Complete Guide to Estate and Gift Taxation - v14 (Course Id 2353)

Taxes - Taxes for Course Id 2353

This presentation integrates federal taxation with overall financial planning. The course will explore tax strategies relating to the central financial tactics of wealth building, capital preservation, and estate distribution. The result is a unified explanation of tax economics that will permit the tax professional to locate, analyze, and solve financial concerns. Designed to improve the quality of services to clients and the profitability of engagements, this program projects the accountant into the world of financial planning. This course will give the participant practice in analyzing problems, developing solutions, and presenting final personal financial plans to clients.

The course surveys wills, living trusts, gifts, marital property, and probate avoidance. Will and trust forms are explored along with living wills, durable powers of attorney, and nominations of conservator. Designed to eliminate estate problems and death taxes, the emphasis is on practical solutions that are cost effective.

NASBA QAS - Text - NASBA Registry - IRS Enrolled Agents - 2353

As a result of studying each assignment, you should be able to meet the objectives listed below each assignment.

       At the start of Chapter 1, participants should identify the following topics for study:

* Goals v. purposes
* Investment purposes
* Myths of retirement
* Investment goals
* Investment needs of five critical decades
* Investment vehicles & entities
* Retirement - the ultimate objective
* Retirement costs & income needs
* Retirement plan development
* Basic planning elements

1. Differentiate short-term financial goals and investment purposes.
2. Specifying ways to hold title to assets starting with the simplest and most direct way to hold property and citing the tax benefits and drawbacks of co-tenancies, corporations (both C & S), partnerships, qualified retirement plans, and trusts.
3. Recognize the importance of early retirement planning using a balance sheet method, identify cost and income needs specifying the purpose of savings.

       At the start of Chapter 2, participants should identify the following topics for study:

* Types of income
* Information reporting on taxable income
* Rules of budgeting
* Cash
* Acquisition
* Assets
* Rules of management
* Managing risk
* Taxes
* Leverage

1. Identify money management specifying income types, recognize causes of increased taxable income for itemizing taxpayers, and specify taxable income types and their proper reporting.
2. Determine the distinctions between tax-free and tax deferred income, and identify tax-deferred investments.
3. Specify ways to shelter income stating how income sheltering amplifies investment return.
4. Recognize the budgeting of income into cash by containing expenditures and developing discretionary income and determine how to convert income into assets by purchasing investments.
5. Specify tax-advantaged investments citing management rules and determine the economic impact of accelerating deductions.

       At the start of Chapter 3, participants should identify the following topics for study:

* Obstacles to preservation
* Tracking spending
* Building savings
* Designing a budget
* Determining worth
* Analyzing net worth
* Ignorance
* Inflation
* Taxes
* Tax planning tactics

1. Identify the barriers to wealth preservation stating how to design a budget to increase discretionary income and determine net worth using a balance sheet.
2. Specify why individuals should take primary responsibility for investment planning and recognize basis planning tactics.

       At the start of Chapter 4, participants should identify the following topics for study:

* Elements of like-kind exchanges
* Related party exchanges
* Personal & multiple property regulations
* Delayed (deferred) exchange regulations
* Actual & constructive receipt rule
* Qualified contribution plans
* Tax-deferred annuities
* Installment sales
* At-risk rule
* Deferred compensation and options

1. Identify the benefits of tax deferral and recall the tax deferral advantage under §1031 listing its elements.
2. Specify the related party §1031 restrictions identifying prohibited parties or entities and disallowance of personal property exchanges.
3. Recognize the use of an intermediary and the disallowance of personal property exchanges, identify retirement plan design, and list popular methods for providing for retirement.
4. Specify the requirements for an installment sale, determine how to elect out of the installment method, and determine how to use a property option to receive income and postpone tax.

