who died a year after their marriage.  Howard Marshall’s Will, executed after he married Anna Nicole, disinherited her almost entirely, allowing her to keep only the gifts he had given her during his lifetime (worth about $8 million).</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/10/2011.10.25-summary.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/10/2011.10.25-summary.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p style=\"text-align: justify;\">She attempted to have the Will set aside, claiming that Howard intended to give her half of his estate, and his son, Pierce, defended the Will as valid.  Anna Nicole lost in her lawsuit, and received no additional assets from her late husband’s estate.  This decision was followed by over 15 years of complex litigation (including two appeals to the U.S. Supreme Court), during which time both Pierce and Anna Nicole died and their respective estates continued to fight over Howard’s fortune.</p> <p style=\"text-align: justify;\">Prior to her death on February 8, 2007 (at age 39), Anna Nicole Smith had a daughter, Dannielynn, on June 1, 2006.  Soon thereafter, she tragically, lost her son, Daniel Wayne, to suicide on September 10, 2006.  Unfortunately, her Last Will and Testament, last updated on July 30, 2001 included the following language:</p> <p style=\"text-align: justify;\">“I have one child DANIEL WAYNE SMITH.  I have no predeceased children nor predeceased children leaving issue.  Except as otherwise provided in this Will, I have intentionally omitted to provide for my spouse and other heirs, including future spouses and children and other descendants now living and those hereafter born or adopted, as well as existing and future stepchildren and foster children.”</p> <p style=\"text-align: justify;\">A copy of her Will, recorded as public record in California, can be <a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/10/anna-nicole-will.pdf\">read here</a>.  Since she named her son, who had since died, as the sole beneficiary of her estate – and specifically excluded any other children, even if not yet born – her minor daughter was effectively disinherited.  Also, Anna Nicole’s estranged mother, and at least two boyfriends, attempted to claim custody of Dannielynn since the Will did not appoint a guardian to care for her after her Anna Nicole’s death.  Presumably, the would-be guardians hoped that caring for Dannielynn would include access to large funds and posh living arrangements.  Further complicating the issue, paternity and jurisdiction investigations were required to be completed before Dannielynn’s custody could be determined (as a result, the father named on the birth certificate was found to be incorrect).</p> <p style=\"text-align: justify;\">Arguments in favor of Dannielynn receiving Anna Nicole’s estate are that the disinheritance was unintentional or, alternatively, that the Will was invalid.  In some U.S. states, if a parent unintentionally omits a child from her Will, the child can contest the validity of the Will and potentially receive a share of the estate (however, Anna Nicole was arguably residing in the Bahamas, not the U.S.).  Ultimately, on June 23, 2011, Anna Nicole’s representatives lost the fight against Howard’s son and brought the ongoing battle over the billionaire’s estate to an end.  Dannielynn will not receive a portion of Howard’s estate and, because of the costs of litigation, there were no assets left from her mother’s estate for her to inherit.  This epically long and costly battle could have been avoided if Anna Nicole had simply updated her Will to include, and appoint a guardian to care for, her minor daughter.  These simple revisions – reflecting significant life changes – could have clearly established her intent and provided closure and finality for her family after this series of tragic deaths.</p>','The Estate of Vickie Lynn Marshall (a.k.a Anna Nicole Smith)','','publish','open','open','','the-estate-of-vickie-lynn-marshall-aka-anna-nicole-smith','','','2011-10-25 13:29:53','2011-10-25 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6165',8,'post','',0),(6167,1,'2011-10-20 13:29:53','2011-10-20 13:29:53','<div style=\"text-align: justify;\"> <p>Before her death on August 20, 2007, billionaire hotelier Leona Helmsley established a charitable trust for “the benefit of dogs,” which was funded with more than $4 billion.</p> </div>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/10/2011.10.20-leona-helmsley.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/10/2011.10.20-leona-helmsley.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> </a> <p style=\"text-align: justify;\">She also established a trust for the benefit of her Maltese, Trouble.  Upon her death, Trouble’s trust was funded with $12 million.  Her brother received $15 million and two of her four grandchildren received $10 million, while the remaining 2 grandchildren were left out of the Will entirely.  She also left $100,000 to her chauffeur.</p> <p style=\"text-align: justify;\">Predictably, the omitted grandchildren initiated a contest, and were able to successfully convince the judge to reduce the trust from $12 million to $2 million even though New York law does not provide inheritance rights to an omitted grandchild and the decedent’s intent typically should prevail.  To make matters worse, the result was especially unfortunate for Trouble as his annual care costs included: $100,000 for full-time security, $8,000 for grooming, $1,200 for food and $60,000 for the guardian fee.  The $10 million reduction was divided, with $6 million going to the grandchildren and $4 million going to the $4 billion charitable dog trust.</p> <p style=\"text-align: justify;\">Although it was Leona’s intent to provide a charitable trust for the benefit of dogs, the court found that the separate mission statement to the trust – drafted by Leona and not incorporated into her Will or trust – included very broad discretionary distribution language; Leona had been warned that the mission statement may not be legally binding.  As a result of Leona’s personally drafted statement, the court determined that the distribution language of the trust allowed the trustees to distribute trust funds for such charitable purposes and in such amounts as they may, in their sole discretion, determine.  So far, distributions from the trust have been made to charities in the areas of health care, medical research, education and human services; however, distributions have not included charities such as the SPCA or The Humane Society.</p> <p style=\"text-align: justify;\">While these generous charitable distributions from the “dog trust’ will fund important research, the true intent of Leona Helmsley (whether or not some find her intent questionable) was not upheld.  Each person has the right to dispose of her property in accordance with her wishes – so, what went wrong in this case?  The result was caused by poor drafting on the part of Leona.  When properly drafted, charitable trusts (and pet trusts) are enforced by the courts.  Instead of being distributed in accordance with her wishes, a vast portion of her estate was given to various organizations without her knowledge or consent.  Even deliberately disinherited family members received a share of her fortune merely because they were related to the decedent.  If she wanted to disinherit two grandchildren, provide her wealth to animal charities and establish a valid pet trust, she should have sought the appropriate legal advice.</p> </div>','The Estate of Leona Helmsley','','publish','open','open','','the-estate-of-leona-helmsley','','','2011-10-20 13:29:53','2011-10-20 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6167',6,'post','',0),(6168,1,'2011-10-18 13:29:54','2011-10-18 13:29:54','<p style=\"text-align: justify;\">Until January 1, 2013 (when the estate tax exemption is scheduled to decrease to $1 million per taxpayer), the estate tax exemption rate is $5 million per taxpayer.  Accordingly, if the value of your assets (including life insurance death benefits) is less than $5 million, then no estate tax will apply to transfers to beneficiaries at death.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/10/2011.10.25-summary.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/10/2011.10.25-summary.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p style=\"text-align: justify;\">Even though the current $5 million exemption amount may allow many taxpayers to avoid estate tax, one must still consider many other issues presented by individual and family circumstances as reasons to develop and implement an estate plan.</p> <p style=\"text-align: justify;\">As demonstrated by our National Estate Planning Awareness Week articles on the estates of Jimi Hendrix, Anna Nicole Smith and Leona Helmsley – devastating and costly non-tax related problems can result from outdated (or non-existent) estate plans.  The following list includes commonly overlooked issues which, if not addressed, can cause distressing outcomes:</p> <p style=\"text-align: justify; padding-left: 90px;\"><br />• Name a person (and an alternate) to handle your affairs in case of   incapacity</p> <p style=\"text-align: justify; padding-left: 90px;\">• Name a guardian (and an alternate) for your minor children</p> <p style=\"text-align: justify; padding-left: 90px;\">• Provide for a trustee to manage assets for your spouse or children, or both</p> <p style=\"text-align: justify; padding-left: 90px;\">• Protect assets for your special needs child</p> <p style=\"text-align: justify; padding-left: 90px;\">• Prevent disputes between your current spouse and children from a prior <br />  marriage</p> <p style=\"text-align: justify; padding-left: 90px;\">• Keep assets out of the control of in-laws</p> <p style=\"text-align: justify; padding-left: 90px;\">• Ensure that your estate has liquidity</p> <p style=\"text-align: justify; padding-left: 90px;\">• Update/revise your IRA or 401(k) plan beneficiary designations</p> <p style=\"text-align: justify; padding-left: 90px;\">• Protect the value of your business/practice for heirs</p> <p style=\"text-align: justify; padding-left: 90px;\">• Control the timing and manner in which your estate passes to intended <br />beneficiaries</p> <p style=\"text-align: justify;\">If one or more of these issues applies to you or a loved one, don’t wait for the next tax law change to address your estate plan!</p>','The Importance of Estate Planning','','publish','open','open','','the-importance-of-reviewing-your-estate-planning-documents','','','2011-10-18 13:29:54','2011-10-18 13:29:54','',0,'http://www.racklaw.com/new-site/?p=6168',6,'post','',0),(6170,1,'2011-11-18 13:29:53','2011-11-18 13:29:53','<p style=\"text-align: justify;\">The IRS has released a Notice reminding executors of estates of decedent’s dying after 2010 that they must file and make an election on Form 706, U.S. Estate Tax Return, in order to preserve a deceased spouse’s unused estate and gift tax exclusion amount for the surviving spouse.  Estate tax returns making this newly offered and irrevocable portability election must be filed nine months after the decedent’s date of death, and the first estate tax returns electing portability for estates of those dying after 2010 are due on October 3, 2011.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/11/2011.11.7-portability-elections.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/11/2011.11.7-portability-elections.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p><strong>IR 2011-97, Notice 2011-82, 2011-42 IRB</strong></p> <p style=\"text-align: justify;\"><strong>What is the Portability Election?</strong>  The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (“Tax Relief Act”) permits a surviving spouse an irrevocable “portability” election to carry over the unused estate and gift tax exemption of their deceased spouse dying after 2011 or 2012.  If the portability election is made, each surviving spouse is allowed their own personal $5 million exclusion (less any lifetime allocations of their $5 million exclusion) plus any remaining unused exclusion amount carried over from their deceased spouse.  IRC Section 2010(c)(2).  Then, during the lifetime of the surviving spouse, he or she may use the combined total exclusion for gifts made during life and taxable transfers made after death.</p> <p style=\"text-align: justify;\">If a surviving spouse who has elected to transfer the deceased spouse’s unused exclusion amount remarries another who also predeceases the surviving spouse, the amount of unused exclusion that is available for use by the still-surviving spouse is the unused exclusion of the most recently deceased spouse, regardless of which deceased spouse’s unused exclusion amount was higher.</p> <p style=\"text-align: justify;\"><strong>Making the Portability Election. </strong> The portability election must be made by the deceased spouse’s executor on a properly and timely filed Form 706 (including extensions) regardless of whether the value of the gross estate of the decedent is large enough to cause an estate tax liability.  If an executor does not wish to make the portability election, he or she can either not file a Form 706 or, if the estate requires the filing of an estate tax return, the executor is given instructions on the proper procedure for preparing the Form 706 without making the portability election.  Be warned however, the portability election is made, the IRS may examine, and re-determine, the asset values used to calculate the unused exclusion amount up until the date of the surviving spouse’s death (which could be many years later), significantly different than the traditional, three-year statute of limitations.</p>','Executors Must Begin to Make Portability Elections for Estates of Decedent’s Dying after 2010','','publish','open','open','','executors-must-begin-to-make-portability-elections-for-estates-of-decedents-dying-after-2010','','','2011-11-18 13:29:53','2011-11-18 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6170',5,'post','',0),(6172,1,'2011-11-18 13:29:53','2011-11-18 13:29:53','<p style=\"text-align: justify;\">Nathan Moccia, shareholder of Rack & Moccia, to conduct a national teleconference for National Business Institute on Friday December 30, 2011, titled “Estate Planning Basics.”</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/11/2011.11.18-nbi-announcement.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/11/2011.11.18-nbi-announcement.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p style=\"text-align: justify;\">The program aims to provide a basic knowledge of the essential estate planning instruments and their use in a well-structured and funded plan.  The course will also cover their use during the incapacity and abuse and protection from controversy.  The core groups of registrants are attorneys; however, the course will also benefit professional partners to include trust officers, estate and financial planners, insurance professionals, bankers and paralegals.  For further information, or to register for this program <span style=\"color: #0000ff;\"><a href=\"http://www.nbi-sems.com/SemTeleDetails.aspx/R-58430ER%7C?ctname=SPKEM\">click here</a></span></p> <p><span style=\"text-decoration: underline;\"><strong>Program Description</strong></span></p> <p style=\"text-align: justify;\">Build a Solid Foundation in Estate Planning Basics.   Do you have the skills to ensure your clients are well taken care of in case of incapacity? Can you minimize their tax liability through carefully planned asset transfers? Gain the knowledge you need to help your clients through their estate planning needs with this fundamental program. Be prepared to effectively represent your clients. </p> <ul> <li style=\"text-align: justify;\">Gain a fundamental understanding of basic principles in drafting wills and trusts to effectively document your client\'s wishes.</li> <li style=\"text-align: justify;\">Learn what impact gift and estate taxes will have on beneficiaries and how your plan can address how these taxes are handled.</li> <li style=\"text-align: justify;\">Help your client plan for incapacity by understanding how to proactively address common legal and financial issues that can arise when health deteriorates.</li> </ul>','Rack & Moccia Attorney to conduct NBI Teleconference','','publish','open','open','','rack-a-olansen-attorney-to-conduct-nbi-teleconference','','','2011-11-18 13:29:53','2011-11-18 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6172',4,'post','',0),(6175,1,'2011-12-22 13:29:53','2011-12-22 13:29:53','<div style=\"text-align: justify;\"> <p>The Internal Revenue Service wants to remind all taxpayers that with the New Year fast approaching, there is still time for you to take steps that can lower your 2011 income taxes.  Here are six tax-saving tips the IRS suggests you consider before the calendar turns to 2012.</p> </div>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/12/2011.12.21-six-tax-tips.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/12/2011.12.21-six-tax-tips.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"></a> <p style=\"text-align: justify;\"><span style=\"text-decoration: underline;\"><strong>1. Make Charitable Contributions.</strong></span>  If you itemize deductions, your donations must be made to qualified charities no later than December 31st to be deductible for 2011.  You must have a canceled check, a bank statement, credit card statement or a written statement from the charity, showing the name of the charity and the date and amount of the contribution for all cash donations.  Donations charged to a credit card by December 31st are deductible for 2011, even if the bill is not paid until 2012.  If you donate clothing or household items, they must be in good used condition or better to be deductible.</p> <p style=\"text-align: justify;\"><strong><span style=\"text-decoration: underline;\">2. Install Energy-Efficient Home Improvements.</span></strong>  You still have time this year to make energy-saving and green-energy home improvements, and qualify for either of two home energy credits.  Installing energy efficient improvements such as insulation, new windows and water heaters to your main home can provide up to $500 in tax savings.  Homeowners going green should also check out the Residential Energy Efficient Property Credit, designed to spur investment in alternative energy equipment.  The credit equals 30 percent of the cost of qualifying solar, wind, geothermal, or heat pump property.  For details see Special Edition Tax Tip 2011-08, Home Energy Credits Still Available for 2011 on the <a href=\"http://www.irs.gov/\">www.IRS.gov</a> website.</p> <p style=\"text-align: justify;\"><strong><span style=\"text-decoration: underline;\">3. Consider an Investment Portfolio Adjustment.</span></strong>  Check your investments for gains and losses and consider sales by December 31st.  You may normally deduct capital losses up to the amount of capital gains, plus $3,000 from other income.  If your net capital losses are more than $3,000, the excess can be carried forward and deducted in future years.</p> <p style=\"text-align: justify;\"><span style=\"text-decoration: underline;\"><strong>4. Contribute the Maximum to Retirement Accounts.</strong></span>  Elective deferrals you make to employer-sponsored 401(k) plans or similar workplace retirement programs for 2011 must be made by December 31st.  However, you have until April 17, 2012, to set up a new IRA or add money to an existing IRA and still have it count for 2011.  You normally can contribute up to $5,000 to a traditional or Roth IRA, and up to $6,000 if you are age 50 or over.  The Saver’s Credit, also known as the Retirement Savings Contribution Credit, is also available to low- and moderate-income workers who voluntarily contribute to an IRA or workplace retirement plan.  The maximum Saver’s Credit is $1,000 for individuals and $2,000 for married couples, but the amount allowed could be reduced or eliminated for some taxpayers in part because of the impact of other deductions and credits.</p> <p style=\"text-align: justify;\"><span style=\"text-decoration: underline;\"><strong>5. Make a Qualified Charitable Distribution.</strong></span>  If you are age 70½ or over, the qualified charitable distribution (QCD) allows you to make a distribution paid directly from your individual retirement account to a qualified charity, and exclude the amount of the distribution from your gross income.  The maximum annual exclusion for QCDs is $100,000.  The excluded amount can be used to satisfy any required minimum distributions that the individual must otherwise receive from their IRAs in 2011.  This benefit is available even if you do not itemize deductions.  Importantly, the exclusion for QCDs expires at the end of this year!</p> <p style=\"text-align: justify;\"><span style=\"text-decoration: underline;\"><strong>6. Do Not Overlook the Small Business Health Care Tax Credit.</strong></span>  If you are a small employer who pays at least half of your employee health insurance premiums, you may qualify for a tax credit of up to 35 percent of the premiums paid.  An employer with fewer than 25 full-time employees who pays an average wage of less than $50,000 a year may qualify.  For more information see the Small Business Health Care Tax Credit page on <a href=\"http://www.irs.gov/\">www.IRS.gov</a>.</p> <p style=\"text-align: justify;\">One final tip to remember: you should always save receipts and records related to your taxes.  Good recordkeeping is a must because you need records to prepare your tax return, and it will help you to file quickly and accurately next year.  In the unfortunate event your return is selected by the taxing authorities for examination, clear and accurate records will be the best defense to an unexpected tax bill.</p> </div>','Six Year-End Tips to Reduce 2011 Taxes','','publish','open','open','','six-year-end-tips-to-reduce-2011-taxes','','','2011-12-22 13:29:53','2011-12-22 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6175',13,'post','',0),(6177,1,'2011-12-27 13:29:53','2011-12-27 13:29:53','<p style=\"text-align: justify;\">Late on December 22nd, House and Senate leaders agreed to end their stalemate over extending the payroll tax break, and have agreed to continue the 2% reduction in workers’ Social Security tax rate through the end of February 2012.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/12/2011.12.27-temporary-extension-payroll.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/12/2011.12.27-temporary-extension-payroll.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p style=\"text-align: justify;\">The payroll extension agreement (bill number H.R. 3765, entitled, the “Temporary Payroll Tax Cut Continuation Act of 2011”) calls for new language to be inserted into the tax relief bill to prevent a potential payroll tax problem for employers.  According to information provided by the House Ways & Means Committee, the revision would allow employers to withhold employee payroll taxes at 4.2% (instead of 6.2%) on all wages paid during the two-month extension period, subject only to the full 2012 wage base ($110,100) and without regard to the $18,350 cap (two-twelfths of the wage base of $110,100) on wages earned through the end of February 2012.   If an employee’s wages during the first two months of 2012 exceed $18,350, and the payroll tax reduction is not extended for the remainder of 2012, an amount equal to 2% of those excess wages would ultimately be recaptured on the worker’s individual 2012 income tax return.  Under the agreement, both Republicans and Democrats in the Senate and House will immediately appoint negotiators to a conference to forge a full-year extension of the payroll tax reduction.</p> <p style=\"text-align: justify;\">Both the Senate and House approved the bill on the morning of December 23, 2011, and it was signed into law by President Obama shortly thereafter.</p>','House and Senate Approve Bill Temporarily Extending the Payroll Tax Cut','','publish','open','open','','house-and-senate-approve-bill-temporarily-extending-the-payroll-tax-cut','','','2011-12-27 13:29:53','2011-12-27 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6177',12,'post','',0),(6178,1,'2012-01-06 13:29:53','2012-01-06 13:29:53','<p>Rev. Rul. 2012-2, 2012-3 IRB</p>  <!--more-->  <p style=\"text-align: right;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/05/2011.5.27-applicable-federal-rates.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/05/2011.5.27-applicable-federal-rates.