What You Dont Know Can Hurt You A Review of Recent Developments in - PowerPoint PPT Presentation

What You Don’t Know Can Hurt You – A Review of Recent Developments in Estate and Gift Taxation and Administration Charles D. Fox IV www.mcguirewoods.com

We virtually ended the estate tax or death tax, as it is often called, on small businesses, for ranches, and also for family farms. Donald J. Trump State of the Union Address February 5, 2019 McGuireWoods – 1

Current Proposed Legislation McGuireWoods – 2

More Death Tax Repeal Acts Ø H.R. 218 (Rep. Jason Smith, R-MO, Jan. 3, 2019) S. 215 (Sen. John Thune, R-SD, Jan. 24, 2019) McGuireWoods – 3

Death Tax Repeal Acts Ø Estate and GST taxes repealed. Ø Treatment of qualified domestic trusts (QDOTs): Distributions during surviving spouse ’ s life taxed for 10 years. Tax on value remaining at spouse ’ s death eliminated. Ø Gift tax rate of 35% with a $10 million (indexed) exemption. Ø In S. 215 only, section 2511(c) (from 2001 Tax Act) restored: “ A transfer in trust shall be treated as a taxable gift under section 2503, unless the trust is treated as wholly owned by the donor or the donor ’ s spouse under subpart E of part I of subchapter J of chapter 1. ” McGuireWoods – 4

For the 99.8 Percent Act Ø S. 309 (Sen. Bernie Sanders, I-VT, Jan. 31, 2019) McGuireWoods – 5

1. Revenue Procedure 2018-57 (November 15, 2018) Ø IRS announces inflation adjustments for 2019 McGuireWoods – 6

2. 2018-2019 Priority Guidance Plan (November 8, 2018) Ø Treasury Department and Internal Revenue Service release their 2018-2019 Priority Guidance Plan McGuireWoods – 7

3. Proposed Treasury Regulations § 20.2010-1(c) (November 20, 2018) Ø Treasury Department issues proposed anti- clawback regulations McGuireWoods – 8

4. IRS Issues Final Regulations on Section 199A (January 18, 2019) Ø IRS proposes new regulations on passthrough deduction under new Section 199A McGuireWoods – 9

5. Notice 2018-54, 2018-24 IRB 750 (May 23, 2018) Ø IRS provides guidance on certain payments made in exchange for state and local tax credits McGuireWoods – 10

6. Press Release: Treasury Issues Proposed Rule on Charitable Contributions and State and Local Tax Credits (August 23, 2018) Ø Department of Treasury issues proposed rule on federal income tax treatment of payments and property transfers under state and local tax credit programs McGuireWoods – 11

7. Letter Rulings on Extension of Time to Make Portability Election Ø Extension of time to make portability election permitted McGuireWoods – 12

8. Letter Ruling 201751005 (Issued September 18, 2017; Released December 22, 2017) Ø IRS grants extension of time to make QTIP election McGuireWoods – 13

9. Karen S. True v. Commissioner, Tax Court Docket No. 21896-16 and H. A. True III v. Commissioner, Tax Court Docket No. 21897-16 (Petitions filed October 11, 2016) Ø IRS attacks use of Wandry clause in gift and sale of interests in a family business McGuireWoods – 14

10. Letter Ruling 201803003 (Issued October 6, 2017; Released January 9, 2018 Ø Proposed trust modifications will not trigger gift or generation-skipping tax McGuireWoods – 15

11. Letter Ruling 201808002 (Issued November 16, 2017; Released February 23, 2018) Ø Service rules on gift tax consequences of gift of life estate interest in pre-October 9, 1990 transaction McGuireWoods – 16

12. Letter Ruling 201825003 (Issued March 9, 2018; Released June 22, 2018) Ø Transfer of the legal title, naked ownership, and remainder interest in and to artwork as defined by the deed of transfer is a completed gift for gift tax purposes McGuireWoods – 17

13. Letter Ruling 201836006 (Issued May 30, 2018; Released September 7, 2018) Ø Service rules on consequences of incomplete non-grantor trust McGuireWoods – 18

14. CCA 201745012 (Issued August 4, 2017; Released November 9, 2017) Ø Purchase of remainder interest in transferred property in which donor retained annuity, which purchase occurred on donor’s deathbed during the term of the annuity, failed to replenish donor’s taxable estate, and failed to constitute adequate and full consideration for gift tax purposes McGuireWoods – 19

15. Badgley v. United States, _____ F.Supp.3d _____ (N.D. Cal 2018) Ø The assets of a GRAT are included in the settlor’s estate McGuireWoods – 20

16. Letter Ruling 201819010 (Issued February 8, 2018; Released May 11, 2018) Ø IRS grants extension of time to make Section 754 election McGuireWoods – 21