       At the start of Chapter 5, participants should identify the following topics for study:

* Work Opportunity Credit & Rehabilitation Credit
* Low Income Housing Credit & Child & Dependent Care Credit
* Estimated taxes
* Interest
* Automobile deductions
* Business entertainment deductions
* Depreciation & cost recovery
* Net operating losses
* Tax breaks for nonitemizers
* Amended returns

1. Identify tax credits specifying qualified computational expenses, limitations, and restrictions.
2. Recognize the types of deductible and nondeductible interest types including the deductibility of investment interest, prepaid interest, points, and prepayment penalties.
3. Identify business vehicle operating costs using (or switching between) the actual cost method or the standard mileage rate.
4. Recall the statutory exceptions to the disallowance of entertainment deductions and recognize the application of R.R. 90-23 and R.R. 99-7 to the deduction of transportation costs to a temporary work location.
5. Determine the requirements of business asset expensing under §179 and identify sources of §172 net operating losses (NOLs) recognizing carryback and carryover rules.

       At the start of Chapter 6, participants should identify the following topics for study:

* Using progressive tax rates
* Deductible business expenses
* Home-office deduction
* C or regular corporations
* S corporations
* Family partnerships
* Kiddie tax trap
* Childcare & education
* Gifts
* Interest-free loans

1. Recognize formats for income splitting, determine the restricted tax treatment of employee business expenses, and cite changes made to home office deduction under TRA ’97.
2. Identify the tax treatment of personal and business casualty losses and bad debts.
3. Determine the uses and tax characteristics of regular and S corporations by recognizing the taxation of these entities including their ability to split income.
4. Recognize the use of partnerships to split income among partners and reduce estate taxes.
5. Identify the use of custodianship to split income specifying “kiddie” tax considerations and recognize good investments for children including bonds.

       At the start of Chapter 7, participants should identify the following topics for study:

* $500,000 home sale exclusion
* Municipal bonds
* Divorce & separation settlements
* Gifts & inheritances
* Life insurance
* Fringe benefits
* Taxation & valuation of benefits
* Employee expense reimbursement & reporting
* Fixed & variable rate allowances
* Social security

1. Recognize the requirements of the current §121 home sale exclusion citing its differences with prior tax law and specify the tax elimination aspects of interfamily transactions such as divorce and gifts.
2. Recognize employer deductions as a means to increase tax-free incentive-based compensation for employees using fringe benefits under §132 and employer-paid accident & health coverage.
3. Identify how to comply with ERISA plan requirements, and specify the proper reporting of reimbursed and unreimbursed business expenses under accountable and nonaccountable plans.

       At the start of Chapter 8, participants should identify the following topics for study:

* Need for asset protection
* Types of creditors
* Fraudulent transfers
* Preparation for asset protection
* Types of insurance
* Buy-sell agreements
* Individual ownership and corporate ownership
* Asset protection aspects of trusts
* Co-tenancy and partnerships
* Divorce

1. Identify the goals and purposes of asset protection recognizing the objections some people have about shielding assets from creditors citing situations that can unexpectedly put assets and financial security at stake and basic protection concepts.
2. Recognize the importance of creditor types associated with asset protection and fraudulent transfers.
3. Specify fraudulent transfer laws listing badges of fraud, and define statutes of limitation, criminal penalties, and permissible asset transfers.
4. Recognize the degree and necessity of an asset protection plan using net worth and asset values on a balance sheet.
5. Identify the ways that insurance and buy-sell agreements can offer asset protection citing the asset protection elements of homeowner's, automobile, and disability insurance.
6. Recognize the asset protection advantages and disadvantages of ownership formats and entities determining the use of individual ownership and corporate and identifying testamentary trusts, living trusts, and subcategories of trusts.
7. Identify the requirements for an enforceable marital agreement, and determine what constitutes post-nuptial and premarital agreements stating how they relate to divorce settlements and divisions.

       At the start of Chapter 9, participants should identify the following topics for study:

* Build, preserve & distribute
* Legal documents
* Estate planning team
* Estate administration
* Transfers within probate
* Transfers outside probate
* Transfers using a trust
* Special planning tools
* Facts

1. Identify basic estate planning elements recognizing the importance of well-drafted legal documents and specify the key team participants.
2. Specify estate planning tools that save death taxes while retaining maximum control including family partnerships, exclusions, and valuations.