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p style=\"text-align: center;\"><span style=\"color: #000000;\"><strong><span style=\"font-size: 12pt;\"> </span></strong></span></p> <table style=\"margin-left: auto; margin-right: auto;\" height=\"497\" border=\"3\" cellpadding=\"3\" width=\"483\" align=\"center\"> <caption> <p><span style=\"color: #000000;\"><strong>Table 1 (Section 1274(d) Rate) Period for Compounding<br /></strong></span></p> </caption>  <tbody> <tr bgcolor=\"7093DB\"> <th><br /></th><th style=\"text-align: center;\"><span style=\"color: #000000;\">Annual</span></th><th style=\"text-align: center;\"><span style=\"color: #000000;\">Semiannual</span></th><th style=\"text-align: center;\"><span style=\"color: #000000;\">Quarterly</span></th><th style=\"text-align: center;\"><span style=\"color: #000000;\">Month</span></th> </tr> <tr> <td colspan=\"5\" style=\"text-align: center;\"><span style=\"color: #000000;\">Short-Term</span></td> </tr> <tr bgcolor=\"7093DB\"> <td><strong><span style=\"color: #333333;\">AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.19%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.19%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.19%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.19%</span></td> </tr> <tr> <td><strong><span style=\"color: #333333;\">110% AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.21%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.21%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.21%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.21%</span></td> </tr> <tr bgcolor=\"7093DB\"> <td><strong><span style=\"color: #333333;\">120% AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.23%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.23%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.23%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.23%</span></td> </tr> <tr> <td><strong><span style=\"color: #333333;\">130% AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.25%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.25%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.25%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.25%</span></td> </tr> <tr bgcolor=\"7093DB\"> <td colspan=\"5\" style=\"text-align: center;\"><span style=\"color: #000000;\">Mid-Term</span></td> </tr> <tr cellpading=\"10\"> <td><strong><span style=\"color: #333333;\">AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.17%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.17%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.17%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.17%</span></td> </tr> <tr bgcolor=\"7093DB\"> <td><strong><span style=\"color: #333333;\">110% AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.29%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.29%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.29%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.29%</span></td> </tr> <tr> <td><strong><span style=\"color: #333333;\">120% AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.40%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.40%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.40%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.40%</span></td> </tr> <tr bgcolor=\"7093DB\"> <td><strong><span style=\"color: #333333;\">130% AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.53%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.52%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.52%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.52%</span></td> </tr> <tr> <td><strong><span style=\"color: #333333;\">150% AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.77%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.76%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.76%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.75%</span></td> </tr> <tr bgcolor=\"7093DB\"> <td><strong><span style=\"color: #333333;\">175% AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.06%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.05%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.04%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.04%</span></td> </tr> <tr> <td colspan=\"5\" style=\"text-align: center;\"><span style=\"color: #000000;\">Long-Term</span></td> </tr> <tr bgcolor=\"7093DB\"> <td><strong>AFR</strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.63%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.61%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.60%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.60%</span></td> </tr> <tr> <td><strong><span style=\"color: #333333;\">110% AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.89%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.87%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.86%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">2.85%</span></td> </tr> <tr bgcolor=\"7093DB\"> <td><strong><span style=\"color: #333333;\">120% AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">3.15%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">3.13%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">3.12%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">3.11%</span></td> </tr> <tr> <td><strong><span style=\"color: #333333;\">130% AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">3.42%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">3.39%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">3.38%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">3.37%</span></td> </tr> </tbody> </table> <table style=\"width: 475px; height: 246px; margin-left: auto; margin-right: auto;\" height=\"197\" border=\"3\" cellpadding=\"3\" width=\"466\"> <caption> <p style=\"text-align: center;\"> </p> <p> </p> <p><span style=\"color: #000000;\"><strong>Table 2 (Section 1288(b) Rate) Period for Compounding</strong></span></p> </caption>  <tbody> <tr cellpading=\"5\" bgcolor=\"7093DB\"> <th><br /></th><th><span style=\"color: #000000;\">Annual</span></th><th><span style=\"color: #000000;\">Semiannual</span></th><th><span style=\"color: #000000;\">Quarterly</span></th><th><span style=\"color: #000000;\">Month</span></th> </tr> <tr> <td><strong><span style=\"color: #333333;\">Short-term </span></strong><br /><strong><span style=\"color: #333333;\">adjusted AFR</span></strong></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.38%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.38%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.38%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">.38%</span></td> </tr> <tr bgcolor=\"7093DB\"> <td><strong><span style=\"color: #333333;\">Mid-term </span></strong><br /><strong><span style=\"color: #333333;\">adjusted AFR</span></strong><br /></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.50%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.49%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.49%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.49%</span></td> </tr> <tr> <td> <p><strong><span style=\"color: #333333;\">Long-term</span></strong><br /><strong><span style=\"color: #333333;\">adjusted AFR</span></strong></p> </td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">3.47%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">3.44%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">3.43%</span></td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">3.42%</span></td> </tr> </tbody> </table> <table style=\"margin-left: auto; margin-right: auto;\" height=\"107\" border=\"3\" width=\"425\"> <caption> <p> </p> <p> </p> <p><span style=\"color: #000000;\"><strong>Table 5 (Section 7520 Rate)</strong></span></p> </caption>  <tbody> <tr> <td> <p style=\"text-align: left;\"><span style=\"color: #333333;\">Applicable federal rate for determining the <br />present value of an annuity, an interest <br />for life or term of years, or a remainder or <br />reversionary interest</span></p> </td> <td style=\"text-align: right;\"><span style=\"color: #333333;\">1.4%</span></td> </tr> </tbody> </table>','Applicable Federal Rates for January 2012','','publish','open','open','','applicable-federal-rates-for-january-2012','','','2012-01-06 13:29:53','2012-01-06 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6178',8,'post','',0),(6180,1,'2012-01-06 13:29:53','2012-01-06 13:29:53','<div style=\"text-align: justify;\"> <p>December 31st marked the expiration of 53 tax break commonly referred to as the “extenders.”</p> </div>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/01/2012.1.6-expired-tax-breaks.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/01/2012.1.6-expired-tax-breaks.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></div> <div style=\"text-align: left;\"></div> <div style=\"text-align: left;\">December 31st marked the expiration of 53 tax breaks commonly referred to as the “extenders” because Congress usually votes to extend them for one more year.  The expired provisions include several popular tax breaks, such as:</div> <div style=\"text-align: left;\"> <ul> <li>the AMT patch (which protects 30 million middle-class taxpayers from the Alternative Minimum Tax; </li> <li>the employee mass transit subsidy;</li> <li>research and development tax credits;</li> <li>bonus depreciation; </li> <li>and 100% expensing.</li> </ul> <p style=\"text-align: justify;\">The Congressional Budget Office assumes the expiration of these provisions, therefore masking the true size of the deficit if they are extended.   Also, many of the 53 tax breaks are questionable at best, but are typically extended as part of the budget package (for which members of Congress troll for campaign contributions from affected individuals and businesses).  For a complete list of the 53 expired tax breaks, see Joint Committee on Taxation, <a href=\"http://www.jct.gov/publications.html?func=startdown&id=3722\" target=\"_blank\">List of Expiring Federal Tax Provisions 2010-2020</a> (JCX-2-11).</p> </div>','53 Tax Breaks Expired on December 31, 2011','','publish','open','open','','53-tax-breaks-expired-on-december-31-2011','','','2012-01-06 13:29:53','2012-01-06 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6180',7,'post','',0),(6182,1,'2012-01-09 13:29:52','2012-01-09 13:29:52','<p style=\"text-align: justify;\">While the process of obtaining a divorce decree is rarely simple, the ordeal can become much more complicated when an involved family member, such as a spouse or child, has special needs.  Further, many attorneys who specialize in family law may not be aware of the estate planning strategies and protective measures that may be available to the family – a situation which can produce devastating results.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/01/2012.1.6-divorce-special-needs.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/01/2012.1.6-divorce-special-needs.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p style=\"text-align: justify;\">As with many areas of law, each special needs planning situation varies based on the facts and circumstances of the case.  However, when any special needs individual is involved, divorce negotiations and proceedings should always include planning for the well-being of such person.  The following is a list of examples of situations that can arise from such a case:</p> <ul> <li style=\"text-align: justify;\">When a divorce involves a minor special needs child, spousal support payments made to the primary custodial parent and child support payments made to a child can be included in the total income computation of the household, which can result in ineligibility for government benefits (such as Social Security Income) which may have otherwise been available to the child.  Further, if benefits are received and the income is later disclosed, the family may be required to reimburse the government for past benefits received – most of which may have already been spent for support needs.</li> <li style=\"text-align: justify;\">An award of spousal support directly payable to a spouse with special needs could result in increasing the recipient spouse’s income in excess of the limitations required for certain government benefits (such as Medicaid), thereby disqualifying the special needs spouse from continued eligibility.</li> <li style=\"text-align: justify;\">A parent may still be required to provide support for an adult special needs child, which can reduce certain benefits on a dollar-for-dollar basis.  This can be avoided if the payments are made to approved recipients on behalf of the special needs adult child or to a special needs trust.</li> <li style=\"text-align: justify;\">If a family with a special needs member properly plans during a divorce, the non-special needs person can agree to make support payments directly to certain creditors so that the direct receipt of the funds by the special needs person does not become ineligible for government benefits.  For example, in lieu of a cash payment, payments can be made directly to a caregiver.  (However, the paying spouse would not be able to deduct such payments, as he or she would when making direct spousal support payments – an issue which may reduce the agreed upon support payment amount.)</li> <li style=\"text-align: justify;\">In cases where the divorcing parties are not amicable, one party can request that the court direct payments to be made in a manner that does not create ineligibility for benefits on the part of the special needs individual (such as establishing a third-party special needs trust).<span style=\"font-size: 12pt;\" new=\"New\" lang=\"EN\"></span></li> </ul> <p>A divorce settlement involving a special needs person should not be executed without consulting an attorney specializing in such areas.  When properly planned, potentially upsetting results can be avoided in favor of a well-crafted plan that benefits the family, and provides for the special needs person, for years to come.</p>','The Effect of Divorce on Special Needs Planning','','publish','open','open','','the-effect-of-divorce-on-special-needs-planning','','','2012-01-09 13:29:52','2012-01-09 13:29:52','',0,'http://www.racklaw.com/new-site/?p=6182',5,'post','',0),(6183,1,'2012-01-11 13:29:52','2012-01-11 13:29:52','<p>Kelly Green, The Wall Street Journal,<em> Who Gets the Vacation Home?</em>:</p> <p style=\"text-align: justify;\">Is there a way to hand off a vacation home to the next generation so that everyone still wants to spend time together there?  Tensions often mount when a family figures out what to do with a property that could be a lightning rod for sibling rivalries—not to mention a sizable chunk of an estate.   Creating a new generation of family vacationers is the exception, not the rule, and it requires thoughtful planning.</p> <p style=\"text-align: justify;\"><a target=\"_blank\" href=\"http://online.wsj.com/article/SB10001424052970204331304577140773728878042.html?mod=WSJ_FamilyFinance_MoreHeadlines\">Click here for the full article</a></p> <p><a href=\"http://online.wsj.com/article/SB10001424052970204331304577140773728878042.html?mod=WSJ_FamilyFinance_MoreHeadlines\" target=\"_blank\"></a></p> <p style=\"text-align: right;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p>','Keeping the Vacation Home in the Family Using LLCs, QPRTs and Dynasty Trusts','','publish','open','open','','keeping-the-vacation-home-in-the-family-using-llcs-qprts-and-dynasty-trusts','','','2012-01-11 13:29:52','2012-01-11 13:29:52','',0,'http://www.racklaw.com/new-site/?p=6183',4,'post','',0),(6185,1,'2012-01-11 13:29:52','2012-01-11 13:29:52','<div style=\"text-align: justify;\"> <p>IRS issues guidance for reporting the income tax consequences of 2010 conversions to Roth IRAs for taxpayers that did not elect to include the entire value of the conversion as income on their 2010 income tax return.</p> </div>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/01/2012.1.11-report-ira-conversion.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/01/2012.1.11-report-ira-conversion.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></div> <div style=\"text-align: left;\"></div> <p style=\"text-align: justify;\"><strong>Background.</strong>  Beginning in 2010, the rule that barred taxpayers with more than $100,000 of modified adjusted gross income from converting traditional IRAs to Roth IRAs was eliminated.  For conversions made in 2010, any amounts that would be included in income as a result of the conversion must be included in income in equal amounts in 2011 and 2012, unless the taxpayer elected to include the entire amount in income in 2010. (<a href=\"https://checkpoint.riag.com/app/main/docLinkNew?usid=137686dcaf6&DocID=iae497a0a19d711dcb1a9c7f8ee2eaa77&SrcDocId=T0NEWSLTR%3A604996.1dr6&feature=tnews&lastCpReqId=3025933&pinpnt=TCODE%3A40002.1&d=d#TCODE:40002.1\" target=\"_blank\"><b>Code Sec. 408A(d)(3)</b></a>).</p> <p style=\"text-align: justify;\"><strong>Income Tax Reporting.</strong>  Half of the taxable amount of the 2010 conversion must be reported on the 2011 income tax return unless the taxpayer (1) elected to include the taxable amount in income for 2010 by filing a 2010 Form 8606 (“Nondeductible IRAs”), and completed Part II or Part III or both, as applicable, and checked the box on line 19, the box on line 24, or both; (2) re-characterized the 2010 rollover or conversion to a Roth IRA; or (3) received a distribution in 2010 or 2011 of any of the taxable amount (in which case, an amount other than half may need to be reported on the 2011 tax return).</p> <p style=\"text-align: justify;\">If no part of the 2010 conversion to a Roth IRA was distributed in 2010 or 2011, the amount from line 20a of the 2010 Form 8606 must be reported on:</p> <ul> <li>line 15b of the 2011 Form 1040;</li> <li>line 11b of the 2011 Form 1040A; or</li> <li>line 16b of the 2011 Form 1040NR.</li> </ul> <p style=\"text-align: justify;\">If, as required, distributions of a 2010 conversion to a Roth IRA were reported on the taxpayer’s 2010 tax return, the taxpayer must, on the 2011 return, report:</p> <ul> <li style=\"text-align: justify;\">on Form 1040, line 15b (Form 1040A, line 11b; or Form 1040NR, line 16b) the smaller of (a) the amount from the 2010 Form 8606, line 20a, or (b) the remaining taxable amount of the 2010 conversions to a Roth IRA; and</li> <li style=\"text-align: justify;\">on Form 1040, line 16b (Form 1040A, line 12b; or Form 1040NR, line 17b) the smaller of (a) the amount from the 2010 Form 8606, line 25a, or (b) the remaining taxable amount of the 2010 rollovers to a Roth IRA and IPRRs.</li> </ul> <p style=\"text-align: justify;\"><strong>Example.</strong>  A taxpayer converted $30,000 from a traditional IRA to a new Roth IRA on February 1, 2010.  On June 1, 2010, the taxpayer received a $20,000 distribution of the converted amount from the Roth IRA.  Part II of the 2010 Form 8606 was completed to report the $30,000 as the taxable amount of the conversion, and the taxpayer elected to include $15,000 of the taxable amount in income for 2011 and $15,000 for 2012.  The $30,000 was the only amount put into the new Roth IRA in 2010, so the entire $20,000 distribution was from the taxable amount of the conversion.  The $20,000 was included in the taxpayer’s 2010 income by reporting it on line 15b of the 2010 Form 1040.</p> <p style=\"text-align: justify;\"><strong>Example.</strong>  A taxpayer converted $30,000 from a traditional IRA to a new Roth IRA on February 1, 2010.  On June 1, 2010, the taxpayer received a $20,000 distribution of the converted amount from the Roth IRA.  Part II of the 2010 Form 8606 was completed to report the $30,000 as the taxable amount of the conversion, and the taxpayer elected to include $15,000 of the taxable amount in income for 2011 and $15,000 for 2012.  The $30,000 was the only amount put into the new Roth IRA in 2010, so the entire $20,000 distribution was from the taxable amount of the conversion.  The $20,000 was included in the taxpayer’s 2010 income by reporting it on line 15b of the 2010 Form 1040.</p> <p style=\"text-align: justify;\">Only $10,000 of the 2010 conversion remains to be taxed, and because this is smaller than the $15,000 listed on line 20a of the 2010 Form 8606 (half of the total 2010 conversion to a Roth IRA), $10,000 must be included on line 15b of the 2011 Form 1040. None of the 2010 conversion to a Roth IRA will have to be reported in 2012 income.</p> <p style=\"text-align: justify;\">Additionally, a taxpayer may have to include in 2011 income all or some of the taxable amount of 2010 rollovers and conversion to a Roth IRA and IPRRs that would have otherwise been included in 2012 income. To determine the amount to report in 2011, the 2011 Form 8606 must be completed, using Part III for distributions from a Roth IRA and Part IV for distributions from a designated Roth account.</p> <p><span style=\"color: #0000ff;\"><a target=\"_blank\" href=\"http://www.irs.gov/retirement/article/0,,id=251832,00.html\">Click here</a></span> to view the original IRS article.</p> <p>For additional information see:</p> <p>IRS <a href=\"http://www.irs.gov/pub/irs-pdf/p590.pdf\"><b>Publication 590</b></a>, Individual Retirement Arrangements (IRAs)</p> <p>Retirement Plans FAQs: <a href=\"http://www.irs.gov/retirement/article/0,,id=111413,00.html\"><b>IRAs</b></a></p> <p><a href=\"http://www.irs.gov/taxtopics/tc413.html\"><b>Topic 413</b></a> - Rollovers from Retirement Plans</p> <p><a href=\"http://www.irs.gov/irb/2009-39_IRB/ar15.html\"><b>Notice 2009-75</b></a>, Rollovers from Employer Plans to Roth IRAs</p> <p><a href=\"http://www.irs.gov/irb/2010-51_IRB/ar11.html\"><b>Notice 2010-84</b></a>, Guidance on In-Plan Roth Rollovers</p> <ul> <li></li> </ul>','How to report 2010 Roth IRA rollovers and conversions','','publish','open','open','','how-to-report-2010-roth-ira-rollovers-and-conversions','','','2012-01-11 13:29:52','2012-01-11 13:29:52','',0,'http://www.racklaw.com/new-site/?p=6185',4,'post','',0),(6187,1,'2012-01-27 13:29:52','2012-01-27 13:29:52','<div style=\"text-align: justify;\"> <p>Most people spend a lifetime accumulating retirement assets in qualified plans, IRAs and other tax deferred retirement accounts.  Often times, these accounts constitute a significant portion of a person’s wealth.  While most of the time the account owner will diligently plan for the withdrawal of assets during retirement, very little time is spent on planning for the distribution or transfer of the account after the owner has passed.</p> </div>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/01/2012.1.27-beneficiary-designation-planning.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/01/2012.1.27-beneficiary-designation-planning.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></div> <div style=\"text-align: left;\"></div> <p style=\"text-align: justify;\">Without careful consideration of the many complex factors involved in beneficiary designation planning, the value of a retirement account can be drastically reduced or even destroyed upon the death of the account owner.</p> <p style=\"text-align: justify;\">For example, if the owner of an IRA or SEP fails to designate a beneficiary, the estate of the account owner automatically becomes the beneficiary.  Regardless of the size of the account, the owner’s estate will be forced to draw down the entire value of the account over no less than five years, and then distribute the net proceeds of the account to the heirs of the owner’s estate.  Estate’s are not able to “stretch-out” the receipt of retirement account distributions.  Since all distributions from IRAs and SEPs are taxable as ordinary income, and estates generally pay a 35% federal income tax, the net value of the account is likely to be only 60% of its original value the day the owner passed.</p> <p style=\"text-align: justify;\">Even if the retirement account owner does designate an individual beneficiary, that beneficiary may not be capable of handling the assets.  Since the beneficiary is free to withdraw the assets of the retirement account as he or she chooses, negative personal circumstances such as creditor issues, poor spending habits, substance abuse issues, or dysfunctional personal relationships may cause the individual beneficiary to expedite the withdrawal of inherited retirement account assets.  Not only would we expect the beneficiary to pay more income tax than necessary, he or she would lose the benefit of continued tax-deferred growth, and may even squander the entire account on frivolous purchases or in attempting to solve personal problems.</p> <p style=\"text-align: justify;\">These are just a few simple examples of the inherent problems associated with beneficiary designation planning for retirement accounts.  Since there are so many factors to consider, there is no one size fits all solution.  Each account owner has different goals and priorities, and external forces such as income taxes, creditors, and spendthrift beneficiaries influence the planning process.  Considering the multitude of distribution possibilities and potential negative consequences for failing to properly plan, do not neglect this important area of your estate plan.