17. Letter Ruling 201814004 (Issued December 11, 2017; Released April 6, 2018) Ø IRS allows extension of time to make special use valuation election for farmland McGuireWoods – 22

18. Letter Ruling 201820010 (Issued February 13, 2018; Released May 18, 2018) Ø IRS allows extension of time for estate to elect alternate valuation date McGuireWoods – 23

19. Letter Ruling 201815001 (Issued December 11, 2017; Released April 13, 2018) Ø IRS allows extension to elect alternate valuation date McGuireWoods – 24

20. Letter Ruling 201825013 (Issued March 19, 2018; Released June 22, 2018) Ø IRS grants an extension of time to make the alternate valuation election McGuireWoods – 25

21. Estate of Clara M. Morrissette v. Commissioner, Tax Court Order, Docket No. 4414-14 (June 21, 2018) Ø Court denies partial summary judgment motion of estate that Section 2703 does not apply to split-dollar arrangement 22. Cahill v. Commissioner , T.C. Memo 2018-84 Ø Taxpayer’s motion for summary judgment with respect to split-dollar arrangement is denied McGuireWoods – 26

23. Streightoff v. Commissioner, T.C. Memo 2018 - 178 Ø Court accepts government’s valuation of limited partnership interests in decedent’s estate McGuireWoods – 27

24. Estate of Turner v. Commissioner, 151 T.C. No. 10 (2018) (Turner III) Ø Tax Court addresses tax issue arising from inclusion of family limited partnership interests in estate and first spouse to die McGuireWoods – 28

25. Letter Ruling 201845014 (Issued August 9, 2018; Released November 9, 2018) Ø IRS issues favorable letter ruling with respect to two charitable remainder unitrusts McGuireWoods – 29

26. Wendell Falls Development, LLC v. Commissioner, T.C. Memo 2018-45; motion for reconsideration denied, T.C. Memo 2018-193 Ø No charitable contribution deduction is allowed for the donation of a conservation easement and no penalty is applicable McGuireWoods – 30

27. Champions Retreat Golf Founders, LLC v. Commissioner, T.C. Memo 2018-146 Ø Golf club development was not entitled to charitable deduction for donation to land trust of conservation easement operating across golf course McGuireWoods – 31

28. Belair Woods, LLC v. Commissioner, T.C. Memo 2018-159 Ø On cross motions for partial summary judgment, court concludes that Belair did not comply, either strictly or substantially, with the requirements of the regulations with respect to obtaining an income tax charitable deduction; however, disputes of material fact existed as to whether Belair had reasonable cause for failure to supply a fully completed appraisal summary McGuireWoods – 32

29. Notice 2017-73, 2017-51 IRB 562 (December 4, 2017) Ø IRS describes approaches being considered to address certain issues regarding Donor Advised Funds McGuireWoods – 33

30. Letter Rulings 201820007 and 201820008 (Issued February 5, 2018; Released May 18, 2018) Ø Proposed distribution from one generation- skipping tax exempt trust to another exempt trust will not cause either trust to lose their exempt status McGuireWoods – 34

31. Letter Ruling 201815012 (Issued November 14, 2017; Released April 13, 2018) Ø Extension of time granted to allocate spouse’s available GST exemption McGuireWoods – 35

32. Letter Ruling 201801001 (Issued September 20, 2017; Released January 5, 2018) Ø Estate granted an extension of time to allocate GST exemption McGuireWoods – 36

33. Letter Rulings 201803001 and 201803002 (Issued September 18, 2017; Released January 19, 2018) Ø Extension of time to allocate GST exemption granted McGuireWoods – 37

34. Letter Rulings 201840002 (Issued July 2, 2018; Released October 5, 2018) Ø Grantor granted extension of time to allocate GST exemption to trust McGuireWoods – 38

35. Letter Ruling 201839001 (Issued June 18, 2018; Released September 28, 2018) Ø Extension of time to allocate GST exemption granted McGuireWoods – 39

36. Letter Ruling 201849007 and 201849008 (Issued July 31, 2018; Released December 7, 2018) Ø IRS grants an extension of time to allocate GST exemption granted McGuireWoods – 40

37. Letter Ruling 201850010 (Issued September 17, 2018; Released December 14, 2018) Ø IRS grants an extension of time to sever QTIP trust into exempt and non-exempt QTIP trusts and to make a “reverse” QTIP election for the exempt QTIP trust and to apply the GST automatic allocation rules to allocate GST exemption to the exempt QTIP trust McGuireWoods – 41

38. Letter Rulings 201839003 (Issued June 18, 2018; Released September 28, 2018), and 201839012, and 201839014 (Issued June 21, 2018; Released September 28, 2018) Ø Extension of time granted to opt out of automatic allocation rules McGuireWoods – 42