       At the start of Chapter 10, participants should identify the following topics for study:

* Taxable estate
* IRS valuation
* Estate tax return & payment
* Tax basis for estate assets
* Generation-skipping transfer tax
* Application of gift taxes and valuation
* Gift tax annual exclusion
* Gift tax marital and charitable deductions
* Gift tax advantages and disadvantages
* Shifting income & gain

1. Identify potential death taxes including federal estate tax as it applies to various size estates, and specify those subject to federal estate tax.
2. Determine what constitutes a taxable estate under §2501 specifying what assets are included in a gross estate using basic categories of property and transfers.
3. Specify estate deductions allowed under federal estate tax law stating their tax advantages and disadvantages.
4. Determine the value of a decedent’s assets using permitted elections, recognize the use of Form 706 to pay any estate tax due, and select the tax basis of estate assets.
5. Recall the advantages of gift planning including estate reduction recognizing the impact of the GST, specify the steps to compute gift tax identifying the gift tax exclusion amount, and determine the value of gifts including those that are split.
6. Identify the various gift tax exclusions, including the annual, medical expense, and tuition exclusions.

       At the start of Chapter 11, participants should identify the following topics for study:

* Provisions of wills
* Requirements of wills
* Executors and guardians
* Types of wills
* Title implications
* Changes to a will
* Advantages of a will
* Simple will
* Probate pros and cons
* Probate avoidance

1. Specify types of wills citing the functions a will can perform, and identify the ways holding title can affect the use of a will.
2. Identify the pros and cons of probate proceedings and the dangers of ancillary probate and intestate succession.

       At the start of Chapter 12, participants should identify the following topics for study:

* Purpose of trusts
* Common elements of trusts
* Types of trusts
* Living trusts
* Income tax & trusts
* Gift tax & trusts
* Estate tax & trusts
* Identification, recital & property transfer clauses
* Income and principal & revocation and amendment clauses
* Trustee and trust termination clauses

1. Identify the relationship of parties in a trust, reasons to establish a trust, and types of trusts specifying their common elements and estate planning function.
2. Specify recommended living trust provisions and identify the application of gift and income tax including the use of a grantor-retained income trust.

       At the start of Chapter 13, participants should identify the following topics for study:

* Individual ownership & sole proprietorships
* Corporations
* Trusts holding title & business trusts
* Co-tenancy taxation, percentage interests & partition
* Partnership taxation & recapitalization
* Family partnerships
* Limited liability companies
* Retirement plans
* Custodianship
* Estate

1. Recognize basic tax and legal title formats identifying the advantages and disadvantages of holding property in a sole proprietorship, a corporation, or an S corporation.
2. Identify the title holding benefits of trusts, co-tenancy, partnerships, and limited liability companies and the tax characteristics of each and recognize the types of retirement plans used to provide lifetime benefits to a business owner and to employees.

       At the start of Chapter 14, participants should identify the following topics for study:

* Types of life insurance
* Life insurance trusts
* Deferred annuities
* Private annuities
* Buy-sell agreements
* Purchase price & terms
* Community property
* Professional corporations
* S corporations
* Sole shareholder planning

1. Specify persons in which rights are placed by life insurance and reasons to purchase life insurance.
2. Identify the income, estate, and gift tax treatment of life insurance proceeds by:
a. Select variables that influence whether life insurance is taxable for federal estate tax purposes; and
b. Recalling the gift tax associated with the transfer of life insurance policies.
3. Determine the pros and cons of life insurance policy types and specify estate tax planning reasons for establishing an irrevocable life insurance trust.
4. Recognize the differences between deferred annuities and private annuities and determine what constitutes an entity purchase agreement and a cross-purchase agreement and their tax and legal advantages.

       At the start of Chapter 15, participants should identify the following topics for study:

* Business valuation of tangible & intangible assets & goodwill
* Business valuation of qualified family-owned businesses
* Business valuation of land subject to a conservation easement
* Business valuation discounts
* Redemptions
* Buy-sell agreements
* Death of spouse
* Stock redemptions
* Stock recapitalization
* Deferred compensation agreements

1. Identify reasons why a business interest must be valued in an estate that is subject to federal estate tax, specify factors used to determine the net value of a business under the regulations and recall the valuation factors in R.R. 59-60 specifying their impact.
2. Determine how tangible assets are normally valued identifying those assets whose valuation is based on values other than book value, and specify the steps in R.R. 68-609’s valuation formula for intangible assets.
3. Identify special business valuation issues including redemptions under §303 by determining the value of a minority stock interest and fractional interests in order to obtain applicable valuation discounts and considering a buy-sell agreement.
4. Determine the tax treatment of a §302 corporate redemption and what exceptions exist to avoid dividend treatment.