</p> <p style=\"text-align: justify;\"> </p> <p> </p> <div class=\"a2a_kit a2a_default_style\"> <p> </p> </div>','The Importance of Beneficiary Designation Planning','','publish','open','open','','the-importance-of-beneficiary-designation-planning','','','2012-01-27 13:29:52','2012-01-27 13:29:52','',0,'http://www.racklaw.com/new-site/?p=6187',4,'post','',0),(6189,1,'2012-02-01 13:29:53','2012-02-01 13:29:53','<div style=\"text-align: justify;\"> <p>An appeals court in New Jersey ruled that a bank account held by a Medicaid recipient would not be considered a countable resource because the funds were being held on behalf of the applicant’s disabled grandson and not for the recipient’s personal use.</p> </div>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/02/2012.2.1-fund-for-disabled.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/02/2012.2.1-fund-for-disabled.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></div> <div style=\"text-align: left;\"></div> <p><strong><em>I.M. v. Division of Medical Assistance and Health Services</em> (N.J. Super. Ct., App. Div., No. A126509T3, June 3, 2011) (unpublished).</strong></p> <p style=\"text-align: justify;\"><strong>Facts. </strong> A 79 year old Medicaid recipient (“Ms. M”) was named the sole caregiver of her 21-year-old mentally disabled grandson, (“J.M.”).  J.M. received a special needs grant of $2,000 from the New Jersey Division of Developmental Disabilities (“DDD”) in December of 2007.  Ms. M spent some of the funds for various needs of J.M., as intended, and established a bank account to hold the remaining grant funds ($1,480) for J.M.</p> <p style=\"text-align: justify;\">Upon a review of Ms. M’s Medicaid status, The Division of Medical Assistance and Health Services (“DMAHS”) deemed the $1,480 to be a countable resource of Ms. M, thereby increasing her resource total in excess of the Medicaid limit of $2,000.  As a result, DMAHS terminated her Medicaid benefits.  In response to having her benefits terminated, Ms. M transferred the remaining grant funds to a new account in her grandson’s name, and added herself as a permitted user on the account.</p> <p style=\"text-align: justify;\">At the primary hearing, the Administrative Law Judge concluded that the termination of the Medicaid benefits had been improper, but that the bank account was still considered an available resource to Ms. M, so she appealed.</p> <p style=\"text-align: justify;\"><strong>Ruling.</strong>  The Superior Court of New Jersey, Appellate Division, reversed the decision of the Administrative Law Judge, agreeing that the \"availability\" of countable assets under Medicaid regulations intends a legal, rather than physical, type of possession.  Although Ms. M has physical access to her grandson’s grant funds, she simply held them on his behalf “as his fiduciary, restricted in their use by the very terms of the DDD grant, as well as of the bank account in which they are held.\"  Ms. M’s Medicaid benefits were reinstated.</p>','Account Held on Behalf of Disabled Family Member Not a Countable Asset for Medicaid','','publish','open','open','','account-held-on-behalf-of-disabled-family-member-not-a-countable-asset-for-medicaid','','','2012-02-01 13:29:53','2012-02-01 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6189',4,'post','',0),(6191,1,'2012-02-02 13:29:52','2012-02-02 13:29:52','<p style=\"text-align: justify;\">In early 2011, a landmark federal bankruptcy case shed doubt on the asset protection powers of the previously lauded domestic asset protection trust (DAPT), alarming many attorneys and distressing certain of those trust-wielding clients.  In a decision filed by the United States Bankruptcy Court for the District of Alaska on May 26, 2011, Judge MacDonald set aside Thomas Mortensen’s transfer of real property to an Alaska asset protection trust as a fraudulent conveyance.</p>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/02/jlm-wealth-counsel.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/02/jlm-wealth-counsel.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></div> <p style=\"text-align: justify;\"><strong><i><span style=\"font-size: 12pt;\" new=\"New\" lang=\"EN-GB\">Battley v. Mortensen</span></i><span style=\"font-size: 12pt;\" new=\"New\" lang=\"EN-GB\">, Adv. D.Alaska, No. A09-90036-DMD (2011).</span></strong></p> <p style=\"text-align: justify;\">This case deviated from previous DAPT holdings because, not only was Mortensen deemed solvent at the time of the transfer, but Alaska’s four-year statute of limitations for reaching the assets transferred to the DAPT had already run.  This controversial ruling has sparked heated debates among estate planners on whether its outcome could invalidate thousands of trusts formerly thought to provide exceedingly reliable asset protection.</p> <p style=\"text-align: justify;\">Following his costly divorce in 1998, Thomas Mortensen personally drafted the “Mortensen Seldovia Trust (An Alaska Asset Preservation Trust)” in February of 2005.  Mortensen had admittedly “not recovered from the financial carnage” of his divorce, and created the trust to hold and protect his recreational real property located in Seldovia, Alaska, worth approximately $60,000 at the time of the transfer.  His mother also gave him $100,000 “to transfer the property to trust because she wanted to preserve it for her grandchildren.”  In April of 2009, Mortensen became ill, accrued massive credit card debt and filed for Chapter 7 bankruptcy in August of the same year.  He disclosed $26,421 in assets on the itemized personal property list provided to the Court, but did not include his interest in the DAPT (although he revealed the existence of the trust).</p> <p style=\"text-align: justify;\">Despite Alaska’s four-year statute of limitations for reaching assets transferred to a DAPT, the Court applied federal law, which includes a ten-year statute of limitations from the date a bankruptcy petition is filed for setting aside a fraudulent transfer if the transfer was made with “actual intent to hinder, delay, or defraud” a creditor.  <i>See </i>Bankruptcy Code Section 548(e). Therefore, the remaining issue to be decided was whether Mortensen made the transfer to his trust with the actual intent required to set aside the transfer.</p> <p style=\"text-align: justify;\">Since, by the terms of the DAPT, the purpose of its establishment was “to maximize the protection of the trust estate or estates from creditors’ claims,” the Court held that the transfer was made by Mortensen with the clear intent to hinder, delay or defraud his creditors.  Although Alaska law also states that “a settlor’s express intention to protect trust assets from a beneficiary’s potential future creditors is not evidence of an intent to defraud,” the ten-year statute of limitations under federal law was enacted in order to close this self-settled trust loophole, and the Court followed this legislative intent.  In determining Mortensen’s actual intent, the Court not only looked to the purpose provision within the trust, but also considered his continual steady decrease in income, mounting credit card debt, statements of financial strife after his divorce and his lost stock market investment of the $100,000 from his mother (rather than using the funds to pay off his substantial credit card debt).  Thus, the transfer to the DAPT was set aside and the recreational property was sold to satisfy his creditors.</p> <p style=\"text-align: justify;\">Is this ruling the beginning of the end of DAPT planning, or was this merely an advisory, fact-specific ruling that provides additional clarity to the current DAPT rules?  Lawyers are split as they speculate whether this outcome was a fluke or the new reality.  Although the Court did not uphold Alaska’s four-year statute of limitations to prevent Mortensen’s transfer from being set aside, the four-year rule is still effective and powerful against claims for assets held by a DAPT.  However, when Mortensen erred by filing for bankruptcy without consulting an attorney, he unknowingly exposed himself to the Bankruptcy Code and its ten-year “clawback” rule.  Had he not filed, Mortensen would have remained protected by Alaska’s four-year rule.  Despite the concern that this case signals the end of the utility of all DAPTs, many argue that Mortensen was simply a case of bad facts with an unsurprising result, given that the debtor elected to file for bankruptcy prior to the expiration of the ten-year statute of limitations, and openly admitted that the trust was created to protect his assets from creditors – the very intent that is required by federal law to set aside the transfer!</p> <p style=\"text-align: justify;\">Ultimately, Mortensen was not a proper candidate for a DAPT since he had waning anticipated income, almost no net worth beyond the Alaska recreational property and escalating debt.  While some contend that the sky is falling and landmines are erupting in the realm of DAPTs, this case provides clarity and guidelines for properly establishing an asset protection trust.  Rather than contributing to uncertainty, the Court ultimately validated those DAPTs that were not established to defraud creditors, as well as those trusts established more than ten years prior to filing for bankruptcy, regardless of their purpose.  In light of this holding, DAPTs remain an effective asset protection strategy when properly marketed, drafted and implemented.</p>','An Overview of Battley v. Mortensen: The End of Domestic Asset Protection Trusts?','','publish','open','open','','an-overview-of-battley-v-mortensen-the-end-of-domestic-asset-protection-trusts','','','2012-02-02 13:29:52','2012-02-02 13:29:52','',0,'http://www.racklaw.com/new-site/?p=6191',4,'post','',0),(6193,1,'2012-02-21 13:29:53','2012-02-21 13:29:53','<div style=\"text-align: justify;\"> <p>On February 13, the President released his federal budget proposals for the 2013 fiscal year.  The proposed budget includes over 130 large and small proposed tax changes for businesses and individuals, including new incentives to “insource” jobs, higher taxes for upper-income taxpayers, and the extension of key tax breaks.  Below are some of the key estate and gift tax proposals made.</p> </div>  <!--more-->  <div style=\"text-align: right;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/02/2012.2.21-changes-to-estate-tax.pdf\" target=\"_blank\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/02/2012.2.21-changes-to-estate-tax.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" border=\"0\" height=\"15\" width=\"15\" /></a></div>   <ol> <li style=\"text-align: justify;\"><span style=\"text-decoration: underline;\"><strong>Return to 2009 estate and gift tax exemption and rate.</strong></span> The estate, generation-skipping transfer (GST), and gift tax exemption top tax rate would be 45% and the exclusion amount would be $3.5 million for estate and GST taxes, and $1 million for gift taxes.  These changes would apply for estates of decedents dying, and for transfers made, after December 31, 2012.</li> <br /> <li style=\"text-align: justify;\"><span style=\"text-decoration: underline;\"><strong>Portable estate tax exclusion made permanent.</strong></span> The provisions allowing a surviving spouse to use the deceased spouse’s unused estate and gift tax exclusion (but not the GST tax exemption) , which expires for decedents dying after December 31, 2012, would be made permanent.</li> <br /> <li style=\"text-align: justify;\"><span style=\"text-decoration: underline;\"><strong>Basis consistency and reporting requirement for donated and inherited property.</strong></span> Current law does not explicitly require that the recipient’s basis in inherited property be the same as the value reported for estate tax purposes.  The proposal would require that the basis of property in the hands of the recipient be no greater than the value of that property as determined for estate or gift tax purposes (subject to subsequent adjustments).   A reporting requirement would be imposed on executors and donors to provide the necessary valuation and basis information to both the recipient and IRS.</li> <br /> <li style=\"text-align: justify;\"><span style=\"text-decoration: underline;\"><strong>Toughened rules for valuation discounts. </strong></span> Certain restrictions (“disregarded restrictions”) would be ignored in valuing an interest in a family-controlled entity transferred to a member of the family if, after the transfer, the restriction will lapse or may be removed by the transferor and/or the transferor’s family.  The transferred interest would be valued by substituting for the disregarded restrictions certain assumptions to be specified in regulations that will undoubtedly limit or eliminate a valuation discount in these circumstances.  These rules would apply to transfers after the enactment date of property subject to restrictions created after Oct. 8, 1990 (the effective date of Code Sec. 2704).</li> <br /> <li style=\"text-align: justify;\"><span style=\"text-decoration: underline;\"><strong>Minimum and maximum term for grantor retained annuity trusts (GRATs).</strong></span> A GRAT would be required to have a minimum term of ten years and a maximum term of the life expectancy of the annuitant plus ten years.  Also, the remainder interest would have to have a value greater than zero at the time the interest is created and any decrease in the annuity during the GRAT term would be prohibited.  These rules would apply to GRATs created after the enactment date.</li> <br /> <li style=\"text-align: justify;\"><span style=\"text-decoration: underline;\"><strong>Duration of GST tax exemption limited.</strong></span>  Under the proposal, the GST exemption allocated to a trust would terminate after 90 years.  This rule would apply to trusts created after the enactment date, and to the portion of a preexisting trust attributable to additions to such a trust made after that date.</li> <br /> <li style=\"text-align: justify;\"><span style=\"text-decoration: underline;\"><strong>Coordination of income and transfer tax rules applicable to grantor trusts.</strong></span> The current lack of coordination between the income and transfer tax rules applicable to a grantor trust creates opportunities to structure transactions between the deemed owner and the trust that can result in the transfer of significant wealth by the deemed owner without transfer tax consequences (e.g., installment sales to grantor trusts).  New rules for grantor trusts would prevent this by: (1) including the assets of the trust in the gross estate of the grantor for estate tax purposes, (2) subjecting to gift tax any distribution from the trust to one or more beneficiaries during the grantor’s life, and (3) subjecting to gift tax the remaining trust assets at any time during the grantor’s life he or she ceases to be treated as an owner of the trust for income tax purposes.  These rules would apply for trusts created on or after the enactment date and with regard to any portion of a pre-enactment trust attributable to a contribution made on or after the enactment date.</li> <br /> <li style=\"text-align: justify;\"><span style=\"text-decoration: underline;\"><strong>Extension of estate tax lien on Code Sec. 6166 deferrals.</strong></span> The estate tax lien under Code Sec. 6324(a)(1) would be extended to apply throughout the Code Sec. 6166 deferral period, effective for estates of decedents dying on or after the effective date and for estates of decedents dying before the enactment date as to which the current law Code Sec. 6324(a)(1) lien period had not expired on the effective date.</li> </ol> <div class=\"a2a_kit a2a_default_style\"> <p> </p> </div>','Changes to the Estate and Gift Tax Rules in the Proposed 2013 Federal Budget','','publish','open','open','','changes-to-the-estate-and-gift-tax-rules-in-the-proposed-2013-federal-budget','','','2012-02-21 13:29:53','2012-02-21 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6193',4,'post','',0),(6195,1,'2012-02-21 13:29:53','2012-02-21 13:29:53','<div style=\"text-align: justify;\"> <p>The Internal Revenue Service today issued guidance that allows certain estates of married individuals who died during the first six months of 2011 an extension of the deadline to make the portability election.</p> </div>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/02/2012.2.21-deadline-for-estates.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/02/2012.2.21-deadline-for-estates.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></div> <div style=\"text-align: left;\"></div> <p style=\"text-align: justify;\">The portability election passes along a decedent’s unused estate and gift tax exclusion amount to a surviving spouse. An extension is available to estates of married individuals with assets of $5 million or less, but only if the decedent died in the first six months of 2011, and the executor files Form 4768 requesting an extension no later than 15 months after the decedent\'s date of death. The extra time is available to an estate even if the estate did not request an automatic six-month filing extension on Form 4768 prior to the regular nine-month filing deadline. As a result, these estates will now have until 15 months after the date of death, rather than the usual nine months, to make the election by filing an estate tax return on Form 706. Thus, the first estate tax returns for estates eligible to make the portability election (because the date of death is after Dec. 31, 2010) are now due on Monday, April 2, 2012. Affected estates should submit both a properly-prepared Form 4768 and Form 706 to the IRS no later than 15 months after the decedent’s date of death. Further details are in Notice 2012-21, posted today on www.IRS.gov.  </p>','IRS Extends Deadline for Estates to  File Estate Tax Return to Make Portability Election Benefiting Surviving Spouses','','publish','open','open','','irs-extends-deadline-for-estates-to-file-estate-tax-return-to-make-portability-election-benefiting-surviving-spouses','','','2012-02-21 13:29:53','2012-02-21 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6195',4,'post','',0),(6197,1,'2012-02-02 13:29:53','2012-02-02 13:29:53','<p style=\"text-align: justify;\">Canceled debt is normally taxable to you, but there are exceptions.  One of those exceptions is available to homeowners whose mortgage debt is partly or entirely forgiven during tax years 2007 through 2012.</p>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/02/2012.2.29-mortgage-debt-forgiveness.pdf\">Download PDF</a><a href=\"pdfs/featured_posts/pdfs/featured_posts/2012.2.29-mortgage-debt-forgiveness.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></div> <p style=\"text-align: justify;\"><strong><i><span style=\"font-size: 12pt;\" new=\"New\" lang=\"EN-GB\"> </span></i></strong></p> <p style=\"text-align: justify;\">Here are 10 facts homeowners should know about Mortgage Debt Forgiveness:</p> <ol style=\"text-align: justify;\"> <li>Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.</li> <li>The limit is $1 million for a married person filing a separate return.</li> <li>You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.</li> <li>To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.</li> <li>Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.</li> <li>Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion.</li> <li>If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.</li> <li>Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision.  In some cases, however, other tax relief provisions – such as insolvency – may be applicable.  IRS Form 982 provides more details about these provisions.</li> <li>If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender.  By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.</li> <li>Examine the Form 1099-C carefully.  Notify the lender immediately if any of the information shown is incorrect.  You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.</li> </ol> <p style=\"text-align: justify;\">For more information about the Mortgage Forgiveness Debt Relief Act of 2007, visit <a href=\"http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTIwMjI4LjU4NDE0NDEmbWVzc2FnZWlkPU1EQi1QUkQtQlVMLTIwMTIwMjI4LjU4NDE0NDEmZGF0YWJhc2VpZD0xMDAxJnNlcmlhbD0xNjg5MjUyNCZlbWFpbGlkPW5hdGhhbi5vbGFuc2VuQHJhY2tsYXcuY29tJnVzZXJpZD1uYXRoYW4ub2xhbnNlbkByYWNrbGF3LmNvbSZmbD0mZXh0cmE9TXVsdGl2YXJpYXRlSWQ9JiYm&&&130&&&http://www.irs.gov\">www.irs.gov</a>. IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments, is also an excellent resource.</p>','Mortgage Debt Forgiveness: 10 Key Facts','','publish','open','open','','mortgage-debt-forgiveness-10-key-facts','','','2012-02-02 13:29:53','2012-02-02 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6197',3,'post','',0),(6199,1,'2012-03-15 13:29:53','2012-03-15 13:29:53','<p style=\"text-align: justify;\">A Medicaid applicant was determined to have made an uncompensated transfer, thereby resulting in an imposed penalty period, after he recorded a deed transferring his residence to his children and reserving a life estate for himself.</p>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/03/2012.3.15.-transfer-life-estate.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/03/2012.3.15.-transfer-life-estate.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></div> <p style=\"text-align: justify;\"><strong><i><span style=\"font-size: 12pt;\" new=\"New\" lang=\"EN-GB\"> </span></i></strong></p> <p><strong>Fimon v. Commissioner of Minnesota Department of Human Services (Minn. App. Ct., No. A11–561, Oct. 24, 2011).</strong></p> <p style=\"text-align: justify;\"><strong>Facts:</strong> In May of 2003,  Mr. Rodney Fimon executed a deed that transferred the ownership of his  residence to his two sons and himself as joint tenants.  By owning the  property jointly with both of his sons, Mr. Fimon maintained an  ownership interest in the residence.  Over six years later, in July of  2009, Mr. Fimon prepared a subsequent deed, this time transferring his  remaining interest in the residence to his two sons and reserving a life  estate for himself.  He claimed that the 2009 deed was prepared in  order to correct the 2003 deed; however, a life estate ownership (as  opposed to the former joint tenancy ownership) is considered an exempt  asset for the purposes of Medicaid eligibility.  Several months later,  Mr. Fimon applied for Medicaid benefits, and he was denied.  The state  of Minnesota determined that the transfer of the residence formerly  owned as a joint tenant, without compensation from his sons, was an  uncompensated transfer, and therefore the state imposed a penalty period  on Mr. Fimon.</p> <p style=\"text-align: justify;\">Mr. Fimon appealed this decision,  arguing that the 2009 deed was prepared in order to correct the 2003  deed.  The state denied the appeal, and the trial court affirmed the  state’s decision. Mr. Fimon then appealed to the Minnesota Court of  Appeals.</p> <p style=\"text-align: justify;\"><strong>Court’s Decision: </strong> The  Minnesota Court of Appeals affirmed the decision of the trial court,  determining that the evidence presented supported the notion that Mr.  Fimon transferred his joint tenancy interest to his sons for less than  fair market value, and retained a life estate interest because such  ownership is an exempt asset for the determination of Medicaid benefits.   Since there was no viable evidence that the initial 2003 deed was  intended to reserve a life estate for Mr. Fimon, the subsequent deed had  the effect of changing his interest in the property, rather than simply  correcting a clerical error.  This penalty period may have been avoided  if Mr. Fimon had consulted an elder law attorney and properly planned  for his Medicaid eligibility prior to applying for benefits.</p>','Court Rejects Claim That Transfer Reserving Life Estate Simply Corrected Earlier Deed','','publish','open','open','','court-rejects-claim-that-transfer-reserving-life-estate-simply-corrected-earlier-deed','','','2012-03-15 13:29:53','2012-03-15 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6199',4,'post','',0),(6201,1,'2012-03-20 13:29:53','2012-03-20 13:29:53','<p style=\"text-align: justify;\">After settling the federal claims in a Medicaid case, a U.S. district court remanded the remaining issues back to the state court in Indiana since the case involved significant issues concerning the transfer of property to the community spouse that would ultimately affect the administration of Medicaid benefits in Indiana.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/03/2012.3.20-medicaid-community-spouse.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/03/2012.3.20-medicaid-community-spouse.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p style=\"text-align: justify;\"><strong>Novak v. Indiana Family and Social Services Administration (U.S. Dist. Ct., S.D. Ind., No. 1:10–cv–677–RLY–DKL, Feb. 29, 2012).