Tax and Estate Planning

According to the United States tax code there are domestic and foreign taxpayers. Domestic taxpayers, which include United States citizens, resident aliens and domestic corporations, are generally taxed on their worldwide income. (§ 61.) By contrast, foreign taxpayers such as nonresident aliens and foreign corporations are generally only taxed on certain income sourced within or connected to the United States. (§§ 871, 881, and 882.) This makes the question of which individuals or entities are domestic and which are foreign very important. An alien will be treated as a resident of the United States if they are lawfully admitted to the United States under the green card test or they meet the requirements of the substantial presence test. (§ 7701(b)(1)(A).)

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This entry was posted on December 19, 2015 at 12:01 AM and has received 5454 views. There are currently 0 comments. Print this entry.

There are two main considerations when deciding when to make a gift of property. The first is estate tax, and the second is property basis.

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This entry was posted on December 19, 2015 at 12:00 AM and has received 5620 views. There are currently 0 comments. Print this entry.

Generally, a person receiving a partnership interest upon the death of a partner receives that interest with a basis equal to the fair market value of the interest immediately before the partner's death plus any assumed partnership liabilities. (§ 1014(a)(1).) This stepped up basis is then decreased by the amount of partnership income that is "in respect of a decedent." (§ 691(a).)

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This entry was posted on December 19, 2015 at 12:00 AM and has received 9518 views. There are currently 0 comments. Print this entry.

California tax law states that any taxpayer will be liable for a delinquent filing penalty if the taxpayer fails to file her tax returns when they are due. (Rev. & Tax. Code, § 19131.) However, the statute provides an exception for those taxpayers that can show that the delinquent filing: (a) was due to a reasonable cause; and (b) not due to willful neglect.

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This entry was posted on January 31, 2015 at 7:02 PM and has received 5384 views. There are currently 0 comments. Print this entry.

A self-canceling installment note (SCIN) is a note that includes a clause that cancels the remaining balance upon the death of the original holder. There are advantages for both the seller and the buyer of a SCIN. The seller is able to freeze the value of the sold property at the face value of the note and may be able to avoid the inclusion of the note in his gross estate. The seller can also spread the payment of taxes on gain on appreciated property over the life of the note.

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This entry was posted on March 8, 2014 at 9:54 PM and has received 6942 views. There are currently 0 comments. Print this entry.

Unfortunately, the answer is no. Notes that are canceled by a decedent's will are to be included in the decedent's gross estate. (Estate of Buckwalter v. C. I. R. (T.C. 1966) 46 T.C. 805.) In Buckwalter, the decedent's son was indebted to a bank. The decedent proposed a deal whereby he would pay off this debt. The son would then make the monthly payment he would have otherwise made to the bank to the decedent, but at a lower interest rate. The agreement was outlined in two separate letters (agreement letters). However, the agreement was to be kept a secret as to avoid paying personal property taxes each year. The decedent indicated that the loan would be totally forgiven should the decedent die before the loan was paid in full.

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This entry was posted on November 27, 2013 at 1:18 AM and has received 5661 views. There are currently 0 comments. Print this entry.

A voluntary change in status from a C corporation to an LLC that has elected to be treated as a partnership is deemed to be a complete liquidation of the C corporation. Additionally, the shareholders are deemed to make an immediate contribution of the distributed assets to the newly-formed LLC. 26 C.F.R. § 301.7701–3(g)(1)(ii). Several private letter rulings have addressed different ways to convert a corporation into an LLC treated as a partnership, but the ultimate result is that the C corporation is treated as being liquidated. (Letter Ruling 9638047; 9401014; 9644003; 9701029; and 9924064). Corporate liquidation is subject to taxation on two different levels. One level is the corporate level and the other is the shareholder level.

Effects of Liquidation on Shareholders

Amounts received by a shareholder in a complete liquidation of the corporation are treated as a sale of

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This entry was posted on November 20, 2013 at 2:18 AM and has received 5857 views. There are currently 0 comments. Print this entry.

Generally, transfers of intangible property by a nonresident not a citizen of the United States are not subject to transfer taxation. (26 U.S.C.A. § 2501.) However, there is an exception where the donor is subject to the alternative income tax regime of §877 (Expatriation to avoid tax). (Id.) For these nonresidents the transfer of intangible property is subject to tax if the property is deemed situated within the United States. (§ 2511.) Debt obligations, such as promissory notes, of a United States person owned and held by a nonresident are deemed to be situated within the United States. (§ 25.2511-3.)

ATTENTION: While the blog entries have been written by an attorney, tax law is very complex and changes extremely fast. Every effort is made to keep the site up to date, but there is no guarantee that the entries reflect current tax law. You are advised to always seek the advice of an attorney, accountant, or other professional when dealing with complex tax matters.

All articles are copyrighted. Any reproduction or use for commercial purposes is strictly prohibited without permission from the author.

IRS CIRCULAR 230 NOTICE: ANY TAX ADVICE CONTAINED IN THIS ELECTRONIC COMMUNICATION (INCLUDING ANY ATTACHMENTS) IS NOT INTENDED TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF AVOIDING PENALTIES UNDER THE INTERNAL REVENUE CODE OR APPLICABLE STATE OR LOCAL TAX LAW PROVISIONS, OR PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PERSON OR PARTY ANY TAX-RELATED MATTER ADDRESSED HEREIN.

This entry was posted on November 19, 2013 at 2:41 AM and has received 5679 views. There are currently 0 comments. Print this entry.