       At the start of Chapter 16, participants should identify the following topics for study:

* Application of estate tax freeze rules
* Corporations, partnerships & exceptions
* Qualified payment exception to zero value rule
* Minimum valuation of a junior interest
* Capital contributions, redemptions & recapitalizations
* Attribution rules
* Transfers of interests in trust
* Term interests & joint purchases
* Buy-sell agreements & options
* Lapsing rights & restrictions

1. Determine the benefits of an estate freeze and its ability to reduce the value of a business interest, identify transactions to which Chapter 14 rules apply and the terminology used in Chapter 14.
2. Identify the “zero value” rule under §2701 by recalling the special lowest valuation rule and the limit this can have on increasing one’s estate.
3. Determine the application of §2701 provisions by identifying when an individual is deemed the owner of an interest based on the §2701 attribution rules and specifying when transfer tax adjustments will be made to transfers.
4. Recall the terms used in §2702 concerning transfers of interests in trust, identify the application of the zero value rule to a transfer of an interest in trust, and specify exceptions to §2702.
5. Determine the effect of options and liquidation rights on §2703 to ensure property is valued appropriately.

       At the start of Chapter 17, participants should identify the following topics for study:

* Managing the estate
* Medicare
* Medicaid & countable assets
* Medicaid & non-countable assets
* Medicaid & inaccessible assets
* Private insurance
* Healthcare decisions
* Supplemental Security Income
* Income & assets
* Disability benefits

1. Recall estate management techniques for the elderly and disabled by identifying joint tenancy and the benefits and drawbacks of using such a method for asset management; specifying levels of conservatorship that can influence management and protection of an estate and/or personal care and disadvantages of this tool; and determining what constitutes a durable power.
2. Cite the eldercare benefits of Medicare, Medicaid, and Supplemental Security Income and identify the benefits of private insurance for catastrophic illness.
3. Identify Medicaid specifying how it relates to elderly health care decisions and specify the requirements that must be met in order to receive disability benefits.

       At the start of Chapter 18, participants should identify the following topics for study:

* After death planning
* Federal returns
* Decedent’s estate tax
* Preparation of Form 706
* Estate income tax return
* Filing requirements of decedent’s final income tax return
* Included income
* Exemptions & deductions
* Filing the gift tax return
* Special applications & traps of the gift tax return

1. Determine post-mortem estate planning action in the face of funeral and administrative expenses using elections and disclaimers.
2. Cite the due dates of post-mortem federal forms, specify the filing requirements of a decedent’s estate tax return, and identify exceptions to the general rule of estate tax payment.
3. Determine the processes and procedures necessary in the preparation and filing of Form 706.
4. Identify the filing requirements for estate income tax and decedent’s final income tax returns by determining the estate income tax under available tax accounting methods and tax years; and
5. Determine the total income to be included on the decedent’s final income tax return using available exemptions or deductions.
6. Identify how to avoid penalties when filing a gift tax return for the decedent and when gifts are deemed completed.

Chapter 10 - Estate & Gift Taxes

Federal Estate Tax

Persons Subject to Federal Estate Tax

Applicable Exemption (or Exclusion) Amount

Spousal Portability of Unused Exemption Amount - §2010(c)(2)

Estate Tax Rates

Progressive or Flat Rate

State Inheritance Tax

State Death Tax Credit Turns into Deduction – §2011 & §2058

Taxable Estate - §2051

Gross Estate - §2031

Owned Property - §2033

Interests Terminating At Death - Life Estates & Joint Tenancies

Interests Created After Death

Remainder Interests

Dower & Curtsey - §2034

Community Property Comparison

Gifts within Three Years of Death - §2035

Transfers from Revocable Trusts

Retained Life Interest - §2036

Retained Voting Rights

Lifetime Transfers With Reversionary Interests - §2037

Revocable Transfers - §2038

Annuities - §2039

Joint Interests - §2040

Qualified Joint Interests Between Spouses - §2040(b)