</strong></p> <p style=\"text-align: justify;\"><strong>Facts: </strong> Mr. Novak, the Medicaid applicant, obtained an Order from a state court in Indiana that permitted his legal guardian to transfer all of Mr. Novak’s assets (retaining only $1,000) to his wife, to be applied for her care and support.  The following year, Mr. Novak applied for Medicaid benefits and his application was denied.  The reason for his ineligibility was the transfer of resources to his wife the previous year.  Following this disconcerting decision, his wife filed an appeal on his behalf, and the case was removed to federal court.</p> <p style=\"text-align: justify;\"><strong>Court’s Decision: </strong> The federal court ultimately ordered that the case be remanded back to the state court of Indiana since the final undecided issue was the judicial review of a state administrative agency decision denying Medicaid eligibility.  Mrs. Novak requested that the federal court retain jurisdiction and rule on the remaining issue, claiming that the judicial economy would be better served if they remained in federal court.  Since the case was already on the docket for 18 months, and Mrs. Novak was 82 years of age, they argued that they would be prejudiced by the additional delay caused by the remand.</p> <p style=\"text-align: justify;\">The federal court denied their request, and remanded the case back to state court.  In remanding the case, the court determined that the final case will involve two issues:  (i) \"When can a person petition a court for an order approving the transfer of assets for the benefit of the community spouse?\" and (ii) if assets can be transferred prior to an assessment, \"whether the assets which the state court ordered transferred must actually be transferred in order for the Community Spouse Resource Allowance to be calculated on the basis of that state court order.\"  According to the federal court, the outcome of these issues will have lasting effect on the administration of Medicaid benefits in Indiana, so any potential prejudice against the Novaks was outweighed.</p>','Medicaid Eligibility:  Federal v. State Court Authority on the Effect of Lifetime Transfers to a Community Spouse','','publish','open','open','','medicaid-eligibility-federal-v-state-court-authority-on-the-effect-of-lifetime-transfers-to-a-community-spouse','','','2012-03-20 13:29:53','2012-03-20 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6201',4,'post','',0),(6203,1,'2012-04-04 13:29:53','2012-04-04 13:29:53','<div style=\"text-align: justify;\"> <p>An Idaho district court ruled that the state cannot recover assets from the estate of a Medicaid recipient’s spouse since those assets were transferred by the Medicaid recipient to her husband prior to her death.</p> </div>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/04/2012.4.4-state-cannot-recover.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/04/2012.4.4-state-cannot-recover.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></div> <div style=\"text-align: left;\"></div> <p style=\"text-align: justify;\"><strong>In Re: Estate of Perry (Idaho Dist. Ct., 4th Dist., No. CV-IE-2009-05214, March 16, 2011).</strong></p> <p style=\"text-align: justify;\"><strong>Facts.</strong>  Mr. and Mrs. Perry owned joint property, which was transferred to Mr. Perry individually when Mrs. Perry moved into a nursing home.  Soon thereafter, Mrs. Perry applied for and began receiving Medicaid benefits.  Mr. Perry predeceased Mrs. Perry and, upon his death, the property was sold as a part of his estate.  The state then filed a claim against Mr. Perry’s estate in an attempt to recover over $100,000 in Medicaid benefits paid on behalf of Mrs. Perry.</p> <p style=\"text-align: justify;\">Since Mrs. Perry had an interest in the property at one time during the marriage (before she applied for Medicaid benefits), the state argued that it could recover the portion of the property from Mr. Perry’s estate that represented her prior ownership interest.  In response, the personal representative of the estate asserted that the state could recover no more than the amount equal to Mrs. Perry\'s interest in the home at the time of her death, which was nothing.</p> <p style=\"text-align: justify;\"><strong>Procedural History.</strong>  The magistrate division of Idaho\'s fourth judicial district determined that the state\'s authority to recover Medicaid benefits paid on behalf of Mrs. Perry was limited only to those assets that were transferred to Mr. Perry upon her death.  The state could not recover lifetime gifts made by Mrs. Perry to her husband.  The state appealed this decision and, while the appeal was pending, Mrs. Perry passed away.</p> <p style=\"text-align: justify;\"><strong>Court’s Ruling.</strong>  The Idaho District Court affirmed the fourth judicial district, holding that the definition of \"estate\" in federal Medicaid law does not permit the state to claim reimbursement from property interests that Mrs. Perry transferred before her death.  Although the state argued that its laws allowed the recovery of property transferred to a spouse during life (if that property was previously community property), the Court disagreed and determined that, since there was a conflict between federal law and Idaho’s law, federal law must prevail over state law.</p>','Assets Transferred Before Medicaid Recipient Died Cannot be Recovered by State','','publish','open','open','','assets-transferred-before-medicaid-recipient-died-cannot-be-recovered-by-state','','','2012-04-04 13:29:53','2012-04-04 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6203',4,'post','',0),(6205,1,'2016-02-25 13:29:53','2016-02-25 13:29:53','<p style=\"text-align: justify;\">???The 4th Circuit Court of Appeals ruled that when a personal injury settlement does not include an allocation of past medical expenses, a Medicaid recipient is entitled to an adversarial proceeding to challenge the state\'s automatic claim for receipt of one-third of the settlement.</p>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/04/2012.4.18-automatic-claim-challenge.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/04/2012.4.18-automatic-claim-challenge.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></div> <p style=\"text-align: justify;\"><strong><i><span style=\"font-size: 12pt;\" new=\"New\" lang=\"EN-GB\"> </span></i></strong></p> <p><strong>E.M.A. v. Cansler (4th Cir., No. 10-1865, March 22, 2012).</strong></p> <p style=\"text-align: justify;\"><strong>Facts.</strong>  E.M.A. was seriously injured during her birth and immediately began receiving Medicaid benefits.  When she was six years old, her representatives settled a medical malpractice action against her doctors for $2.8 million.  By the time the settlement was complete, the North Carolina Department of Health and Human Services (DHHS) had provided E.M.A. with approximately $1.9 million in medical care benefits.  Pursuant to state law, DHHS is entitled to collect up to one-third of the settlement as reimbursement for past medical expenses, so DHHS asserted a lien in the amount of $933,333.33 against E.M.A.</p> <p style=\"text-align: justify;\"><strong>Procedural History.</strong>  The representatives of E.M.A. filed a suit in federal court seeking a declaratory judgment and an injunction preventing DHHS from asserting its claim against the settlement funds.  E.M.A. argued that because North Carolina common law prevents a minor from asserting a cause of action for past medical expenses, none of the settlement proceeds could be attributed to her past medical expenses.  In the alternative, E.M.A. claimed that the state could not recover one-third of her settlement because caselaw necessitates a proportional analysis of the settlement to determine the proper amount of the lien.  The district court granted summary judgment in favor of DHHS, relying on a previous North Carolina Supreme Court decision upholding the one-third allocation.  E.M.A. appealed.</p> <p style=\"text-align: justify;\"><strong>Court’s Decision</strong>.  After dismissing E.M.A.\'s common law argument, the 4th Circuit Court of Appeals reversed the district court and remanded the case for a hearing that will allow E.M.A. to rebut the one-third presumption.  The court specified that \"on remand, the district court must determine the true value of the case in allocating medical expenses,” but caselaw “does not mandate such a ‘proportional analysis’ . . . the sum certain allocable to medical expenses must be determined by way of a fair and impartial adversarial procedure that affords the Medicaid beneficiary an opportunity to rebut the statutory presumption in favor of the state.\"</p>','Medicaid Recipient Entitled to Challenge Automatic Claim by State for Share of Settlement','','publish','open','open','','medicaid-recipient-entitled-to-challenge-automatic-claim-by-state-for-share-of-settlement','','','2016-02-25 13:29:53','2016-02-25 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6205',3,'post','',0),(6207,1,'2012-05-08 13:29:53','2012-05-08 13:29:53','<p style=\"text-align: justify;\">An appeals court in Massachusetts ruled that (1) a Medicaid applicant was subject to a penalty period for assets that were transferred to a trust as part of a court-approved estate plan, and (2) the penalty period would not begin until after she had spent down her excess assets.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/05/2012.5.8-medicaid-penalty-period.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/05/2012.5.8-medicaid-penalty-period.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p style=\"text-align: justify;\"><strong>Lombardi v. Director of Office of Medicaid (Mass. App. Ct., No. 11–P–1208, April 17, 2012).</strong></p> <p style=\"text-align: justify;\"><strong>Facts.</strong>  Catherine Lombardi, who had a court-appointed guardian, transferred $17,400 to a realty trust to benefit her children as part of a court-approved estate plan.  Mrs. Lombardi then applied for Medicaid benefits and the state assessed a penalty period based on the uncompensated transfer to the realty trust.  The state also determined that the applicant would be required to spend down her excess assets before the penalty period would begin.</p> <p style=\"text-align: justify;\"><strong>Procedural History.</strong>  Ms. Lombardi appealed the determination that she would be subject to a penalty period, arguing that the court cannot consider a court-approved transfer of assets when determining Medicaid eligibility and that, therefore, the state improperly imposed a double penalty.</p> <p style=\"text-align: justify;\"><strong>Court’s Decision. </strong> The Appeals Court of Massachusetts affirmed the decision, holding that the penalty period was properly applied to Mrs. Lombardi.  According to the Court, it did not matter that the transfer was \"court-approved\" because \"a probate judge cannot insulate asset transfers from being considered in the determination of eligibility for [Medicaid].\" The court also ruled that the penalty period properly began after Ms. Lombardi spent down her excess assets.</p>','Medicaid Penalty Period Applies to Assets Transferred as Part of Court-Approved Estate Plan','','publish','open','open','','medicaid-penalty-period-applies-to-assets-transferred-as-part-of-court-approved-estate-plan','','','2012-05-08 13:29:53','2012-05-08 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6207',4,'post','',0),(6209,1,'2012-05-16 13:29:53','2012-05-16 13:29:53','<div style=\"text-align: justify;\"> <p>Many seniors who require long-term care would rather remain at home than move to an assisted living or nursing facility; however, the selection of which company to hire for in-home assistance can be a difficult decision for family members to make.  The Centers for Medicare & Medicaid Services’ (CMS) have prepared a national survey requesting that patients describe their experiences with certain Medicare-certified home health agencies, and these results are now available on the agency’s Quality Care Finder website.</p> </div>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/05/2012.5.16-home-health-survey.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/05/2012.5.16-home-health-survey.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></div> <div style=\"text-align: left;\"></div> <p style=\"text-align: justify;\"><a href=\"http://www.medicare.gov/quality-care-finder\">www.medicare.gov/quality-care-finder</a></p> <p style=\"text-align: justify;\">The survey asks patients questions such as:</p> <ul style=\"text-align: justify;\"> <li>Whether their home health team gave care in a professional way;</li> <li>Whether their team communicated well with them in a courteous and respectful way;</li> <li>Whether the team discussed medicines, pain, and home safety; and</li> <li>Whether the patient would recommend the agency to friends and family.</li> </ul> <p style=\"text-align: justify;\">The survey results, which resource will be updated every four months with new information, will supplement the information already available on the agency’s Home Health Compare website, located at <a href=\"http://www.medicare.gov/homehealthcompare/search.aspx\">http://www.medicare.gov/homehealthcompare/search.aspx</a>.</p> <p style=\"text-align: justify;\">CMS has provided that the survey results were designed to create incentives for home health agencies to improve their quality of care, as well as to give patients additional information so they are aware of the types of care they will receive from various agencies.  The survey results will offer prospective patients, their families and caregivers the chance to compare home health agencies by reviewing such results.</p> <p style=\"text-align: justify;\">The initial survey results cover the period from October 2010 to September 2011.  Currently, patients are generally giving their home health agencies favorable scores.  For example, 84 percent of patients gave their home health agency a rating of 9 or 10 on a scale from 0 (lowest) to 10 (highest), and 80 percent of patients said “yes, they would definitely recommend the home health agency to friends.”</p> <p style=\"text-align: justify;\">For more information on the survey, visit <a href=\"https://homehealthcahps.org/\">https://homehealthcahps.org</a>.</p>','Results of Home Health Agency Patient Surveys Available to Medicare Recipients','','publish','open','open','','results-of-home-health-agency-patient-surveys-available-to-medicare-recipients','','','2012-05-16 13:29:53','2012-05-16 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6209',4,'post','',0),(6211,1,'2016-02-25 13:29:53','2016-02-25 13:29:53','<p style=\"text-align: justify;\">The IRS has expanded its “Fresh Start” initiative, which is designed to help struggling taxpayers who owe taxes by offering more flexible terms in its Offer In Compromise (“OIC”) program.  These changes may allow some taxpayers to resolve their income tax problems in as little as two years, as compared to four or five years in the past. </p>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/04/2012.5.30-offer-in-compromise.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/04/2012.5.30-offer-in-compromise.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></div> <p style=\"text-align: justify;\">Specifically, the IRS has revised the calculation used to determine a taxpayer’s future income, and expanded the amount of allowable living expenses.  The IRS will now also consider credit card payments, bank fees and charges, student loan payments, and state and local delinquent taxes in determining OIC eligibility.</p> <p style=\"text-align: justify;\">In general, an OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed.  An OIC is generally not accepted if the IRS believes that the liability can be paid in full through a payment agreement or in a lump sum.  When deciding whether to accept an OIC, the IRS examines the taxpayer’s income and assets to make a determination of the taxpayer’s Reasonable Collection Potential (“RCP”).</p> <p style=\"text-align: justify;\">Where financial analysis is needed to determine a taxpayer’s ability to pay, the IRS uses the Allowable Living Expense standards, which provide consistency in collection determinations by incorporating average expenditures for basic necessities for citizens in similar geographic areas.  These standards are used when evaluating installment agreement and offer in compromise requests.</p> <p style=\"text-align: justify;\">The Fresh Start OIC initiative focuses on the financial analysis used to determine which taxpayers qualify for an OIC.  When the IRS calculates a taxpayer’s RCP, for offers paid in five or fewer months, it will now look at only one year of future income, rather than four years.  For offers paid in six to 24 months, the IRS will now look at only two years of future income, rather than five years.</p> <p style=\"text-align: justify;\">The IRS has also made other changes to the OIC program, including narrowed parameters and clarification of when a dissipated asset (i.e., an asset that is no longer available to pay a tax liability because the taxpayer has sold, given away, or spent it on non-priority debts) will be included in the RCP calculation.  In addition, equity in income producing assets will generally not be included in the calculation of the RCP for an on-going business.  Finally, the new OIC initiative also provides that the National Standard miscellaneous allowance has been expanded to include allowance for expenses such as credit card payments and bank fees and charges.</p> <p style=\"text-align: justify;\">While not a panacea to all past due income tax liabilities, the liberalized OIC terms will certainly allow many taxpayers to make an Offer In Compromise who were previously unable to qualify.  For additional information on the Fresh Start initiative, and other IRS announcements, visit <a href=\"http://www.irs.gov\">www.irs.gov</a></p>','IRS Liberalizes Offer In Compromise Terms Under “Fresh Start” Initiative','','publish','open','open','','irs-liberalizes-offer-in-compromise-terms-under-fresh-start-initiative','','','2016-02-25 13:29:53','2016-02-25 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6211',4,'post','',0),(6213,1,'2012-07-10 13:29:52','2012-07-10 13:29:52','<p style=\"text-align: justify;\">The 2010 Patient Protection and Affordable Care Act, which the Supreme Court largely declared constitutional last month, contains several new taxes.  Among the most significant is the new 3.8% Medicare surtax on investment income which takes effect January 1, 2013.</p>  <!--more-->  <p style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/07/2012.7.10-medicare-surtax.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/07/2012.7.10-medicare-surtax.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" width=\"15\" height=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p style=\"text-align: justify;\">The new Medicare tax, designed to raise revenue to offset the cost of health care reform, applies to individuals earning more than $200,000 and married couples earning more than $250,000.  The Medicare tax is imposed on the <em>lesser</em> of:</p> <ul> <li>Net investment income for the tax year; or</li> <li>The amount by which the modified adjusted gross income (“MAGI”) exceeds $200,000 for individuals and $250,000 for married couples.</li> </ul> <p>Net investment income includes the following items, reduced by deductions allocated to such income:</p> <ul> <li>Interest, dividends, royalties, annuities, and rents</li> <li>Income derived from passive activities</li> <li>Trading of financial instruments and commodities</li> <li>Net capital gains derived from the disposition of property not held in an active trade or business</li> </ul> <p>Net investment income does not include:</p> <ul> <li>Active trade and/or business income</li> <li>Any of the above sources of income (e.g. interest, dividends, capital gains, etc.) if derived from an active trade and/or business</li> <li>Distributions from IRAs or other qualified retirement plans</li> <li>Any income taken into account for self-employment tax purposes</li> </ul> <p>Examples:</p> <p style=\"text-align: justify;\"><strong>Single Individual. </strong> John has $215,000 of dividend, interest, and rental income with no other sources of income.  The 3.8% Medicare surtax applies to $15,000 of income since it is the lesser of net investment income of $215,000 or the excess of the $200,000 MAGI threshold.</p> <p style=\"text-align: justify;\"><strong>Married Filing Jointly without Net Investment Income.</strong>  John and Jane file a joint return reporting $300,000 in salaries and do not have any net investment income.  The 3.8% Medicare surtax does not apply.</p> <p style=\"text-align: justify;\"><strong>Married Filing Jointly with Net Investment Income.</strong>  John and Jane file a joint return reporting $225,000 in salaries and $75,000 of interest, dividend, and rental income for a total MAGI of $300,000.  The 3.8% Medicare surtax applies to $50,000 of income because it is the lesser of the couple’s $75,000 of net investment income or the excess over the $250,000 MAGI threshold.</p> <p style=\"text-align: justify;\"><strong>IRA Distributions.</strong>  In 2013, Michael, a single taxpayer age 69, has investment income of $150,000 and is not subject to the Medicare surtax.  In 2014 when he turns 70 ½, Michael takes a $125,000 required minimum distribution from his IRA in addition to $150,000 of investment income.  In this case, the 3.8% Medicare surtax applies to $75,000 of income because it is the lesser of his $150,000 net investment income or the excess over the $200,000 MAGI threshold.</p> <p style=\"text-align: justify;\">Even though various provisions of The 2010 Patient Protection and Affordable Care Act are likely to be challenged well into the future, it is best to consider the new Medicare surtax as being permanent and plan accordingly.</p>','Individual Taxpayers and The 3.8% Medicare Surtax','','publish','open','open','','individual-taxpayers-and-the-38-medicare-surtax','','','2012-07-10 13:29:52','2012-07-10 13:29:52','',0,'http://www.racklaw.com/new-site/?p=6213',3,'post','',0),(6216,1,'2012-07-07 13:29:53','2012-07-07 13:29:53','<div style=\"text-align: justify;\"> <p>IRS has issued long-awaited temporary and proposed regulations providing guidance on the requirements for electing portability of a deceased spousal unused exclusion amount (“DSUEA”) to the surviving spouse, and on the rules for the surviving spouse\'s use of this DSUEA.</p> </div>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/07/2012.7.7-estate-portability-regulations.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/07/2012.7.7-estate-portability-regulations.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></div> <div style=\"text-align: left;\"></div> <p style=\"text-align: justify;\"><strong>Background on the portability election.</strong>  The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 added a new “portability feature” for estates of decedents dying after 2010 and before 2013, under which the applicable exclusion amount is the sum of (1) the “basic exclusion amount” (i.e., $5 million with an adjustment for inflation after 2011), and (2) in the case of a surviving spouse, the DSUEA.  (I.R.C. § 2010(c)(2))</p> <p style=\"text-align: justify;\">The DSUEA <em>is the lesser of</em>:</p> <ol> <li>(1) the basic exclusion amount, or</li> <li>(2) the excess of (i) the basic exclusion amount of the last deceased spouse of the surviving spouse, over (ii) the amount with respect to which the tentative tax is determined under I.R.C. § 2001(b)(1) on the estate of such deceased spouse. (I.R.C. §2010(c)(4)).</li> </ol> <p style=\"text-align: justify;\">A surviving spouse may use the DSUEA in addition to her own $5 million exclusion (as indexed) for taxable transfers made during life or at death, but if a surviving spouse is predeceased by more than one spouse, the amount of unused exclusion that is available for use by the surviving spouse is limited to the lesser of $5 million or the unused exclusion of the last deceased spouse.  (I.R.C. § 2010(c)(4)).  The DSUEA cannot, however, be taken into account by a surviving spouse unless the executor of the estate of the deceased spouse elects to do so by timely filing an estate tax return on which the DSUEA is computed.  Once filed, the IRS has the authority to examine the estate tax return of the deceased, to make determinations with respect to the calculation of the DSUEA, even after the statute of limitations on assessment has expired.</p> <p style=\"text-align: justify;\">Here are some of the highlights of the temporary regulations on the DSUEA.</p> <p style=\"text-align: justify;\"><strong>Making the portability election.</strong>  Treas. Reg. § 20.2010-2T(a), requires an executor electing portability to make that election on a timely-filed estate tax return.  