Wednesday, May 02, 2012 Six-Year Statute of Limitations
During our 2011 Year-End Seminars, Bob and I discussed the 4th Circuit's decision in the Home Concrete Case. The 4th Circuit determined that the six-year statute of limitations does not apply to an overstatement of basis which in turn causes an understatement of income in excess of 25% of that which is reported. The 4th Circuit's decision added to an already messy landscape of decisions that had come from the Tax Count and various Courts of Appeals. At the seminar we mentioned that the Supreme Court had granted Certiorari and would ultimately decide the issue.
On April 25, 2012, in a 5-4 decision, the Supreme Court affirmed the 4th Circuit and found that the six-year statute of limitations does not apply to an overstatement of basis. Following its long-standing decision in Colony, Inc. v. Comm'r, the Court maintained its position that the plain language of the term "omit" as used in the statute refers only to something that is left out, and while the impact of an overstatement of basis might be the same, it is not an omission. Further, the Court pointed to the prior Colony decision which stated that the purpose of the six-year statute was to give the IRS some "extra time" to find items that did not appear on the face of a return and such additional time would not be necessary to review the reported basis amount.
The Supreme Court in Home Concrete thus refused to overrule its previous decision and effectively invalidated the Treasury Regulation (301.6501(e)-1(a)(1)(ii)) which set forth Treasury's position as to the six-year statute applying to overstated basis. Presumably, the IRS will shortly withdraw this regulation.
Neil
Tuesday, April 17, 2012 Congratulations on making it through another Tax Season!!!
Bob, Lara and I wanted to congratulate you on completing another tax season!!!
We hope it was a successful season and we look forward to seeing you at one of the upcoming Summer Seminars or at the Tax Symposium at Mohegan Sun in October!!!
As always if there is anything that we can do to assist you with a client matter, or help you in any area of your practice, please do not hesitate to call or email. We look forward to working with you throughout the year!!!
Enjoy the beautiful weather!
Neil
Tuesday, February 28, 2012 Extension of Time to Make Portability Election
For decedents who died in the first six months of 2011, the IRS has extended the deadline to make the portability election for the benefit of the surviving spouse. Normally the election must be made on a timely filed (including extension) estate tax return. This is true even if a federal estate tax return is not required to be filed.
In Notice 2012-21, the IRS sets forth that the estate of an individual who died after December 31, 2010 and before July 1, 2011 is eligible for this relief. Under the Notice, eligible estates of under $5 million that did not file an estate tax return have 15 months from the date of death to file an estate tax return and Form 4768 (Extension of Time to File an Estate Tax Return) to elect portability.
Therefore, an estate of an individual who died on January 1, 2011 must file Forms 706 and 4768 no later than April 2, 2012 (note: April 1 is a sunday) if portability is to be elected.
If you need further information regarding portability please call Neil or me.
Bob Katz
Friday, January 20, 2012 February AFR
The February AFR's were released yesterday. The rates remain at a historic low. The short-term rate (.19%) and the Section 7520 rate (1.4%) remain the same as last month. The mid-term rate (1.12%) and long-term rate (2.58%) have gone down slightly. With the gift tax exemption increased to $5,120,000, in 2012, this is an exceptional time to do life-time estate planning with your clients. While you are meeting with them for the preparation of their income tax returns you should be discussing the fact that with rates this low they should be considering estate planning techniques that are available.
As always Neil and I remain available to assist you and your clients in this regard.
Bob Katz
Monday, January 16, 2012 Form 8939 - Allocation of Increase in Basis for Property Acquired From a Decedent
Reminder: If you have a client who died in 2010 and the executor wants to elect out of the estate tax and into the carry-over basis regime, Form 8939 must be filed. The deadline for filing the return is tomorrow, January 17. There are no extensions of time to file this form. In addition, as I have stated in a previous blog, the only way to elect out of the estate tax, for 2010 decedents, is to timely file this form.
Bob Katz
Tuesday, January 10, 2012 Foreign Account Voluntary Disclosure Initiative
At our recent seminars I spent a considerable amount of time talking about the offshore voluntary disclosure initiatives that had expired and the extremely large penalties that can be asserted. Commissioner Shulman stated that there would be no more disclosure initiatives available after the second one ended in 2011.
Good News!!!!!! Yesterday the IRS announced that it had reopened the Offshore Voluntary Disclosure Initiative. The 2009 and 2011 programs have accounted for $4.4 billion of revenue so far. While the reopened program will be generally the same as the 2011 program, the penalty will 27.5% of the highest amount in the accounts in the previous 8 years (this is a 10% increase from the 25% penalty that applied in the 2011 program). In certain cases the penalty could be as low as 5% or 12.5%.
At this time the IRS has not set a date for the end of this initiative. As always, Neil and I remain available to assist you and your clients in regards to applying for this program and receiving the relief available.
Bob Katz
Wednesday, December 21, 2011 New Foreign Financial Asset Reporting
The Internal Revenue Service has released the final version of, and instructions for, Form 8938 (Statement of Specified Foreign Financial Assets) which must be used by individuals to report specified foreign financial assets for tax year 2011. With a joint return, only one Form need be filed. Until regulations are promulgated, this disclosure requirement does not apply to domestic entities formed or used to hold such assets.
The requirement to file Form 8938, which is an attachment to the tax return, applies to any year in which an individual has an interest in specified foreign assets the aggregate value of which exceeds an applicable reporting threshold amount. The threshold amount depends upon whether the individual lives in the United States or files a joint income tax return. The Form need not be filed if there is no income tax return filing requirement.
The specified foreign assets include any financial account at a foreign financial institution, individually owned stock or securities issued by foreign persons, any foreign issued financial instrument or contract, and any interest in a foreign entity.
Failure to file the disclosure form could result in a $10,000 penalty with an additional penalty of up to $50,000 for continued failure to file after IRS notification, unless there is reasonable cause for not filing the form.
Monday, December 12, 2011 NYS Tax Changes
Governor Cuomo has signed legislation restructuring the personal income tax for the tax year 2012 -2014. In addition, significant changes to the MCTMT will apply to small businesses.
These changes along with a number of other developments in NYS taxation will be discussed in detail at our Year End NYS/Entity Tax Update on December 14, 2011 at the Uniondale Marriott and January 6, 2012 at the Melville Marriott.
We hope to see you there.
N
Tuesday, November 22, 2011 Super Committee - Take 2
As you all know by now, the Super Committee has failed in its task regarding deficit reduction. Politics as usual! It now appears that there may not be any significant tax legislation, income or estate related, until after the Presidential election. Planning in a vacuum continues.
Tuesday, November 22, 2011 Thanksgiving
Neil, Lara and I want to take this opportunity to wish you all a Happy Thanksgiving.
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