Powers of Appointment - §2041

Ascertainable Standard - The Safe Harbor Limitation

5/5 Power

Life Insurance - §2042

Incidents of Ownership

Community Property Issue

Deductions from Gross Estate

Estate Expenses & Claims - §2053

Inclusion of Administrative Expenses on Non-Probate Assets

Casualty & Theft Losses during Administration - §2054

Charitable Transfers - §2055 (§170 & §2522)

Immediate Contributions

Split-Interest Contributions

Charitable Remainder Trusts

Charitable Lead Trusts

Insurance Related Contributions

Unlimited Marital Deduction - §2056

Requirements

Net Value Rule

Non-Citizen Spouse

Qualified Domestic Trust

Gifts to Non-Citizen Spouses

Valuation

IRS Valuation Explanation - §7517

Alternate Valuation - §2032

Special Valuation - §2032A

Estate Tax Return & Payment - §6018

Installment Payment of Federal Estate Taxes - §6166

Computation

Eligibility & Court Supervision

Closely Held Business

Acceleration of Payment

Tax Basis for Estate Assets - §1014

Community Property Cost Basis

GST Tax - §2601

Predeceased Parent Exception

Exemption

Allocation

Retroactive Allocation

Gift Taxes - §2501 to §2524

Gift Tax Computation

Calculation Steps

Applicable Exemption Amount for Gift Tax - §2505

Application

Entity Rule

Valuation

Real Property

Stocks & Bonds

Annuities, Life Estates, Terms for Years, Remainders, & Reversions

Split Gifts - §2513

Community Property States

Annual Exclusion

Per Donee/Per Year

Gifts in Excess of the Annual Exclusion

Gifts Within the Annual Exclusion

Gifts within 3 Years of Death

Uniform Gifts to Minors Act

Exception for Minor’s Trusts - §2503(b) & (c)

Medical & Tuition Exclusion - §2503(e)

Qualifying Transfers

Interest-Free or Below-Market Loans

Gift Tax Marital Deduction

Nondeductible Terminable Interests

Gift Tax Charitable Deduction

Partial Interests

Selecting Gift Property

Gift Advantages

Gift Disadvantages

Gift Tax Returns

Inclusion of Gifts in the Estate

Shifting Income & Gain

Gifts before Sale

Transfers into Trust Prior to Sale

Installment Obligations

Transfer to Obligor at Death

Income in Respect of a Decedent

Reporting of Foreign Gifts - §6039(f)

Chapter 11 - Wills & Probate

What Is A Will?

Provisions & Requirements

Specific & General Bequests

Residual Bequests

Conditional Bequests

Executor

Guardian

Types of Wills

Title Implications

Individual

Joint Tenancy

Tenants in Common

Tenants by the Entirety

Community Property

Tax Basis Advantage

Untitled Assets

Changes to a Will

Advantages of a Will

Intestate Succession

Periodic Review

Continuing Business Operations

Simple Will

Probate

Advantages

Disadvantages

Probate Avoidance

Joint Tenancy

Community Property

Totten Trust Accounts

Life Insurance & Employee Benefits

Living Trusts

Chapter 12 - Trusts

What is a Trust?

Why a Trust?

Types of Trusts

Common Elements

Revocable Trust

Irrevocable Trusts

Testamentary Trust

Foreign Trusts - §679

Family Trusts

Medicaid Trust

Living Trust

Reversion

Advantages of a Living Trust

Disadvantages

Priority

Pour-Over Will

Trust Taxation

Income Tax

Grantor Trusts - §671 to §678

Grantor Retained Income Trust

Revocable Trusts Included in Estate - §646 & §2652(b)(1)