The last return filed by the return due date, including extensions actually granted, will supersede any previously-filed return. Thus, an executor generally may supersede a previously-filed portability election on a subsequent timely-filed estate tax return.  The estate tax return must be filed within nine months of the decedent’s date of death, unless an extension of time for filing has been granted.  A portability election is irrevocable once the due date (as extended) of the estate tax return has passed.</p> <p style=\"text-align: justify;\"><strong>Filing of complete and properly prepared estate tax return.</strong>  A number of commenters have asked the IRS for clarification of what was required under the Notice 2011-82 rule that the estate of a decedent (survived by a spouse) makes the portability election by timely filing a “complete and properly-prepared estate tax return” for the decedent’s estate.  Commentators also asked for relief for estates that are not required to file a return, but are doing so only to elect portability of the decedent\'s DSUEA.</p> <p style=\"text-align: justify;\">In response, Treas. Reg. § 20.2010-2T(a)(7), provides that an estate tax return prepared in accordance with all applicable requirements is considered a “complete and properly-prepared” estate tax return.   Executors of estates that are not otherwise required to file an estate tax return under do not have to report the value of certain property that qualifies for the marital or charitable deduction.</p> <p style=\"text-align: justify;\">An executor who chooses to make use of this special rule in filing an estate tax return must estimate the total value of the gross estate (including the values of the property that do not have to be reported on the estate tax return under this provision), based on a determination made in good faith and with due diligence regarding the value of all of the assets includible in the gross estate.  The Instructions for Form 706 will provide ranges of dollar values, and the executor must identify on the estate tax return the particular range within which falls the executor’s best estimate of the total gross estate.  By signing the return, the executor will be certifying, under penalties of perjury, that the estimate falls within the identified range of values to the best of the executor\'s knowledge and belief.</p> <p style=\"text-align: justify;\"><strong>Executor responsible for making portability election.</strong>  The administrator that is appointed, qualified, and acting within the U. S. for the decedent\'s estate (an appointed executor), may file an estate tax return to elect portability or to opt to have the portability election not apply. If there is no appointed executor, any person in actual or constructive possession of any property of the decedent (a “nonappointed executor”) may file the estate tax return to elect portability or to opt to have the portability election not apply. A portability election made by a non-appointed executor cannot be superseded by a contrary election made by another non-appointed executor of that same decedent\'s estate. (Treas. Reg. § 20.2010-2T(a)(6)).</p> <p style=\"text-align: justify;\"><strong>How to opt out of portability election.</strong>  Under Treas. Reg. § 20.2010-2T(a)(3), an executor must make an affirmative statement on the estate tax return signifying the decision to have the portability election not apply.  If no estate tax return is required, not filing an estate tax return will be considered to be an affirmative statement signifying the decision not to make a portability election.</p> <p style=\"text-align: justify;\"><strong>Use of the DSUEA by the surviving spouse.</strong>  Under Treas. Reg. § 20.2010-3T(c)(1) and Treas. Reg. § 20.2010-2T(d)(1), a portability election made by the executor of a decedent’s estate is effective as of the date of the decedent’s death.  Thus, the DSUEA of a decedent survived by a spouse may be included in determining the applicable exclusion amount of the surviving spouse, subject to any applicable limitations, with respect to all transfers occurring after the death of the decedent, if the executor of the decedent\'s estate makes a portability election and the election is not superseded by the executor of the decedent’s estate before the due date of the return, including extensions.</p> <p style=\"text-align: justify;\">Under Treas. Reg. § 20.2010-1T(d)(5), the term “last deceased spouse” referred to in I.R.C. § 2010(c)(4)(B)(i) means the most recently deceased individual who was married to the surviving spouse at that individual’s death, except that an individual dying before calendar year 2011 cannot be considered the last deceased spouse of such surviving spouse.</p> <p style=\"text-align: justify;\"><strong>Other provisions.  </strong>The Regulations also discuss the DSUEA where there are multiple spouses and previously applied DSUEAs, the IRS’s authority to examine returns of deceased spouses, applicability of the portability rules to nonresidents who are not citizens, and the applicability of portability in case of qualified domestic trusts.</p>','New, Temporary Regulations Explain Estate Tax Portability Election','','publish','open','open','','new-temporary-regulations-explain-estate-tax-portability-election','','','2012-07-07 13:29:53','2012-07-07 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6216',3,'post','',0),(6218,1,'2012-07-20 13:29:53','2012-07-20 13:29:53','<p style=\"text-align: justify;\">A U.S. district court rules that a Medicaid applicant whose son gave him a promissory note in exchange for rental property had excess resources.</p>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/07/2012.7.20-promissory-note-counts.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/07/2012.7.20-promissory-note-counts.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></div> <p><strong>Gragert v. Hendrick (U.S. Dist. Ct., W.D. Okla., No. CIV-11-984-C, May 24, 2012).</strong></p> <p style=\"text-align: justify;\"><strong>Facts.</strong>  George Gragert owned a rental property at the time he entered a nursing home and applied for Medicaid.  On May 1, 2011, Mr. Gragert\'s son gave Mr. Gragert\'s wife a promissory note in which he promised to pay $28,800 in 96 monthly installments of $330.28. One the same day, the Gragerts deeded the rental property, which was worth $22,800, to their son.  The state denied Mr. Gragert\'s Medicaid application, finding that he had excess resources due to the promissory note.  Mr. Gragert sued the state in federal court, and both parties asked for summary judgment.</p> <p style=\"text-align: justify;\"><strong>Court’s Decision. </strong> The U.S. District Court for the Western District of Oklahoma granted summary judgment in favor of the state, holding that Mr. Gragert is not eligible for Medicaid. According to the court, a promissory note is typically considered an available resource, and Mr. Gragert offered no evidence to rebut this presumption.</p> <p style=\"text-align: justify;\"><strong>Virginia Law. </strong> In some situations and under certain state laws, it may be proper to implement a strategy structured around the preparation of a promissory note as a short-term planning tool to contribute toward the costs of long-term care during a Medicaid ineligibility penalty period.  In this scenario, the Medicaid applicant would transfer a portion of his or her estate as a gift (intentionally causing an ineligibility period), and then prepare a promissory note, as the maker, for the remaining portion of the estate.  The note would be structured to require monthly repayments in the amount needed to pay for long-term care for the duration of the ineligibility period, resulting in a completed gift upon the scheduled termination of the note.  However, even if a promissory note complies with the Deficit Reduction Act regulations, the note balance could still be deemed an available resource.</p> <p style=\"text-align: justify;\">Unfortunately, the Virginia Medicaid Manual (S1140.300) provides an instruction to “[a]ssume that the value of a promissory note, loan or property agreement as a resource is its outstanding principal balance unless the individual furnishes reliable evidence that it has a CMV of less than the outstanding principal balance.”  Therefore, this strategy is not typically recommended in Virginia, as it is extremely risky and likely to trigger a lengthy penalty/ineligibility period that may extend well beyond what the applicant’s resources could sustain.</p>','Medicaid Applicant\'s Promissory Note is Considered Countable Resource','','publish','open','open','','medicaid-applicants-promissory-note-is-considered-countable-resource','','','2012-07-20 13:29:53','2012-07-20 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6218',5,'post','',0),(6219,1,'2012-07-25 13:29:53','2012-07-25 13:29:53','<div style=\"text-align: justify;\"> <p>Nathan Moccia Shareholder of Rack & Moccia, P.C., will conduct a national teleconference for the National Business Institute on Wednesday August 1, 2012, titled \"Estate Planning for Blended Families\".</p> </div>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"pdfs/featured_posts/2012.76.11-nbi-announcement.pdf\">Download PDF</a><a target=\"_blank\" href=\"pdfs/featured_posts/2012.76.11-nbi-announcement.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></div> <div style=\"text-align: left;\"></div> <p style=\"text-align: justify;\">Blended families are becoming more “rule” than “exception.” Do you have the skills to help the the growing number of re-married spouses plan for their future?  This insightful program will arm you with the knowledge and a set of techniques that will allow you to customize your practice to fit this growing client base. <a href=\"http://www.nbi-sems.com/SemTeleDetails.aspx/R-60028ER|?ctname=SPKEM\">Click here</a> fore more information.</p> <p><span style=\"text-decoration: underline;\"><strong>Program Description</strong></span></p> <p style=\"text-align: justify;\">The teleconference will inform practitioners of the key provisions in pre- and post-marital agreements aimed to protect assets and plan bequests.  It will guide participants through the proper steps to ensure your clients biological children are not accidentally disinherited, while learning to anticipate and minimize the potential complications which stem from significant age and/or wealth difference between spouses.</p> <p><span style=\"text-decoration: underline;\"><strong>Program Outline<br /></strong></span></p> <ul style=\"list-style-type: circle;\"> <li>Pre-Nuptial and Post-Nuptial Agreements</li> <li>Common issues in estate planning for blended families</li> <li>Advanced estate planning issues</li> </ul>','Rack & Moccia,P.C. Attorney to conduct National teleconference','','publish','open','open','','rack-a-olansenpc-attorney-to-conduct-national-teleconference','','','2012-07-25 13:29:53','2012-07-25 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6219',2,'post','',0),(6221,1,'2012-08-30 13:29:53','2012-08-30 13:29:53','<div style=\"text-align: justify;\"> <p>A U.S. Court of Appeals held that a nursing home patient was not entitled to coverage from her health insurance plan for her nursing home stay because she received primarily custodial care, not skilled nursing services.</p> </div>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/08/2012.8.30-custodial-care.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/08/2012.8.30-custodial-care.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></div> <div style=\"text-align: left;\"></div> <p style=\"text-align: justify;\"><strong>Becker v. Chrysler LLC Health Care Benefits Plan, 7th Cir., No. 11-2624 (Aug. 20, 2012).</strong></p> <p style=\"text-align: justify;\"><strong>Facts.</strong>  Ms. Evelyn Jeranek received health insurance through her husband\'s employer.  The healthcare plan provided that it would not cover benefits for a terminally ill enrollee whose condition is primarily custodial and no longer requires skilled nursing service. Ms. Jeranek entered a nursing home suffering from congenital heart failure, among other maladies. She refused treatment several times, as well as her doctor\'s recommendation that she go to the hospital.</p> <p style=\"text-align: justify;\">The nursing home submitted a claim to Ms. Jeranek\'s insurance company, which denied the claim after finding that Ms. Jeranek had a chronic stable condition that did not require skilled nursing care.  After Ms. Jeranek died, her personal representative sued the insurer, arguing that Ms. Jeranek was a complex patient that required the care of skilled nursing personnel.  The district court granted summary judgment to the insurance company, and Ms. Jeranek\'s personal representative appealed.</p> <p style=\"text-align: justify;\"><strong>Court Determination. </strong> The U.S. Court of Appeals, 7th Circuit, affirmed the decision of the lower court, holding that the health insurance plan did not cover Ms. Jeranek\'s nursing home stay because she did not receive skilled nursing services.  According to the court, there is nothing in the plan that \"suggests that \'skilled nursing personnel\' equates with the provision of \'skilled nursing services,\'\" so there was a basis for the insurance company\'s conclusion that the care provided was entirely custodial.</p>','Nursing Home Patient Under Custodial Care Not Entitled to Coverage from Insurance','','publish','open','open','','nursing-home-patient-under-custodial-care-not-entitled-to-coverage-from-insurance','','','2012-08-30 13:29:53','2012-08-30 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6221',4,'post','',0),(6223,1,'2012-09-20 13:29:53','2012-09-20 13:29:53','<p style=\"text-align: justify;\">On appeal, the court reversed a lower court ruling by determining that the caregiver child exemption for the transfer of a house still applied because the Medicaid applicant\'s attorney-in-fact transferred the house, not the Medicaid applicant himself.</p>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/09/2012.9.20-caregiver-child-exemption.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/09/2012.9.20-caregiver-child-exemption.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" width=\"15\" height=\"15\" /></a></div> <p><strong>Dahly v. Anderson (N.D., No.20120013, Aug. 30,2012).</strong></p> <p style=\"text-align: justify;\"><strong>Facts:</strong>  Wilfred and Geraldine Dahly appointed their son, Rick, to serve as their attorney-in-fact. In 2007, the couple began suffering from dementia and their daughter, LeAnn Greenwall, moved from Kentucky to live with and care for them under a written care agreement. Mrs. Dahly eventually entered a nursing home and Ms. Greenwall continued to care for Mr. Dahly.  In 2009, Rick, as attorney-in-fact, transferred Mrs. Dahly\'s interest in the home to Mr. Dahly.  In 2010, Rick transferred Mr. Dahly\'s interest in the home to Ms. Greenwell. Mr. Dahly then entered a nursing home, and Ms. Greenwell sold the home and gave half of the proceeds to Rick.</p> <p style=\"text-align: justify;\">Mr. Dahly applied for Medicaid, but the state denied him benefits because the proceeds from the sale of the house were an available asset. Mr. Dahly appealed, arguing the caregiver child exemption for the transfer of the family home applied.  The state argued that the exemption did not apply because Mr. Dahly did not transfer the house himself; instead Rick transferred the house as attorney-in-fact, which created a presumption of undue influence. The trial court agreed, and Mr. Dahly appealed.</p> <p style=\"text-align: justify;\"><strong>Ruling:  </strong>The Supreme Court of North Dakota reversed the ruling, holding the caregiver child exemption did apply. The court ruled that Mr. Dahly and Ms. Greenwall complied precisely with the requirements of the exemption and the state was attempting to \"circumvent a clear expression of federal law through an overly broad application of state trust law.\"  The court also noted that if the state\'s decision were upheld, then only mentally competent Medicaid applicants could use the caregiver child exemption.  One justice dissented, arguing the exemption should not apply because the transfer was not to allow the daughter to remain in the home, \"but rather to divide the applicant\'s assets among his children.\"</p>','Caregiver Child Exemption Applies Even Though Attorney-in-Fact Transferred House','','publish','open','open','','caregiver-child-exemption-applies-even-though-attorney-in-fact-transferred-house','','','2012-09-20 13:29:53','2012-09-20 13:29:53','',0,'http://www.racklaw.com/new-site/?p=6223',3,'post','',0),(6226,1,'2012-10-10 13:29:52','2012-10-10 13:29:52','<p style=\"text-align: justify;\">Treasury has answered a letter from Democratic Representatives voicing suspicions that the contribution limits for tax-deferred retirement accounts are being avoided by undervaluing the contributed assets.   Treasury highlighted the IRS’s enforcement efforts, opined that current tax rules provide little incentive to shift investment gains to IRAs and SEP-IRAs by using undervalued assets, and highlighted current law’s fair market value standard for valuing assets contributed to IRAs.</p>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/10/2012.10.10-treasury-responds-claims.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/10/2012.10.10-treasury-responds-claims.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></div> <p style=\"text-align: justify;\"><strong>Background. </strong> Annual contributions to defined contribution plans are limited to an inflation adjusted figure ($50,000 for 2012), and contributions to IRAs are limited to $5,000 for 2012, plus a $1,000 catch-up contribution for those age 50 or older.  Taxpayers generally may roll over their defined contribution plans to IRAs on a tax-free basis.</p> <p style=\"text-align: justify;\">Question of valuation.  In an August 2, 2012, letter to the Treasury Department and Employee Benefits Security Administration, Reps. George Miller (D-CA), Sander Levin (D-MI), and Chris Van Hollen (D-MD), expressed concern that taxpayers may be getting around the above contribution limits for tax-deferred retirement accounts by assigning low values to property contributed to the account.  They cited, as an example, Republican presidential candidate Mitt Romney’s high-value IRAs, which reportedly hold stakes in businesses relating to his employment at Bain Capital.</p> <p style=\"text-align: justify;\">The Democratic Congressmen requested answers to specific questions, such as: the current standards related to the valuation of assets that are purchased by tax-deferred retirement accounts; the proof taxpayers must submit if they are examined as to the value of assets held by retirement accounts when those assets are not publicly traded or their value cannot be established by reference to an established market; and the number of audits the IRS has recently conducted on the valuation of assets held in tax-deferred retirement accounts.</p> <p style=\"text-align: justify;\"><strong>Treasury’s response.</strong>  In identical letters responding to Reps. Levin, Miller, and Van Hollen, Treasury Assistant Secretary for Tax Policy Mark Mazur said IRS was aware of potential valuation problems for IRAs (as well as SEP IRAs), and had raised the issue in Notice 2004-8, 2004-4 IRB 333, which listed the undervaluation of IRA assets as a listed transaction that must be disclosed to IRS.  Specifically targeted were transactions attempting to bypass contribution limits that involved a business owned by a taxpayer and a corporation owned by the taxpayer’s Roth IRA (the Roth IRA corporation).</p> <p style=\"text-align: justify;\">Although IRS has gone after listed transactions identified by Notice 2004-8, and instances where assets of traditional IRAs and qualified plans have been abusively undervalued, Mazur maintained that under current tax rules, there is relatively little incentive to shift investment gains into traditional IRAs or SEP IRAs through the use of undervalued assets.  While sales or other dispositions of assets within an IRA are not taxable, any appreciation (or other earnings) on assets distributed from traditional IRAs and SEP IRAs are taxed at ordinary income tax rates when distributions occur and are not eligible for favorable capital gains treatment that might apply to the sale of capital assets held directly by the taxpayer.  Mazur said that although value-shifting strategies involving traditional IRAs and SEP IRAs may have offered greater advantages in the early ‘90s when the tax treatment of long-term capital gains was closer to that for ordinary income, these advantages appear to be much smaller given the spread in ordinary versus long-term capital gains tax rates.</p> <p style=\"text-align: justify;\">Mazur pointed out that IRS rules generally require all IRA assets, including those not publicly traded, to be valued using a FMV standard (as opposed to liquidation or other value), and that FMV of IRA and qualified plan assets must be reported on Form 5498 (IRA Contribution Information) and Form 5500 (Annual Return/Report of Employee Benefit Plan), as applicable.  Responding to the Representatives’ request for audit information, Mazur said the IRS is currently working to obtain a reliable estimate of the number of audits that specifically involve IRA asset valuation issues and an estimate of the size of associated tax compliance problems.  He also said IRS has assembled a working group to study ways of improving compliance and enforcement in the IRA/SEP IRA valuation area.</p> <p style=\"text-align: justify;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2012/10/2012.10.10-ltr-from-treasury.pdf\">Click here to read Treasury’s complete response.</a></p>','Treasury Responds to Claims of Undervaluation in Contributed Retirement Plan Assets','','publish','open','open','','treasury-responds-to-claims-of-undervaluation-in-contributed-retirement-plan-assets','','','2012-10-10 13:29:52','2012-10-10 13:29:52','',0,'http://www.racklaw.com/new-site/?p=6226',2,'post','',0),(6228,1,'2013-01-03 13:29:52','2013-01-03 13:29:52','<p style=\"text-align: justify;\">On January 1, 2013, Congress passed the American Taxpayer Relief Act (“2012 Taxpayer Relief Act”), which the President has vowed to sign as soon as it is ready for his signature.  The 2012 Taxpayer Relief Act will prevent many of the tax hikes scheduled to go into effect this year and retain many favorable tax breaks that were scheduled to expire.  The 2012 Taxpayer Relief Act also increases income taxes for some “high-income” individuals, modifies the 2012 transfer tax rates slightly, and extends a host of expired and expiring tax breaks for businesses and individuals.  Here are a few highlights of the new legislation.  We will provide additional information regarding other provisions of the new legislation in the coming days.</p>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2013/01/2013.1.3-taxpayer-relief-2013.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2013/01/2013.1.3-taxpayer-relief-2013.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" width=\"15\" height=\"15\" /></a></div> <p style=\"text-align: justify;\"><strong>Estate, Gift and Generation Skipping Transfer Tax Provisions Kept Mostly Intact</strong><br />The 2012 Taxpayer Relief Act prevents steep increases in estate, gift and generation-skipping transfer (“GST”) tax that were slated to occur for individuals dying and gifts made after 2012 by permanently keeping the unified exemption level at $5,000,000 (currently $5,120,000 as indexed for inflation).  However, the 2012 Taxpayer Relief Act also permanently increases the top estate, gift and GST tax rate from 35% to 40%.  The 2012 Taxpayer Relief Act also continues the portability feature that allows the estate of the first spouse to die to transfer his or her unused exclusion amount to the surviving spouse.</p> <p style=\"text-align: justify;\"><strong>Individual Income Tax Rates</strong><br />For tax years beginning January 1, 2013, the income tax rates for most individuals will stay at 10%, 15%, 25%, 28%, 33% and 35% (instead of moving to 15%, 28%, 31%, 36% and 39.6% as would have occurred if current tax rates had been allowed to expire).  However, a 39.6% tax rate now applies to income exceeding $450,000 for joint filers and surviving spouses; $425,000 for heads of household; $400,000 for single filers; and $225,000 for married individuals filing seperately.  These dollar amounts are inflation-adjusted for tax years after 2013.</p> <p style=\"text-align: justify;\"><strong>Capital Gain and Dividend Rates</strong><br />For tax years beginning January 1, 2013, the top rate for long-term capital gains and qualified dividends will permanently rise to 20% (up from 15%) for taxpayers with incomes exceeding $400,000 ($450,000 for married taxpayers).  When accounting for I.R.C. § 1411’s 3.8% surtax on investment-type income and gains for tax years beginning January 1, 2013, the overall rate for higher-income taxpayers will be 23.8% on both long-term capital gains and qualified dividends.</p> <p style=\"text-align: justify;\">For taxpayers whose ordinary income is generally taxed at a rate below 25%, long-term capital gains and qualified dividends will permanently be subject to a 0% rate.  Taxpayers who are subject to a 25% or greater tax rate on their ordinary income, but whose income levels fall below the $400,000/$450,000 thresholds, will continue to be subject to a 15% rate on long-term capital gains and qualified dividends.  The tax rate will be 18.8% for those subject to the 3.8% surtax (i.e., those with modified adjusted gross income over $250,000 for joint filers or surviving spouses, $125,000 for a married individual filing a separate return, and $200,000 in any other case).</p> <p style=\"text-align: justify;\"><strong>Permanent Alternative Minimum Tax Relief</strong><br />The 2012 Taxpayer Relief Act provides permanent alternative minimum tax (“AMT”) relief.  The AMT is the excess, if any, of the tentative minimum tax for the year over the regular tax for the year.  In arriving at the tentative minimum tax, an individual begins with taxable income, modifies it with various adjustments and preferences, and then subtracts an exemption amount (which phases out at higher income levels).  The result is alternative minimum taxable income (“AMTI”), which is subject to an AMT rate of 26% or 28%.</p> <p style=\"text-align: justify;\">Prior to the 2012 Taxpayer Relief Act, the individual AMT exemption amounts for 2012 were to have been $33,750 for unmarried taxpayers; $45,000 for joint filers; and $22,500 for married persons filing separately.  Retroactively effective for tax years beginning January 1, 2012, the 2012 Taxpayer Relief Act permanently increases these exemption amounts to $50,600 for unmarried taxpayers; $78,750 for joint filers; and $39,375 for married persons filing separately.  In addition, for tax years beginning after January 1, 2012, the AMT exemption amounts are indexed for inflation.</p> <p style=\"text-align: justify;\">Also, prior to the 2012 Taxpayer Relief Act nonrefundable personal credits—other than the adoption credit; the child credit; the savers’ credit; the residential energy efficient property credit; the non-depreciable property portions of the alternative motor vehicle credit; the qualified plug-in electric vehicle credit; and the new qualified plug-in electric drive motor vehicle credit—would have been allowed in 2012 only to the extent that the individual’s regular income tax liability exceeded his tentative minimum tax, determined without regard to the minimum tax foreign tax credit.  Retroactively effective for tax years beginning after January 1, 2012, the 2012 Taxpayer Relief Act permanently allows an individual to offset his entire regular tax liability and AMT liability by the nonrefundable personal credits.</p> <p style=\"text-align: justify;\"><strong>Personal Exemption Phaseout Limitations Reinstated</strong><br />For tax years beginning January 1, 2013, the Personal Exemption Phaseout (“PEP”), which had previously been suspended, is reinstated with a starting adjusted gross income (“AGI”) threshold of $300,000 for joint filers and surviving spouses; $275,000 for heads of household; $250,000 for single filers; and $150,000 for married taxpayers filing separately.  Under the phaseout, the total amount of exemptions that can be claimed by a taxpayer subject to the limitation is reduced by 2% for each $2,500 (or portion thereof) by which the taxpayer’s AGI exceeds the applicable threshold.  These dollar amounts are inflation-adjusted for tax years after 2013.</p> <p style=\"text-align: justify;\"><strong>Itemized Deduction Limitations Reinstated</strong><br />For tax years beginning January 1, 2013, the “Pease” limitation on itemized deductions, which had previously been suspended, is reinstated with a starting threshold of $300,000 for joint filers and surviving spouses; $275,000 for heads of household; $250,000 for single filers; and $150,000 for married taxpayers filing separately.  Thus, for taxpayers subject to the “Pease” limitation, the total amount of their itemized deductions is reduced by 3% of the amount by which the taxpayer’s AGI exceeds the threshold amount, with the reduction not to exceed 80% of the otherwise allowable itemized deductions.  These dollar amounts are inflation-adjusted for tax years after 2013.</p> <p style=\"text-align: justify;\"><strong>Historical Individual Tax Extenders</strong></p> <ul> <li>The 2012 Taxpayer Relief Act extends the following tax items through the end of 2013:</li> <li>Deduction for certain expenses of elementary and secondary school teachers;</li> <li>Exclusion for discharge of qualified principal residence indebtedness;</li> <li>Treatment of mortgage insurance premiums as qualified residence interest;</li> <li>Option to deduct State and local general sales taxes;</li> <li>The special rule for contributions of capital gain real property made for conservation purposes;</li> <li>The above-the-line deduction for qualified tuition and related expenses; and</li> <li>Tax-free distributions from individual retirement plans for charitable purposes are continued through 2013.  Since 2012 has already passed, a special rule permits distributions taken in 2012 to be transferred to charities for a limited period in 2013. Another special rule permits certain distributions made in 2013 to be deemed as made on December 31, 2012.</li> </ul>','Highlights of the American Taxpayer Relief Act – Part I','','publish','open','open','','highlights-of-the-american-taxpayer-relief-act-part-i','','','2013-01-03 13:29:52','2013-01-03 13:29:52','',0,'http://www.racklaw.com/new-site/?p=6228',2,'post','',0),(6230,1,'2013-02-26 13:29:52','2013-02-26 13:29:52','<div style=\"text-align: justify;\"> <p>Nathan Moccia, shareholder of Rack & Moccia P.C., will conduct a national teleconference for the National Business Institute on Tuesday April 30, 2013, titled “Estate Planning Basics”</p> </div>  <!--more-->  <div style=\"text-align: right;\"><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2013/02/2013.2.26-nbi-announcement.pdf\">Download PDF</a><a target=\"_blank\" href=\"http://www.racklaw.com/new-site/wp-content/uploads/2013/02/2013.2.26-nbi-announcement.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a></div> <div style=\"text-align: left;\"></div> <p style=\"text-align: justify;\">Do you have the skills to ensure your clients are well taken care of in case of incapacity? Can you minimize their tax liability through carefully planned asset transfers? Gain the knowledge you need to help your clients through their estate planning needs with this fundamental program. Be prepared to effectively represent your clients.  Click Here fore more information.</p> <p><span style=\"text-decoration: underline;\">Program Description</span></p> <p style=\"text-align: justify;\">The teleconference will give practitioners the fundamental understanding of basic principles in drafting wills and trusts to effectively document your client’s wishes.  Attendees will learn what impact gift and estate taxes will have on beneficiaries and how your plan can address how these taxes are handled.  Practitioners will gain the knowledge to help clients plan for incapacity by understanding how to proactively address common legal and financial issues that can arise when health deterirates.</p> <p><span style=\"text-decoration: underline;\">Program Outline</span></p> <p>Wills and Trusts<br />BasicTaxes You Need to Be Aware of<br />Considerations in Planning for Incapacity</p>','Rack & Moccia,P.C. Attorney to conduct National teleconference','','publish','open','open','','rack-a-olansenpc-attorney-to-conduct-national-teleconference-3','','','2013-02-26 13:29:52','2013-02-26 13:29:52','',0,'http://www.racklaw.com/new-site/?p=6230',2,'post','',0),(6402,1,'2016-02-23 21:18:01','2016-02-23 21:18:01','Kevin B. Rack has been recognized, once again by his peers as one of <em>The Best Lawyers in America</em> in Trusts and Estates, and Trusts and Estates Litigation.  The selection process comprised of more than 2.5 million confidential evaluations by top attorneys in the country. Mr. Rack was first named to this elite category in 2009.','The Best Lawyers in America 2015','','publish','open','open','','the-best-lawyers-in-america-2015','','','2016-02-23 21:18:01','2016-02-23 21:18:01','',0,'http://www.racklaw.com/new-site/?p=6402',0,'post','',0),(6404,1,'2016-02-23 21:18:28','2016-02-23 21:18:28','Rack &amp; Moccia, P.C. is pleased to announce a Tier 2 ranking in <em>U.S. News - Best Lawyers</em> \"Best Law Firms\" for Trust and Estates Litigation and a Tier 3 ranking in Trust and Estates for the fourth consecutive year.  The selection process is based on a rigorous evaluation process that includes the collection of client and lawyer evaluations, peer reviews from leading attorneys in their field, and review of additional information provided by the law firm as part of the formal submission process.','The Best Law Firms 2015','','publish','open','open','','the-best-law-firms-2015','','','2016-02-23 21:18:28','2016-02-23 21:18:28','',0,'http://www.racklaw.com/new-site/?p=6404',0,'post','',0),(6406,1,'2016-02-23 21:18:52','2016-02-23 21:18:52','Rack &amp; Moccia, P.C. is pleased to announce the association of Rachel E. Zuraw with the Firm.  Ms. Zuraw, a Fulbright-Hays Scholorship recipient, joins the Firm after two years as a staff attorney for the Fourth Circuit Court of Appeals.  She will concentrate her practice in the administration of trusts and estates, and representation of executors, trustees and conservators.','New Associate joins firm','','publish','open','open','','new-associate-joins-firm','','','2016-02-23 21:18:52','2016-02-23 21:18:52','',0,'http://www.racklaw.com/new-site/?p=6406',0,'post','',0),(6408,1,'2016-02-23 21:19:11','2016-02-23 21:19:11','We are proud to announce that Kevin B. Rack and Jennifer L. Moccia of Rack &amp; Moccia, P.C., have been named as one of Virginia\'s \"Legal Elite\" in Virginia Business magazine.  Mr. Rack has been recognized for nine of the past twelve years.  Mr. Rack and Ms. Moccia were named by their peers in the category of attorneys specializing in taxation, trusts and estates, and elder law.  Virginia\'s \"Legal Elite\" is a listing of the best lawyers in the Commonwealth.','Virginia\'s Legal Elite 2014','','publish','open','open','','virginias-legal-elite-2014','','','2016-02-23 21:19:11','2016-02-23 21:19:11','',0,'http://www.racklaw.com/new-site/?p=6408',0,'post','',0),(6410,1,'2016-02-23 21:19:31','2016-02-23 21:19:31','Rack &amp; Moccia are pleased to announce that Kevin B. Rack, Nathan R. Moccia, and Jennifer L. Moccia were named in Virginia Super Lawyers Magazine for 2014.  Kevin B. Rack is recognized for the eigth consecutive year in Estate Planning and Probate.  Nathan R. Moccia is recognized for the third consecutive year in Virginia Rising Stars 2014 for Taxation.  Associate, Jennifer L. Moccia, was also recognized in Virginia Risng Stars 2014 for Estate Planning and Probate.  Virginia Super Lawyers is an exclusive listing of the top 5% of attorneys in Virginia and West Virginia. The selection process involves peer nominations from more than 18,000 Virginia lawyers and a blue ribbon panel review.','Virginia Super Lawyers 2014','','publish','open','open','','virginia-super-lawyers-2014','','','2016-02-23 21:19:31','2016-02-23 21:19:31','',0,'http://www.racklaw.com/new-site/?p=6410',0,'post','',0),(6412,1,'2016-02-23 21:19:57','2016-02-23 21:19:57','The Professional Development Conference (PDC), organized by Rack &amp; Moccia Associate, Jennifer L. Moccia, as Chair of the event, is a full-day CLE program established by the Virginia State Bar Young Lawyers Conference. This year, the sold-out PDC was held in Richmond on September 23rd, and hosted notable speakers who offered practical advice on timely issues, including client opportunities in a changing legal market and the evolution of social media in litigation.\n\nAs Chair, Jennifer assembled a committee who worked with her to develop the theme and lecture topics for the event, select presenters, reserve the venue, prepare the agenda, attain CLE approval, coordinate logistics, market the event, and host and introduce the speakers on the day of the event. The affordable program was approved for 6 CLE credits, 2 of which were ethics credits presented by ReelTime CLE, who displayed Hollywood movie clips to present vignettes and provoke discussion and debate. This stimulating and thought-provoking event has received excellent feedback from registrants, and was attended by the Executive Editor of Virginia Lawyers Weekly, who plans to author an article on the PDC to be featured in the publication.','Associate Chairs Successful Professional Development Conference CLE in Richmond','','publish','open','open','','associate-chairs-successful-professional-development-conference-cle-in-richmond','','','2016-02-23 21:19:57','2016-02-23 21:19:57','',0,'http://www.racklaw.com/new-site/?p=6412',0,'post','',0),(6414,1,'2016-02-23 21:20:31','2016-02-23 21:20:31','Please join us in congratulating our estate planning associate, Jennifer L. Moccia, for being elected to serve for a two year term on the Board of Governors of the Virginia State Bar Young Lawyers Conference. Jennifer is known for her incredible attention to detail and strong work ethic, as well as growing expertise in the estate planning and elder law fields of practice. In her role as the 2nd District Representative for the Board of Governors, Ms. Moccia will lead the Young Lawyers Conference by serving as a state bar liaison to program committee chairs, coordinating programs and projects for the bar, initiating and voting on policy decisions and participating in state-wide board meetings.\n\nThe Young Lawyers Conference (YLC) focuses its efforts on the special interests and concerns of young and new lawyers. Through a diverse group of projects, the YLC is a vehicle through which young lawyers can participate in the governance of the Virginia State Bar, serve the profession and the public, and enhance the public awareness of the legal profession.','Associate elected to Virginia Bar Association Young Lawyers Conference Board of Governors','','publish','open','open','','associate-elected-to-virginia-bar-association-young-lawyers-conference-board-of-governors','','','2016-02-23 21:20:31','2016-02-23 21:20:31','',0,'http://www.racklaw.com/new-site/?p=6414',0,'post','',0),(6416,1,'2016-02-23 21:20:53','2016-02-23 21:20:53','Rack &amp; Moccia, P.C. served as a State Liaison for National Healthcare Decisions Day, held on April 16th.  National Healthcare Decisions Day highlights the importance of establishing an Advance Medical Directive in order to ensure that your wishes regarding healthcare decisions are reduced to a legally enforceable writing so that they will be carried out, whether for medical treatment or for the withholding of life-prolonging procedures, in the event you cannot speak for yourself.\n\nAdvance medical directives are now widely considered to be a standard document in even the most basic of estate plans.  These instruments, executed in advance of incapacity, allow for the designation of an agent to make health care decisions and authorize medical treatment on your behalf.  In a section of the advance medical directive often entitled, “Health Care Power of Attorney,” the appointed health care agent is given authority to provide direction to health care providers and other parties regarding the type and extent of medical treatment you would, or would not, want to be given to you, including residential arrangements for long term care.\n\nThe instructions you give pertaining to the withholding of life-prolonging procedures in the event of a terminal illness or persistent vegetative state are typically set forth in the portion of your advance medical directive commonly referred to as the “Living Will.”\n\nIn the absence of an advance medical directive, family members are often required to apply to the courts for appointment as a guardian or conservator in order to address your health care decisions or financial matters, respectively.  Sadly, these proceedings sometimes become family battlegrounds for control, leading to costly and divisive litigation.  Since our law practice focuses on both estate planning and the appointment of guardians and conservators, our experience motivates us to encourage every adult to implement an Advance Medical Directive naming at least two health care agents and clarifying the values and choices to be applied in the making of health care decisions.   And we specifically urge you not to wait until next National Healthcare Decisions Day, just in case.','National Healthcare Decisions Day- April 16th','','publish','open','open','','national-healthcare-decisions-day-april-16th','','','2016-02-23 21:20:53','2016-02-23 21:20:53','',0,'http://www.racklaw.com/new-site/?p=6416',0,'post','',0),(6418,1,'2016-02-23 21:21:52','2016-02-23 21:21:52','As a graduate of the Master of Laws program in Estate Planning at the University of Miami Law School, our associate Jennifer L. Moccia, has a particular interest in the Heckerling Institute on Estate Planning.  Sponsored by Miami Law School, Heckerling is the nation’s leading conference for estate and tax planning professionals, and is attended by attorneys, accountants, trust officers, insurance advisors and wealth management professionals.  Jennifer attended Miami Law School as a graduate student, and decided it was time for her traditional mid-winter Florida homecoming visit.\n\nThe 45th Annual Heckerling Institute, now held in Orlando due to the popularity of the program, featured numerous specialized presentations highlighting estate planning and tax strategies such as: grantor retained annuity trusts, sales to grantor trusts, valuation discounts, post-mortem estate planning, special needs trusts and retirement planning.  The Institute also offered in-depth panel discussions featuring the country’s leading estate and tax planning experts on recently enacted estate and gift tax laws.\n\nUpon her return from Florida, Jennifer has helped prepare our recent correspondence addressing estate and tax planning considerations arising from the Tax Relief Act of 2010, contributed to the Estate Steward Program Seminar presentation summarizing the Tax Act, and has authored various Featured Posts on our recently updated website.','5th Annual Heckerling Institute on Estate Planning','','publish','open','open','','5th-annual-heckerling-institute-on-estate-planning','','','2016-02-23 21:21:52','2016-02-23 21:21:52','',0,'http://www.racklaw.com/new-site/?p=6418',0,'post','',0),(6420,1,'2016-02-23 21:22:14','2016-02-23 21:22:14','<em>Kevin Rack</em> was elected to serve a 3-year term on the Board of Directors for the Central Business District Association of Virginia Beach. Kevin has been a leader in many community organizations and activities, and he will be contributing his knowledge and experience to support the goals of the businesses and professions which make up the Association.','Rack Elected to Board of Directors for Beach CBDA','','publish','open','open','','rack-elected-to-board-of-directors-for-beach-cbda','','','2016-02-23 21:22:14','2016-02-23 21:22:14','',0,'http://www.racklaw.com/new-site/?p=6420',0,'post','',0),(6422,1,'2016-02-23 21:22:38','2016-02-23 21:22:38','Kevin B. Rack served as Master of Ceremonies for the <em>Bringing Breast Cancer to Light</em> event held September 25, 2010 at the First Baptist Church of Norfolk. The event included presentations by Jennifer Reed, M.D., FACS, Michael Danso, M.D., and Lauries Jesz, RN, CBNC and included a fashion show in which the models were beautiful breast cancer survivors. The events aimed to provide essential information about early detection, treatment and prevention of breast cancer Girl Scouts from local troop 164 were able to use this event to achieve their Gold Award which compares in recognition to the Boy Scouts award of Eagle Scout.','Bringing Breast Cancer to Light','','publish','open','open','','bringing-breast-cancer-to-light','','','2016-02-23 21:22:38','2016-02-23 21:22:38','',0,'http://www.racklaw.com/new-site/?p=6422',0,'post','',0),(6424,1,'2016-02-23 21:23:36','2016-02-23 21:23:36','<div>Congratulations to Kevin on being presented the Distinguished Service Award in recognition and appreciation of Kevin\'s valuable contributions and dedicated service as a Director.</div>\nRack &amp; Moccia, P.C. is proud to be a member of the National Academy of Elder Law Attorneys, Inc. (NAELA)','Virginia Academy of Elder Law Attorneys, Inc.','','publish','open','open','','virginia-academy-of-elder-law-attorneys-inc','','','2016-02-23 21:23:36','2016-02-23 21:23:36','',0,'http://www.racklaw.com/new-site/?p=6424',0,'post','',0),(6537,1,'2016-08-30 12:53:32','2016-08-30 12:53:32','','top-news-01','','inherit','open','closed','','top-news-01','','','2016-08-30 12:53:32','2016-08-30 12:53:32','',5909,'http://www.racklaw.com/rack3/wp-content/uploads/2016/02/top-news-01.png',0,'attachment','image/png',0),(6538,1,'2016-08-30 12:53:36','2016-08-30 12:53:36','The 2010 Tax Relief Act provides a two-year respite for valuable tax breaks that would have been eliminated after 2010 by sun setting tax rules.\r\n\r\n<!--more-->\r\n<p style=\"text-align: right;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2010/12/2010tra-key.pdf\" target=\"_blank\"><img class=\" alignright size-full wp-image-5904\" style=\"float: right;\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" width=\"15\" height=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2010/12/2010tra-key.pdf\" target=\"_blank\">Download PDF</a></p>\r\n<p style=\"text-align: justify;\">On December 17, 2010, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “2010 Tax Relief Act”).  Among its many provisions, the 2010 Tax Relief Act provides a two-year respite for valuable tax breaks that would have been eliminated after 2010 by sunsetting tax rules.  These include favorable income tax rates, marriage penalty relief, favorable tax rates for long-term capital gains and qualified dividends, and liberal education-related tax breaks and credits.  The discussion also explains the 2010 Tax Relief Act’s new two-year “patch” for the alternative minimum tax (AMT).  However, unless Congress acts, the favorable rules explained below will sunset on December 31, 2012 and revert to their 2001 levels.</p>\r\n<p style=\"text-align: center;\"><strong>Reduced Individual Tax Rates Extended for Two Years</strong></p>\r\n<p style=\"text-align: justify;\">For tax years 2010 through 2012, the income tax rates for individuals are 10%, 15%, 25%, 28%, 33% and 35%. In addition, the size of the 15% tax bracket for joint filers and qualified surviving spouses is 200% of the 15% tax bracket for individual filers (the so-called marriage penalty relief).</p>\r\n<p style=\"text-align: justify;\">Under pre-2010 Tax Relief Act law, for tax years beginning after Dec. 31, 2010, the rates were scheduled to rise to 15%, 28%, 31%, 36% and 39.6%, respectively; and the 15% tax bracket for joint filers and qualified surviving spouses was scheduled to drop to 167% of the 15% tax bracket for individual filers.</p>\r\n<p style=\"text-align: justify;\">To view the complete 2011 income tax tables see <a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2010/12/rp-11-12.pdf\">Rev. Proc. 2011-12</a></p>\r\n<p style=\"text-align: center;\"><strong>Increased Standard Deduction Amounts Extended for Two Years</strong></p>\r\n<p style=\"text-align: justify;\">For tax years 2010 through 2012, the basic standard deduction for a married couple filing a joint return remains at twice the basic standard deduction for an unmarried individual filing a single return.  Under pre-2010 Tax Relief Act law, for tax years beginning after Dec. 31, 2010, the standard deduction for married taxpayers filing jointly (and qualified surviving spouses) was to be only 167% of the standard deduction for single taxpayers.