Election for Income Tax Purposes

Irrevocable Trust Taxation

Throwback Rules

Capital Gains

Deduction of Estate Planning Expenses

Deductibility of Death Expenses

Gift Tax

Estate Tax

Unlimited Marital Deduction

Outright to Spouse

Marital Deduction Trust

Qualified Terminable Interest Property (QTIP) Trust

“A-B” Format

“A-B-C” (QTIP) Format

Valuation & Tax Basis

Alternate Valuation

Fundamental Provisions - Revocable Living Trust

Identification Clause

Recital Clause

Property Transfer Clause

Income & Principal Clause

Revocation & Amendment Clause

Trustee Clause

Trustee’s Acceptance

Choice of a Trustee

Factors for Corporate Trustees

Factors for Individual Trustees

Trust Termination Clause

Chapter 13 - Entities & Title

Basic Entity Formats

Individual & Sole Proprietorship

Marital Property

Timing & Domicile

Corporate

Categories of C Corporations

Personal Holding Company - §541

Attribution Rules

Penalty Tax

Regular C Corporation

Corporate Tax Rate

No Pass-Through

Getting Money Out of the C Corporation

Passive Loss Restrictions

Partnership vs. Corporation

Personal Service Corporation - §269A

S Corporation - §1361

Minors as Shareholders

Bequests & Estate Ownership

Trusts as Shareholders

S Corporation Assets

Built-In Gains Tax - §1374

Incorporation of a Farm

Land Partnership Advantage

Leasebacks

Trusts

Title Holding

Business Trusts

Co-Tenancy

Taxation

Percentage Interests

Partition

Partnership

Partnership Taxation

Allocation of Income & Deduction

Partnership Recapitalization

Two Class Format

Valuation

Guaranteed Payment

Control & Management

Estate Issues

Family Partnerships

Estate Savings

Income Tax Savings

Family Partnership Requirements

Recognizing a Partner

Control

Transferability

Donee as a Partner

Trusts as Partners

Minor as a Partner

Purchased Interests

Capital Interest in the Partnership

Capital as a Material Income-Producing Item

Source of Capital

Family Partnerships Not Within §704(e)

Real Estate Family Partnerships

Business Family Partnerships

Structuring the Family Partnership

Limited Liability Company

Outside Basis & Debt Share Advantage

Substantial Economic Effect Rules

Discharge of Indebtedness Income

Suggested Uses

Professional Firms

Joint Ventures

Substitute for Family Limited Partnership

Retirement Plan

Employer Costs

Profit-Sharing Plan

Money Purchase Pension Plan

Defined Benefit Pension Plan

Custodianship

Estate

Chapter 14 - Life Insurance, Annuities & Buy-Sell Agreements

Purpose

Tax Overview

Income Tax

Transfer for Value Rule

Employee Death Benefit - §101(b) (Repealed)

Premiums

Lifetime Benefits

Section 72

Estate Taxes - §2042 & §2035(a)

Ownership

Gift Taxes

Community Property Gift Danger

Types of Life Insurance

Term Insurance

Whole Life (Permanent) Insurance

Straight Life v. Limited Payment

Modified v. Preferred

Endowment Insurance

Universal Life

Charges

Premium Payment

Variable life

Investment Accounts

Taxation

Survivor Life

Single Premium Whole Life

Dividends

Life Insurance Trust

Considerations

Annuities

Deferred Annuity

Private Annuity

Unsecured Promise

Regulations Restrict Private Annuity Income

Buy-Sell Agreements

Definition

Contractual Format

Funding

Life Insurance Funding

Term vs. Whole Life

Policy Ownership & Premium Payment

Entity & Cross-Purchase Agreements

Tax Consequences - Cross-Purchase Agreements

Non-Deductible Premiums

No Dividend Danger

Tax Consequences - Entity Purchase Agreements

Non-Deductible Premiums

Dividend Danger - §302

Exception to Dividend Treatment

Constructive Ownership (Attribution) Rules

“Estate/Beneficiary” Rule

“Family/Trust/Corporation” Rule

No Gain on Sale

Estate Tax Valuation

Using the Buy-Sell Agreement to Set Value

Enforcement of Contract Price

Purchase Price & Terms

Valuation

Community Property

Professional Corporations

Marketability Problems

Controlled Disposition

S Corporations

Sole Shareholder Planning

Complete Liquidations

Alternative Dispositions

Use of Life Insurance

Estate Valuation

One-Way Buy-Outs

Chapter 15 - Special Business Issues

Business Valuation

Relevant Facts

Revenue Ruling 59-60

Tangible Assets

Special Real Estate Election - §2032A

Limitations

Related Party Cash Lease

Intangible Assets & Goodwill

R.R. 68-609

Land Subject To Conservation Easement - §2032A(c)(8)

Family Member

Indirect Ownership of Land

Qualified Conservation Easement

Qualified Real Property Interest

Qualified Organization

Conservation Purpose

No Additional Income Tax Deduction

Valuation Discounts