</p>\r\n<p style=\"text-align: justify;\">Under the 2010 Tax Relief Act, the basic standard deduction for 2011 (reflecting inflation adjustments) will be:</p>\r\n\r\n<table style=\"width: 550px; height: 135px; float: left;\" border=\"0\" width=\"500\" align=\"left\">\r\n<tbody>\r\n<tr align=\"left\">\r\n<td align=\"left\"><span style=\"font-size: 10pt;\">Joint Return or Surviving Spouse</span></td>\r\n<td align=\"left\"><span style=\"font-size: 10pt;\">$11,600 (up from $11,400 for 2010</span>)</td>\r\n</tr>\r\n<tr>\r\n<td align=\"left\"><span style=\"font-size: 10pt;\">Single (other than head of\r\nhousehold or surviving Spouse)</span></td>\r\n<td align=\"left\"><span style=\"font-size: 10pt;\">$5,800 (up from $5,700 for 2010</span>)</td>\r\n</tr>\r\n<tr>\r\n<td align=\"left\"><span style=\"font-size: 10pt;\">Head of Household</span></td>\r\n<td align=\"left\"><span style=\"font-size: 10pt;\">$8,500 (up from $8,400 for 2010</span></td>\r\n</tr>\r\n<tr>\r\n<td align=\"left\"><span style=\"font-size: 10pt;\">Married filing seperate returns</span></td>\r\n<td align=\"left\"><span style=\"font-size: 10pt;\">$5,800 (up from $5,700 for 2010</span></td>\r\n</tr>\r\n</tbody>\r\n</table>\r\n&nbsp;\r\n<p style=\"text-align: justify;\">For 2011, the additional standard deduction for married taxpayers 65 or over or blind will be $1,150 (up from $1,100 for 2010). For a single taxpayer or head of household who is 65 or over or blind the additional standard deduction for 2011 will be $1,450 (up from $1,400 for 2010).</p>\r\n<p style=\"text-align: center;\"><strong>3% / 80% Limitation Eliminated on Itemized Deductions for 2011 and 2012</strong></p>\r\n<p style=\"text-align: justify;\">Under the 2010 Tax Relief Act, the itemized deductions of higher-income taxpayers remain unlimited by the taxpayer’s adjusted gross income (“AGI”) through 2012, although separate limitations (floors) may apply to the particular deduction.</p>\r\n<p style=\"text-align: justify;\">Under pre-2010 Tax Relief Act law, for tax years beginning after Dec. 31, 2010, the total amount of itemized deductions was to be reduced (the “Pease limitation”) by 3% of the amount by which the taxpayer’s AGI exceeds a threshold amount ($169,550 for 2011), with the reduction not to exceed 80% of the otherwise allowable itemized deductions.</p>\r\n<p style=\"text-align: center;\"><strong>No Phase-Out of Personal Exemptions for 2011 and 2012</strong></p>\r\n<p style=\"text-align: justify;\">Under the 2010 Tax Relief Act, a high-income taxpayer’s personal exemptions are not phased out for 2011 and 2012 when AGI exceeds the inflation-adjusted threshold.</p>\r\n<p style=\"text-align: justify;\">Under pre-2010 Tax Relief Act law, for tax years beginning after Dec. 31, 2010, the total amount of personal exemptions (estimated to be $3,700 in 2011) that could be claimed by a taxpayer was to be reduced (personal exemption phaseout (PEP)) by 2% for each $2,500 (or portion thereof) by which the taxpayer’s AGI exceeds the applicable threshold (in 2011, $169,550 for unmarried individuals; $254,350 for married couples filing joint returns; $211,950 for heads of household). The phase-out rate was to be 2% for each $1,250 for married taxpayers filing separate returns.</p>\r\n<p style=\"text-align: center;\"><strong>Reduced Capital Gains and Qualified Dividends Rate Extended for Two Years</strong><em> </em></p>\r\n<p style=\"text-align: justify;\"><em>Capital gain</em>.  For tax years 2010 through 2012, the maximum rate of tax on the adjusted net capital gain of an individual is 15% for both regular tax and AMT purposes.  If the adjusted net capital gain would otherwise be taxed at a rate below 25% if it were ordinary income, it is taxed at a 0% rate.  That part of net capital gain attributable to unrecaptured section 1250 gain (i.e., gain attributable to real estate depreciation) is taxed at a maximum rate of 25%.  Net capital gain attributable to collectibles gain and section 1202 gain is taxed at a maximum rate of 28%.</p>\r\n<p style=\"text-align: justify;\">Under pre-Act law, for tax years beginning after Dec. 31, 2010, the maximum rate of tax on an individual’s adjusted net capital gain was to be 20%.  Any adjusted net capital gain which otherwise would be taxed at the 15% rate was to be taxed at a 10% rate.  In addition, any gain from the sale or exchange of property held more than five years that would otherwise have been taxed at the 10% capital gain rate would be taxed at an 8% rate.  Any gain from the sale or exchange of property acquired after 2000 and held for more than five years (that would otherwise have been taxed at a 20% rate) was to be taxed at an 18% rate.  Net capital gain attributable to unrecaptured section 1250 gain was to continue to be taxed a maximum rate of 25%.  Net capital gain attributable to collectibles gain and section 1202 gain was to continue to be taxed at a maximum rate of 28%.</p>\r\n<p style=\"text-align: justify;\"><em>Qualified dividend income</em>.  For tax years 2010 through 2012, for both the regular tax and AMT purposes, an individual’s qualified dividend income is taxed at the same rates that apply to net capital gain.  Thus, an individual’s qualified dividend income is taxed at a 15% and (for qualified dividend income, which otherwise would be taxed at a 10% or 15% rate if the special rates did not apply) at a 0% rate.</p>\r\n<p style=\"text-align: justify;\">Under pre-Act law, for tax years beginning after Dec. 31, 2010, dividends received by an individual were to be taxed at ordinary income tax rates.</p>\r\n<p style=\"text-align: center;\"><strong>Temporary Exclusion of 100% of Gain on Certain Small Business Stock</strong></p>\r\n<p style=\"text-align: justify;\">For 2010 and 2011, the 2010 Tax Relief Act allows a taxpayer to exclude all of the gain on the disposition of qualified small business stock acquired after September 27, 2010 and before January 1, 2011, and allows a taxpayer to exclude 75% of the gain from the disposition of such stock if it was acquired after February 17, 2009 and before September 28, 2010.</p>\r\n<p style=\"text-align: justify;\">Under pre-2010 Tax Relief Act law, the exclusion was to be limited to 50% of the gain on the disposition of stock acquired after December 31, 2010.</p>\r\n<p style=\"text-align: center;\"><strong>Liberalized Rules for Qualified Conservation ContributionsReinstated and Extended</strong></p>\r\n<p style=\"text-align: justify;\">The 2010 Tax Relief Act retroactively reinstates and extends, for 2010 and 2011, the 50% and 100% limitations on qualified conservation contributions of appreciated real property.  Accordingly, a taxpayer’s aggregate qualified conservation contributions (i.e., contributions of appreciated real property for conservation purposes) are allowed up to the excess of 50% of the taxpayer\'s contribution base over the amount of all other allowable charitable contributions (100% for qualified farmers and ranchers), with a 15-year carryover of such contributions in excess of the applicable limitation.</p>\r\n<p style=\"text-align: justify;\">Under pre-2010 Tax Relief Act law, these rules did not apply to any contribution made in a tax year beginning after December 31, 2009, and contributions made thereafter were to be subject to the otherwise applicable 30% limit for capital gain property (50% limit for qualified farmers and ranchers).</p>\r\n<p style=\"text-align: center;\"><strong>Expanded Child Tax Credit Extended for Two Years</strong></p>\r\n<p style=\"text-align: justify;\">For tax years beginning in 2010 and running through 2012, individuals may claim a maximum $1,000 child tax credit under IRC § 24 for each qualifying child under age 17 that the taxpayer can claim as a dependent.  The amount of the allowable credit is reduced (not below zero) by $50 for each $1,000 (or fraction thereof) of modified AGI above: $110,000 for joint filers, $75,000 for unmarried individuals, and $55,000 for married taxpayers filing separately.  The child tax credit can offset both the regular tax and AMT.  The child tax credit is refundable, but only to the extent of the greater of: (1) 15% of taxable earned income above $3,000 (as adjusted for inflation), or (2) for a taxpayer with three or more qualifying children, the excess of his social security taxes for the tax year over his earned income credit for the year.</p>\r\n<p style=\"text-align: justify;\">Under pre-2010 Tax Relief Act law, for tax years beginning after Dec. 31, 2010, the maximum credit was to drop from $1,000 to $500, and the credit was not to be allowed against AMT.  In addition, more restrictive rules were to apply to refundable child credit.</p>\r\n<p style=\"text-align: center;\"><strong>Expanded Adoption Credit and Employer-Provided Adoption Assistance</strong></p>\r\n<p style=\"text-align: justify;\">There is a maximum adoption credit of $13,170 for 2010 ($13,360 for 2011) per eligible child (both special needs and non-special needs adoptions) under IRC § 36C; and for employer-provided adoption assistance a maximum exclusion of $13,170 ($13,360 for 2011) per eligible child (both special needs and non-special needs adoptions) under IRC § 137.  These amounts are adjusted annually for inflation.  The benefit is phased out for taxpayers with modified AGI over $182,520 in 2010 ($185,210 in 2011), adjusted for inflation annually, and is fully eliminated when modified AGI reaches $222,520 in 2010 ($225,210 in 2011).</p>\r\n<p style=\"text-align: justify;\">Under the 2010 Tax Relief Act, the expanded adoption credit and exclusion from income for employer-provided adoption assistance are extended for one year, through 2012, but the changes made by the Patient Protection and Affordable Health Care Act (enacted in March of 2010) to the adoption credit for 2010 and 2011 (relating to the $1,000 increase in the maximum credit and the refundability of the credit) are not extended.  Thus, for 2012, the maximum benefit is $12,170 (indexed for inflation after 2010), and is phased out ratably for taxpayers with modified AGI between $182,520 and $222,520 (indexed for inflation after 2010).</p>\r\n<p style=\"text-align: justify;\">Under pre-2010 Tax Relief Act law, for tax years beginning after December 31, 2011, the adoption credit and employer-provided adoption assistance exclusion were to be available only to special needs adoptions and the maximum credit and exclusion was to be reduced by more than half to $6,000.  The phase-out range was to be reduced to between $75,000 and $115,000.  The maximum credit, exclusion, and phase-out range were not indexed for inflation.</p>\r\n<p style=\"text-align: center;\"><strong>Expanded Employer-Provided Child Care Tax Credit</strong></p>\r\n<p style=\"text-align: justify;\">Under IRC § 45F, a tax credit for employer-provided child care applies for tax years 2010 through 2012.  It is equal to the sum of the following expenses (up to $150,000) for the tax year:</p>\r\n<p style=\"text-align: justify; padding-left: 60px;\">1) 25% of qualified child care expenses, which are expenses to buy, build, rehabilitate, or expand property to be used as part of an employer’s qualified child care facility, for which a deduction for depreciation (or amortization) is allowable, and which is not part of the taxpayer’s (or an employee’s) principal residence. Qualifying child care expenses also include operating costs of a taxpayer’s qualified child care facility (including costs related to employee training, scholarship programs, and to providing increased compensation to employees with higher levels of child care training), and amounts paid under a contract with a qualified child care facility to provide child care services to the taxpayer’s employees; and</p>\r\n<p style=\"text-align: justify; padding-left: 60px;\">2) 10% of qualified child care resource and referral expenses (i.e., amounts paid or incurred under a contract to provide child care resource and referral services to an employee).</p>\r\n<p style=\"text-align: justify;\">Under pre-2010 Tax Relief Act law, for tax years beginning after December 31, 2010, this child care credit was no longer going to apply.</p>\r\n<p style=\"text-align: center;\"><strong>Expanded Dependent Care Tax Credit Extended Two Years</strong></p>\r\n<p style=\"text-align: justify;\">A dependent care tax credit may be claimed in 2010, 2011 and 2012 by an individual who has one or more qualifying individuals and incurs employment-related expenses enabling him or her to be gainfully employed.  For 2010, the maximum dependent care tax credit is $1,050 (35% of up to $3,000 of eligible expenses) if there is one qualifying individual, and $2,100 (35% of up to $6,000 of eligible expenses) if there are two or more qualifying individuals.  The 35% credit rate is reduced (but not below 20%) by one percentage point for each $2,000 (or fraction thereof) of AGI above $15,000.  Thus, the credit percentage is reduced to 20% for taxpayers with AGI over $43,000.</p>\r\n<p style=\"text-align: justify;\">Under pre-2010 Tax Relief Act-law, for tax years beginning after December 31, 2010, the level of the credit was to be reduced: the maximum credit percentage was to drop from 35% to 30% and the AGI-based percentage reduction was to begin at $10,000 instead of $15,000.  The creditable expense was to drop from $3,000 to $2,400 (for one qualifying individual) and from $6,000 to $4,800 (for two or more).</p>\r\n<p style=\"text-align: center;\"><span style=\"font-size: 12pt;\"> </span><strong>Nontaxable IRA Transfers to Eligible Charities Reinstated and Extended</strong></p>\r\n<p style=\"text-align: justify;\">The 2010 Tax Relief Act retroactively reinstates and extends the charitable IRA distribution provisions of IRC § 408 for tax years 2010 and 2011.  Under this provision, taxpayers who are age 70 1/2 or older can make tax-free distributions to a charity from an IRA of up to $100,000.  These distributions are not subject to the charitable contribution percentage limits since they are neither included in gross income nor claimed as a deduction on the taxpayer’s return.  In addition, a taxpayer can elect to treat a charitable IRA distribution made in January of 2011 as if it were made on December 31, 2010, allowing the distribution to (1) count against the 2010 $100,000 limitation, and (2) be used to satisfy the taxpayer’s minimum distribution requirement for 2010.</p>\r\n<p style=\"text-align: center;\"><strong>Numerous Education Incentives Extended Two Years</strong></p>\r\n<p style=\"text-align: justify;\"><em>American opportunity tax credit</em>.  For tax years 2010 through 2012, individuals may claim an American opportunity tax credit (“AOTC”) under IRC § 25A equal to 100% of up to $2,000 of qualified higher-education tuition and related expenses (including course materials), plus 25% of the next $2,000 of expenses paid for education furnished to an eligible student in an academic period for a maximum credit of $2,500 a year for each eligible student.  For 2010, the availability of the credit phases out ratably for taxpayers with modified AGI of $80,000 to $90,000 ($160,000 to $180,000 for joint filers).  The AOTC (which expanded the credit available under the Hope Scholarship Credit) is allowed for each of the first four years of the student’s post-secondary education in a degree or certificate program.  The credit can be claimed against AMT liability; and 40% of the otherwise allowable AOTC is refundable (unless the taxpayer claiming the credit is a child under age 18 or a child under age 24 who is a student providing less than one-half of his or her support, who has at least one living parent, and does not file a joint return).</p>\r\n<p style=\"text-align: justify;\">Under pre-2010 Tax Relief Act law, for tax years beginning after December 31, 2010, instead of the AOTC an individual was to be able to claim a Hope credit equal to 100% of the first $1,200 (as inflation adjusted) of qualified higher-education tuition and related expenses (not including course material), plus 50% of the next $1,200 (as inflation-adjusted) of expenses paid for education furnished to an eligible student in an academic period for a total maximum Hope credit of $1,800.  For each eligible student, the Hope credit would be allowed only for expenses paid for the first two years of the post-secondary education, and it was to phase out ratably for taxpayers with lower specified (inflation adjusted) modified AGI.</p>\r\n<p style=\"text-align: justify;\"><em>Exclusion for scholarships</em>.  For tax years 2010 through 2012, a qualified individual can exclude from income a qualified scholarship or qualified tuition reductions under IRC § 117.  These exclusions generally do not apply to any amounts received by a student as payment for teaching, research, or other services as a condition for receiving the scholarship or tuition reduction.</p>\r\n<p style=\"text-align: justify;\">Under pre-2010 Tax Relief Act law, for tax years beginning after December 31, 2010, this exception to the no payment for teaching, research, or other services rule for the National Health Service Corps (NHSC) Scholarship Program and the F. Edward Hebert Armed Forces Health Professions Scholarship and Financial Assistance Program (Armed Forces Scholarship Program) was no longer going to apply.</p>\r\n<p style=\"text-align: justify;\"><em>Employer-provided educational assistance</em>.  Under IRC § 127, for tax years 2010 through 2012, an employee may exclude educational assistance provided under an employer’s qualified educational assistance program, up to an annual maximum of $5,250.</p>\r\n<p style=\"text-align: justify;\">Under pre-2010 Tax Relief Act law, for tax years beginning after December 31, 2010, this specific exclusion for employer-provided educational assistance was no longer to apply, so that educational assistance would be excludable from gross income only if it qualifies as a working condition fringe benefit (i.e., the expenses would have been deductible as business expenses if paid by the employee; such expense must be related to the employee’s current job).</p>\r\n<p style=\"text-align: justify;\"><em>Above-the-line student loan interest deduction</em>.  For tax years 2010 through 2012, individuals can deduct a maximum of $2,500 annually for interest paid on qualified higher education loans under IRC § 221.  For 2010, the deduction phases out ratably for taxpayers with modified AGI between $60,000 and $75,000 ($120,000 and $150,000 for joint returns).</p>\r\n<p style=\"text-align: justify;\">Under pre-2010 Tax Relief Act law, for tax years beginning after December 31, 2010, the phaseout ranges were to revert to a much lower base level of $40,000 to $55,000 ($60,000 to $75,000 for joint returns), adjusted for inflation occurring since 2002.  In addition, the interest was not to be deductible beyond the first 60 months that interest payments are required.</p>\r\n<p style=\"text-align: center;\"><strong>Above-the-Line Deduction for Educator Expenses Reinstated and Extended</strong></p>\r\n<p style=\"text-align: justify;\">The 2010 Tax Relief Act retroactively extends the educator expense deduction for two years so that it applies to expenses paid and incurred in tax years 2010 and 2011.  Accordingly, eligible elementary and secondary school teachers may claim an above-the-line deduction for up to $250 per year of expenses paid or incurred for books, certain supplies, computer and other equipment, and supplementary materials used in the classroom.</p>\r\n<p style=\"text-align: justify;\">Under pre-2010 Tax Relief Act law, this minimal educator expense deduction did not apply for tax years beginning after December 31, 2009.</p>\r\n<p style=\"text-align: center;\"><strong>Above-the-Line Deduction for Higher Education Expenses Reinstated and Extended</strong></p>\r\n<p style=\"text-align: justify;\">The 2010 Tax Relief Act retroactively reinstates and extends the qualified tuition deduction for 2010 and 2011.  Accordingly, a taxpayer may claim an above-the-line deduction for qualified tuition and related expenses for higher education paid by that taxpayer during the tax year, subject to applicable AGI and dollar limits.</p>\r\n<p style=\"text-align: justify;\">Under pre-2010 Tax Relief Act law, this deduction was not available for tax years beginning after December 31, 2009.</p>\r\n<p style=\"text-align: center;\"><strong>State and Local Sales Tax Deduction Reinstated and Extended</strong></p>\r\n<p style=\"text-align: justify;\">The 2010 Tax Relief Act retroactively extends for tax years 2010 and 2011, the ability for taxpayers to deduct state and local general sales and use taxes instead of state and local income taxes.</p>\r\n<p style=\"text-align: justify;\">Under pre-2010 Tax Relief Act law, this deduction was unavailable for tax years beginning after December 31, 2009.</p>\r\n<p style=\"text-align: center;\"><strong>Treatment of Mortgage Insurance Premiums as\r\nDeductible Qualified Residence Interest Extended</strong></p>\r\n<p style=\"text-align: justify;\">Mortgage insurance premiums paid or accrued by a taxpayer in connection with acquisition indebtedness with respect to the taxpayer’s qualified residence are treated as deductible qualified residence interest, subject to a phase-out based on the taxpayer’s AGI.  The 2010 Tax Relief Act retroactively reinstates and extends this provision for tax years 2010 and 2011.</p>\r\n<p style=\"text-align: justify;\">Under pre-2010 Tax Relief Act law, this provision only applied to premiums paid or accrued before January 1, 2011.</p>\r\n<p style=\"text-align: center;\"><strong>Boosted AMT Exemption Amounts for 2010 and 2011</strong></p>\r\n<p style=\"text-align: justify;\">The alternative minimum tax (“AMT”) is the excess, if any, of the tentative minimum tax for the year over the regular tax for the year.  In arriving at the tentative minimum tax, an individual begins with taxable income, modifies it with various adjustments and preferences, and then subtracts an exemption amount (which phases out at higher income levels).  The result is alternative minimum taxable income (“AMTI”), which is subject to an AMT rate of 26% or 28%.</p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 12pt;\"> </span></p>\r\n<p style=\"text-align: center;\"><strong>AMT Exemption Amount Comparison Chart</strong></p>\r\n\r\n<table style=\"float: left;\" border=\"0\" width=\"539\">\r\n<tbody>\r\n<tr>\r\n<td style=\"border: 1px solid #ffffff;\"><span style=\"font-size: 10pt; font-family: arial,helvetica,sans-serif;\"> </span></td>\r\n<td style=\"border: 1px solid #ffffff;\"><span style=\"font-size: 10pt; font-family: arial,helvetica,sans-serif;\">Pre-2010\r\nTax Relief\r\nAct Law</span></td>\r\n<td style=\"border: 1px solid #ffffff;\"><span style=\"font-size: 10pt; font-family: arial,helvetica,sans-serif;\">2010\r\nTax Relief\r\nAct 2010</span></td>\r\n<td style=\"border: 1px solid #ffffff;\"><span style=\"font-size: 10pt; font-family: arial,helvetica,sans-serif;\">2010\r\nTax Relief\r\nAct 2011</span></td>\r\n</tr>\r\n<tr>\r\n<td style=\"border: 1px solid #ffffff;\"><span style=\"font-size: 10pt; font-family: arial,helvetica,sans-serif;\">Unmarried Individuals</span></td>\r\n<td style=\"border: 1px solid #ffffff;\"><span style=\"font-size: 10pt;\">$33,750</span></td>\r\n<td style=\"border: 1px solid #ffffff;\"><span style=\"font-size: 10pt;\">$47,450</span></td>\r\n<td style=\"border: 1px solid #ffffff;\"><span style=\"font-size: 10pt;\">$48,450</span></td>\r\n</tr>\r\n<tr>\r\n<td style=\"border: 1px solid #ffffff;\"><span style=\"font-size: 10pt;\">Married Couples Filing Jointly\r\nand Surviving Spouses</span></td>\r\n<td style=\"border: 1px solid #ffffff;\"><span style=\"font-size: 10pt;\">$45,000</span></td>\r\n<td style=\"border: 1px solid #ffffff;\"><span style=\"font-size: 10pt;\">$72,450</span></td>\r\n<td style=\"border: 1px solid #ffffff;\"><span style=\"font-size: 10pt;\">$74,450</span></td>\r\n</tr>\r\n<tr>\r\n<td style=\"border: 1px solid #ffffff;\"><span style=\"font-size: 10pt;\">Married Individuals Filing\r\nSeparately</span></td>\r\n<td style=\"border: 1px solid #ffffff;\"><span style=\"font-size: 10pt;\">$22,500</span></td>\r\n<td style=\"border: 1px solid #ffffff;\"><span style=\"font-size: 10pt;\">$36,225</span></td>\r\n<td style=\"border: 1px solid #ffffff;\"><span style=\"font-size: 10pt;\">$37,22</span></td>\r\n</tr>\r\n</tbody>\r\n</table>\r\n<p style=\"text-align: justify;\"></p>\r\n<p style=\"text-align: justify;\">Absent future legislation (e.g., another AMT “patch”), the reduction in the AMT exemption amounts that, under pre-2010 Tax Relief Act law, was scheduled to apply to tax years beginning after 2009, will apply to tax years beginning after 2011.  This means that in 2012, without further “patches” or broader changes to the AMT generally, the AMT exemption amounts will drop to: $33,750 for unmarried individuals who are not surviving spouses; $45,000 for married couples filing jointly and surviving spouses; and $22,500 for married individuals filing separately.</p>\r\n<p style=\"text-align: center;\"><strong>Personal Nonrefundable Credits Offset AMT and Regular Tax for 2010 and 2011</strong></p>\r\n<p style=\"text-align: justify;\">For tax years beginning before 2010, a number of personal credits were nonrefundable (i.e., the dependent care credit, the credit for the elderly and disabled, the child credit, the credit for interest on certain home mortgages, the Hope Scholarship and Lifetime Learning credits, the credit for savers, the credit for certain non-business energy property, the credit for residential energy efficient property, the credit for certain plug-in electric vehicles, the credit for alternative motor vehicles, the credit for new qualified plug-in electric drive motor vehicles, and the D.C. first-time homebuyer credit) and allowed only to offset a taxpayer’s regular income tax liability, not the AMT.</p>\r\n<p style=\"text-align: justify;\">Under the 2010 Tax Relief Act, for tax years 2010 and 2011, an individual may offset his or her entire regular tax liability and AMT liability by the nonrefundable personal credits.</p>\r\n<p style=\"text-align: justify;\">The rule allowing nonrefundable personal credits to reduce the AMT (as well as regular tax) benefits middle income individuals who: (a) have low taxable income (and thus a low regular tax), e.g., because of a large number of personal exemptions; (b) are subject to the AMT because personal exemptions (as well as the standard deduction and certain itemized deductions) generally are not allowed in computing the AMT; and (c) have substantial nonrefundable personal credits.</p>','2010 Tax Relief Act: Key Individual Tax Extenders and Breaks','','inherit','closed','closed','','5909-revision-v1','','','2016-08-30 12:53:36','2016-08-30 12:53:36','',5909,'http://www.racklaw.com/rack3/5909-revision-v1/',0,'revision','',0),(6539,1,'2016-08-30 12:55:26','2016-08-30 12:55:26','<p style=\"text-align: justify;\">The Court of Federal Claims has held that the majority owner, CEO, and principal financier of a publishing corporation was responsible for its nonpayment of payroll tax, and willfully failed to pay over the funds to the government.  Although he did not exercise day-to-day control over the entity, he clearly had the capacity to do so.  He also drew on company funds in an attempt to recoup cash he advanced to the entity during the same time he knew payroll taxes were unpaid.</p>  <!--more-->  <p style=\"text-align: right;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/09/2011.9.23-responsible-person-penalty.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/09/2011.9.23-responsible-person-penalty.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" height=\"15\" width=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\"> <br /></a></p> <p> </p> <p><strong>Jenkins v. U.S., 108 AFTR 2d 2011-_____, 09/15/2011</strong></p> <p style=\"text-align: justify;\"><strong>Trust Fund Recovery Penalty. </strong> Code Sec. 6672 imposes the trust fund recovery penalty on any person who: (1) is responsible for collecting, accounting for, and paying over payroll taxes; and (2) willfully fails to perform this responsibility.  The amount of the penalty is equal to the amount of the tax that was not collected and paid.  The penalty is imposed on a “responsible person,” i.e., anyone in a business entity who has the duty to collect, account for, or pay over the tax.  In determining whether there is “willfulness,” the courts have focused on whether a taxpayer had knowledge about the non-payment of the payroll taxes, or showed reckless disregard with respect to whether the payments were being made.</p> <p style=\"text-align: justify;\"><strong>Facts.  </strong>In 1992, Timothy Jenkins and Gary Puckrein founded Dialogue Diaspora, Inc. (“DDI”), a corporation which published American Visions magazine and promoted African-American culture.  Jenkins was a majority stockholder, CEO, CFO, and publisher.  He also was a major financial backer of DDI.  He rented space to DDI, advanced money to it under a loan agreement secured by a factor\'s lien, and made a series of advances to DDI or American Visions totaling over $250,000.  Puckrein was DDI President and editor of American Visions andwas primarily responsible for the day-to-day management of the business from 1992 to 1994.</p> <p style=\"text-align: justify;\">Early in 1995, Jenkins and Puckrein had a major falling out, and in April of that year, Jenkins learned that DDI had been experiencing employment tax problems with the IRS and had entered into an installment agreement for the payment of those taxes.  DDI did not stay compliant with the installment agreement and, in June of 1995 after having learned Puckrein was secretly operating a competing company, Jenkins changed the locks on DDI\'s premises, called a board meeting, and ousted Puckrein.  On July 5, 1995, Jenkins wrote a check on DDI\'s bank account for $16,668 made payable to himself and his wife (the last of 13 such checks), cashed the check and deposited the proceeds into one of his personal bank accounts.  Jenkins said that he wrote this check to himself based on the loan/factoring agreement and admitted that, at the time he wrote it, he knew about the unpaid IRS liability.</p> <p style=\"text-align: justify;\">After taking various procedural steps, the IRS collected $264,097.56 from Jenkins by levying on his individual retirement account and Social Security benefits.  Jenkins then filed a claim for refund seeking in an attempt to recover the levied assets.  The IRS disallowed Jenkins’ refund claim and, in turn, Jenkins filed a suit for refund in the Court of Federal Claims.</p> <p style=\"text-align: justify;\"><strong>Court of Federal Claims Finds in Favor of the IRS.</strong>  Ruling in favor of the IRS, the Court held that Jenkins was a responsible person who willfully failed to collect, account for, or remit the withholding taxes.  Jenkins held various positions of significant authority within DDI, sat on the company\'s board and, together with his wife, owned at least 50% of the company\'s stock.  In addition, he had the ability to sign checks on DDI\'s primary bank account and the ability to withdraw funds from those accounts. Because of his stake in the corporation and his role as a director, Jenkins also had the ability to precipitate reorganizations of the corporation\'s leadership.  Moreover, he held an additional entrepreneurial stake in DDI via his role in financing the company and leasing the building that was used as its principal place of business.  Owing to his multi-faceted role within the corporation and his role as a financier of first resort, the Court held that Jenkins plainly had the leverage and authority to “avoid the default” and demand that the corporation not squander the taxes it withheld from its employees.  Although he claimed not to have exercised day-to-day decision making authority regarding DDI\'s tax obligations, Jenkins clearly possessed the effective power to do so.  The Court pointed out that it was well-accepted that a person need not actually perform an entity\'s tax functions (withhold and pay over payroll tax deposits) in order to be a responsible person under Code Sec. 6672.</p> <p style=\"text-align: justify;\">The Court also held that Jenkins willfully failed to collect, account for, and remit the withholding taxes owed by DDI.  There was little doubt that Jenkins had an earnest desire for DDI to pay the past due and current taxes it owed the IRS, but only if the payment did not adversely impact his own ability to recoup moneys owed to him by DDI.  It was in pursuit of the latter goal, and certainly not the former, that Jenkins wrote himself a check for $16,668.45 (the last of at least 13 checks) in an attempt to recover his investment in DDI.  The Court determined that every time he signed one of these checks, he should have wondered, in light of DDI\'s history of delinquency, its modest size, and the lack of improvement in its bottom line, whether history was repeating itself and he was signing over to creditors (and himself) money that belonged to the United States.</p>','Responsible Person Penalty Upheld Against Majority Owner and Financier of Company','','inherit','closed','closed','','6158-autosave-v1','','','2016-08-30 12:55:26','2016-08-30 12:55:26','',6158,'http://www.racklaw.com/rack3/6158-autosave-v1/',0,'revision','',0),(6540,1,'2016-08-30 12:55:36','2016-08-30 12:55:36','','top-news-02','','inherit','open','closed','','top-news-02','','','2016-08-30 12:55:36','2016-08-30 12:55:36','',6158,'http://www.racklaw.com/rack3/wp-content/uploads/2016/02/top-news-02.png',0,'attachment','image/png',0),(6541,1,'2016-08-30 12:55:40','2016-08-30 12:55:40','<p style=\"text-align: justify;\">The Court of Federal Claims has held that the majority owner, CEO, and principal financier of a publishing corporation was responsible for its nonpayment of payroll tax, and willfully failed to pay over the funds to the government.  Although he did not exercise day-to-day control over the entity, he clearly had the capacity to do so.  He also drew on company funds in an attempt to recoup cash he advanced to the entity during the same time he knew payroll taxes were unpaid.</p>\r\n<!--more-->\r\n<p style=\"text-align: right;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/09/2011.9.23-responsible-person-penalty.pdf\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/09/2011.9.23-responsible-person-penalty.pdf\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" width=\"15\" height=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\">\r\n</a></p>\r\n&nbsp;\r\n\r\n<strong>Jenkins v. U.S., 108 AFTR 2d 2011-_____, 09/15/2011</strong>\r\n<p style=\"text-align: justify;\"><strong>Trust Fund Recovery Penalty. </strong> Code Sec. 6672 imposes the trust fund recovery penalty on any person who: (1) is responsible for collecting, accounting for, and paying over payroll taxes; and (2) willfully fails to perform this responsibility.  The amount of the penalty is equal to the amount of the tax that was not collected and paid.  The penalty is imposed on a “responsible person,” i.e., anyone in a business entity who has the duty to collect, account for, or pay over the tax.  In determining whether there is “willfulness,” the courts have focused on whether a taxpayer had knowledge about the non-payment of the payroll taxes, or showed reckless disregard with respect to whether the payments were being made.</p>\r\n<p style=\"text-align: justify;\"><strong>Facts.  </strong>In 1992, Timothy Jenkins and Gary Puckrein founded Dialogue Diaspora, Inc. (“DDI”), a corporation which published American Visions magazine and promoted African-American culture.  Jenkins was a majority stockholder, CEO, CFO, and publisher.  He also was a major financial backer of DDI.  He rented space to DDI, advanced money to it under a loan agreement secured by a factor\'s lien, and made a series of advances to DDI or American Visions totaling over $250,000.  Puckrein was DDI President and editor of American Visions andwas primarily responsible for the day-to-day management of the business from 1992 to 1994.</p>\r\n<p style=\"text-align: justify;\">Early in 1995, Jenkins and Puckrein had a major falling out, and in April of that year, Jenkins learned that DDI had been experiencing employment tax problems with the IRS and had entered into an installment agreement for the payment of those taxes.  DDI did not stay compliant with the installment agreement and, in June of 1995 after having learned Puckrein was secretly operating a competing company, Jenkins changed the locks on DDI\'s premises, called a board meeting, and ousted Puckrein.  On July 5, 1995, Jenkins wrote a check on DDI\'s bank account for $16,668 made payable to himself and his wife (the last of 13 such checks), cashed the check and deposited the proceeds into one of his personal bank accounts.  Jenkins said that he wrote this check to himself based on the loan/factoring agreement and admitted that, at the time he wrote it, he knew about the unpaid IRS liability.</p>\r\n<p style=\"text-align: justify;\">After taking various procedural steps, the IRS collected $264,097.56 from Jenkins by levying on his individual retirement account and Social Security benefits.  Jenkins then filed a claim for refund seeking in an attempt to recover the levied assets.  The IRS disallowed Jenkins’ refund claim and, in turn, Jenkins filed a suit for refund in the Court of Federal Claims.</p>\r\n<p style=\"text-align: justify;\"><strong>Court of Federal Claims Finds in Favor of the IRS.</strong>  Ruling in favor of the IRS, the Court held that Jenkins was a responsible person who willfully failed to collect, account for, or remit the withholding taxes.  Jenkins held various positions of significant authority within DDI, sat on the company\'s board and, together with his wife, owned at least 50% of the company\'s stock.  In addition, he had the ability to sign checks on DDI\'s primary bank account and the ability to withdraw funds from those accounts. Because of his stake in the corporation and his role as a director, Jenkins also had the ability to precipitate reorganizations of the corporation\'s leadership.  Moreover, he held an additional entrepreneurial stake in DDI via his role in financing the company and leasing the building that was used as its principal place of business.  Owing to his multi-faceted role within the corporation and his role as a financier of first resort, the Court held that Jenkins plainly had the leverage and authority to “avoid the default” and demand that the corporation not squander the taxes it withheld from its employees.  Although he claimed not to have exercised day-to-day decision making authority regarding DDI\'s tax obligations, Jenkins clearly possessed the effective power to do so.  The Court pointed out that it was well-accepted that a person need not actually perform an entity\'s tax functions (withhold and pay over payroll tax deposits) in order to be a responsible person under Code Sec. 6672.</p>\r\n<p style=\"text-align: justify;\">The Court also held that Jenkins willfully failed to collect, account for, and remit the withholding taxes owed by DDI.  There was little doubt that Jenkins had an earnest desire for DDI to pay the past due and current taxes it owed the IRS, but only if the payment did not adversely impact his own ability to recoup moneys owed to him by DDI.  It was in pursuit of the latter goal, and certainly not the former, that Jenkins wrote himself a check for $16,668.45 (the last of at least 13 checks) in an attempt to recover his investment in DDI.  The Court determined that every time he signed one of these checks, he should have wondered, in light of DDI\'s history of delinquency, its modest size, and the lack of improvement in its bottom line, whether history was repeating itself and he was signing over to creditors (and himself) money that belonged to the United States.</p>','Responsible Person Penalty Upheld Against Majority Owner and Financier of Company','','inherit','closed','closed','','6158-revision-v1','','','2016-08-30 12:55:40','2016-08-30 12:55:40','',6158,'http://www.racklaw.com/rack3/6158-revision-v1/',0,'revision','',0),(6542,1,'2016-08-30 12:55:55','2016-08-30 12:55:55','','top-news-03','','inherit','open','closed','','top-news-03','','','2016-08-30 12:55:55','2016-08-30 12:55:55','',6145,'http://www.racklaw.com/rack3/wp-content/uploads/2016/02/top-news-03.png',0,'attachment','image/png',0),(6543,1,'2016-08-30 12:55:59','2016-08-30 12:55:59','Rev. Rul. 2011-22, 2011-41 IRB\r\n\r\n<!--more-->\r\n<p style=\"text-align: right;\"><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/09/2011.9.22-applicable-federal-rates.pdf\" target=\"_blank\">Download PDF</a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/09/2011.9.22-applicable-federal-rates.pdf\" target=\"_blank\"><img class=\" size-full wp-image-5904\" src=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/pdf-icon.png\" alt=\"pdf-icon\" width=\"15\" height=\"15\" /></a><a href=\"http://www.racklaw.com/new-site/wp-content/uploads/2011/01/2011taxpayer.pdf\">\r\n</a></p>\r\n<p style=\"text-align: center;\"><span style=\"color: #000000;\"><strong><span style=\"font-size: 12pt;\"> </span></strong></span></p>\r\n\r\n<table style=\"margin-left: auto; margin-right: auto;\" border=\"3\" width=\"483\" cellpadding=\"3\" align=\"center\"><caption><span style=\"color: #000000;\"><strong>Table 1 (Section 1274(d) Rate) Period for Compounding\r\n</strong></span>\r\n\r\n</caption>\r\n<tbody>\r\n<tr bgcolor=\"#7093db\">\r\n<th></th>\r\n<th style=\"text-align: center;\"><span style=\"color: #000000;\">Annual</span></th>\r\n<th style=\"text-align: center;\"><span style=\"color: #000000;\">Semiannual</span></th>\r\n<th style=\"text-align: center;\"><span style=\"color: #000000;\">Quarterly</span></th>\r\n<th style=\"text-align: center;\"><span style=\"color: #000000;\">Month</span></th>\r\n</tr>\r\n<tr>\r\n<td style=\"text-align: center;\" colspan=\"5\"><span style=\"color: #000000;\">Short-Term</span></td>\r\n</tr>\r\n<tr bgcolor=\"#7093db\">\r\n<td><strong><span style=\"color: #333333;\">AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.16%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.16%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.16%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.16%</span></td>\r\n</tr>\r\n<tr>\r\n<td><strong><span style=\"color: #333333;\">110% AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.18%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.18%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.18%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.18%</span></td>\r\n</tr>\r\n<tr bgcolor=\"#7093db\">\r\n<td><strong><span style=\"color: #333333;\">120% AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.19%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.19%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.19%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.19%</span></td>\r\n</tr>\r\n<tr>\r\n<td><strong><span style=\"color: #333333;\">130% AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.21%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.21%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.21%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.21%</span></td>\r\n</tr>\r\n<tr bgcolor=\"#7093db\">\r\n<td style=\"text-align: center;\" colspan=\"5\"><span style=\"color: #000000;\">Mid-Term</span></td>\r\n</tr>\r\n<tr>\r\n<td><strong><span style=\"color: #333333;\">AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.19%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.19%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.19%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.19%</span></td>\r\n</tr>\r\n<tr bgcolor=\"#7093db\">\r\n<td><strong><span style=\"color: #333333;\">110% AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.31%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.31%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.31%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.31%</span></td>\r\n</tr>\r\n<tr>\r\n<td><strong><span style=\"color: #333333;\">120% AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.44%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.43%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.43%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.43%</span></td>\r\n</tr>\r\n<tr bgcolor=\"#7093db\">\r\n<td><strong><span style=\"color: #333333;\">130% AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.56%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.55%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.55%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.55%</span></td>\r\n</tr>\r\n<tr>\r\n<td><strong><span style=\"color: #333333;\">150% AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.80%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.79%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.79%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.79%</span></td>\r\n</tr>\r\n<tr bgcolor=\"#7093db\">\r\n<td><strong><span style=\"color: #333333;\">175% AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">2.09%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">2.08%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">2.07%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">2.07%</span></td>\r\n</tr>\r\n<tr>\r\n<td style=\"text-align: center;\" colspan=\"5\"><span style=\"color: #000000;\">Long-Term</span></td>\r\n</tr>\r\n<tr bgcolor=\"#7093db\">\r\n<td><strong>AFR</strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">2.95%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">2.93%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">2.92%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">2.91%</span></td>\r\n</tr>\r\n<tr>\r\n<td><strong><span style=\"color: #333333;\">110% AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.25%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.22%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.21%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.20%</span></td>\r\n</tr>\r\n<tr bgcolor=\"#7093db\">\r\n<td><strong><span style=\"color: #333333;\">120% AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.55%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.52%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.50%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.49%</span></td>\r\n</tr>\r\n<tr>\r\n<td><strong><span style=\"color: #333333;\">130% AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.85%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.81%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.79%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.78%</span></td>\r\n</tr>\r\n</tbody>\r\n</table>\r\n<table style=\"width: 475px; height: 246px; margin-left: auto; margin-right: auto;\" border=\"3\" width=\"466\" cellpadding=\"3\"><caption><span style=\"color: #000000;\"><strong>Table 2 (Section 1288(b) Rate) Period for Compounding</strong></span>\r\n\r\n</caption>\r\n<tbody>\r\n<tr bgcolor=\"#7093db\">\r\n<th></th>\r\n<th><span style=\"color: #000000;\">Annual</span></th>\r\n<th><span style=\"color: #000000;\">Semiannual</span></th>\r\n<th><span style=\"color: #000000;\">Quarterly</span></th>\r\n<th><span style=\"color: #000000;\">Month</span></th>\r\n</tr>\r\n<tr>\r\n<td><strong><span style=\"color: #333333;\">Short-term </span></strong>\r\n<strong><span style=\"color: #333333;\">adjusted AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.32%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.32%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.32%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">.32%</span></td>\r\n</tr>\r\n<tr bgcolor=\"#7093db\">\r\n<td><strong><span style=\"color: #333333;\">Mid-term </span></strong>\r\n<strong><span style=\"color: #333333;\">adjusted AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.27%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.27%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.27%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">1.27%</span></td>\r\n</tr>\r\n<tr>\r\n<td><strong><span style=\"color: #333333;\">Long-term</span></strong>\r\n<strong><span style=\"color: #333333;\">adjusted AFR</span></strong></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.51%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.48%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.46%</span></td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.46%</span></td>\r\n</tr>\r\n</tbody>\r\n</table>\r\n<table style=\"margin-left: auto; margin-right: auto;\" border=\"3\" width=\"425\"><caption><span style=\"color: #000000;\"><strong>Table 3 </strong></span>\r\n\r\n<span style=\"color: #000000;\"><strong>Rates Under Section 382 for October 2011\r\n</strong></span>\r\n\r\n</caption>\r\n<tbody>\r\n<tr>\r\n<td>Adjusted federal long-term rate for the current month</td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.51%</span></td>\r\n</tr>\r\n<tr>\r\n<td>Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal long-term rates for the current month and the prior two months)</td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.82%</span></td>\r\n</tr>\r\n</tbody>\r\n</table>\r\n<table style=\"margin-left: auto; margin-right: auto;\" border=\"3\" width=\"425\"><caption><span style=\"color: #000000;\"><strong>Table 4 </strong></span>\r\n\r\n<span style=\"color: #000000;\"><strong>Appropriate Percentages Under Section 42(b)(2)**</strong></span>\r\n\r\n</caption>\r\n<tbody>\r\n<tr>\r\n<td>Appropraite percentage for the 70% present value low-income housing credit</td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">7.48%</span></td>\r\n</tr>\r\n<tr>\r\n<td>Appropriate percentage for the 30% present value low-income housing credit</td>\r\n<td style=\"text-align: right;\"><span style=\"color: #333333;\">3.20%</span></td>\r\n</tr>\r\n</tbody>\r\n</table>\r\n<span style=\"color: #000000;\"><strong>Table 5 (Section 7520 Rate)</strong></span>\r\n<p style=\"text-align: left;\"><span style=\"color: #333333;\">Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest</span></p>\r\n<span style=\"color: #333333;\">1.4%</span>','Applicable Federal Rates for October 2011','','inherit','closed','closed','','6145-revision-v1','','','2016-08-30 12:55:59','2016-08-30 12:55:59','',6145,'http://www.racklaw.com/rack3/6145-revision-v1/',0,'revision','',0);
