Tax, Trust and Estate News | New Jersey Estate Planning Attorneys

Tax Issues that Impact Your Wealth,Part V: Qualified Small Business Stock

By James F. McDonough, Jr. on February 22nd, 2012 Posted in Business, Business Entities, Qualified Small Business Stock, Social Media, Tax Issues that Impact Your Wealth, Video, YouTube

Part V: Qualified Small Business Stock

Yesterday, Scarinci Hollenbeck Launched, “Qualified Small Business Stock”, the fifth installment of a seven part video series, “Tax Issues That Impact Your Wealth.” Each new installment to the series will be posted to this on Wednesday blog and to Scarinci Hollenbeck’s YouTube every Tuesday, so be sure to stop by and check out the rest.

In part V of Tax Issues That Impact Your Wealth, you will follow me, James F. McDonough, L.L.M, attorney at Scarinci Hollenbeck, as I explain three key things to know about Qualified Small Business Stock.

This video series is part of Scarinci Hollenbeck’s new website and integrated social media platform. The video series was designed in part to assist small business owners in understanding issues within the complicated and often complex tax world. Any questions pertaining to the material presented should be directed to Frank L. Brunetti or James F. McDonough by calling the number at the top of this blog.

The Fight Over the Un-dead Parent

By James F. McDonough, Jr. on February 21st, 2012 Posted in Business, Family Business, Power of Attorney, Revocable Living Trusts, Uncategorized

Frank Brunetti and I were discussing business succession plans for a client the other day, and he uttered the phrase that is the title of this blog post. It will stay with me forever, because every business attorney has seen family disputes involving business succession. In a nutshell, they often become the Fight Over the Un-dead Parent.

The battle starts with a family business and aging parents. The children – rightly or wrongly – begin to angle to protect their own interests. Children threaten to withhold the grandchildren to gain leverage. Children feed the fears and insecurities of an aging parent that the child in charge of the business will bankrupt it, or that this child is taking too much money out of the business.

Who is capable of running the business? I have seen two very intelligent children, successful in endeavors outside of a family business, step into the family operation and cause the business to close in eight months. In this particular instance, the child who had spent all of his adult life in the business was forced out, and the other two children assumed control of the business. The employees that remained after his departure warned the two children against taking certain actions that affected the quality of the product. Their advice was not taken, and the finished goods were rejected by the customer and returned. The next act of hubris by the two children was to demand payment in advance or cash on delivery. The industry did not operate that way, and the business closed. Continue Reading

Tax Issues that Impact Your Wealth,Part IV: Interest Rates

By Frank L. Brunetti on February 15th, 2012 Posted in Interest Rates, Social Media, Tax Issues that Impact Your Wealth, Uncategorized, Video, YouTube

Part IV: Interest Rates

Yesterday, Scarinci Hollenbeck Launched, “Interest Rates”, the Fourth installment of a seven part video series, “Tax Issues That Impact Your Wealth.” Each new installment to the series will be posted to this on Wednesday blog and to Scarinci Hollenbeck’s YouTube every Tuesday, so be sure to stop by and check out the rest.

In part lV of Tax Issues That Impact Your Wealth, we will learn how to take advantage of low interest rates with me, Frank L Brunetti L.L.M., partner at Scarinci Hollenbeck and Chair of the Tax, Trusts and Estates Law Group.

Unpaid Federal Taxes, Lead to Federal Tax Liens

By C.J. Griffin on February 14th, 2012 Posted in Federal Tax information, IRS, Tax Liability, Taxes, Uncategorized, Unpaid

Proving that celebrities are not above the law, the IRS recently served rapper Lil’ Kim with a tax lien for allegedly dodging more than $1 million in taxes.

While it is celebrity tax stories that most often make the headlines, businesses and individuals frequently face the serious consequences of having a tax lien filed against them when the IRS determines that federal taxes have gone unpaid. A lien gives the IRS a legal claim to all of a taxpayer’s property as security for tax debt.

Sometimes Random Client Telephone Calls Produce the Most Interesting Questions

By James F. McDonough, Jr. on February 10th, 2012 Posted in Expatriate tax, Federal Inheritance Tax, Internal Revenue Code, IRS, Pre-Nuptial Agreements, Taxes

I received a call from an old client who had retired and moved away. The client had met a prospective spouse who was a citizen of a civil law country, and they were discussing marriage. In addition, they were also discussing moving permanently to a third country, where neither one was a citizen or resident. The client had question about pre-nuptial agreements, choice of laws, and tax issues. One of my questions, which troubled my client, was the length of time that the prospective spouse had spent in the United States and whether permanent residency had been already acquired.

I was, in turn, asked what would happen if the client relinquished United States citizenship. The answer is somewhat complicated. U.S. citizens, having a net worth of $2,000,000 or average income over 5 years of $145,000, who become expatriates, have a number of issues with which to deal. These include whether to make a mark-to-market gain recognition or elect to defer gain. In addition, if the U.S. person successfully becomes an expatriate, any United States citizens or residents who receive a bequest from the ex-pat are then subject under §877A of the Internal Revenue Code to an inheritance tax (See IRC §2801). Yes, §2801 is a federal inheritance tax. The client at issue here has children that will remain in the United States and be the objects of the client’s bounty. I also cautioned the client that civil law jurisdictions have forced heirship that prevents one spouse from disinheriting the other. Continue Reading

Tax Issues that Impact Your Wealth: NJ Estate Planning & Dynasty Trusts

By James F. McDonough, Jr. on February 8th, 2012 Posted in Business Entities, Dynasty Trusts, Estate Planning, Tax Issues that Impact Your Wealth, Uncategorized, Video, YouTube

Part III: New Jersey Case Law

Today, Scarinci Hollenbeck launched the third installment of a seven part video series “Tax Issues That Impact Your Wealth.” This video features your author Jim McDonough as I discuss Estate Planning & Dynasty Trusts. Each new installment to the series will be posted to Scarinci Hollenbeck’s YouTube every Tuesday and to this blog on Wednesdays, so be sure to stop by and check out the rest.

This video series is part of Scarinci Hollenbeck’s new website and integrated social media platform. The video series was designed in part to assist small business owners in understanding issues in the complicated and often complex tax world. Any questions pertaining to the material presented should be directed to Frank L. Brunetti or to me.

Is the Sale Price of a Residence Determinative of Its True Value for purposes of Real Property Tax Assessments?

By Frank L. Brunetti on February 6th, 2012 Posted in market value, Property Tax, Property Tax Assessments, residence sale price, Taxes, True Value

No, the residence sale price standing alone is insufficient to provide reliable evidence of market value in the absence of other corroborative evidence.

The New Jersey Tax Court has affirmed a municipality’s determination of true value of a residential property after finding that the purchaser’s sale price standing alone was insufficient to provide a reliable evidence of market value.

In these difficult economic times for homeowners and municipalities, the payment and receipt of real property taxes are important. Real property taxes are assessed and paid based on a property’s full and fair value which is defined as the price of the property would sell for at a “fair and bona fide sale” by private contract on October 1. Taxable value is a fixed percentage of true value. Hence, the method used to determine true value is critical.

Recently, in a Tax Court decision (Gibbons v. City of East Orange) a residence was assessed at $262,100 but had been purchased for $125,000 within a month after the assessment. The owner challenged the assessment. The Board of Taxation however entered a judgment affirming the assessment. The owner appealed to the Tax Court maintaining that the assessment should be the purchase price of the residence, namely, $125,000 not the assessed value Continue Reading

How About Adopting an Adult?

By James F. McDonough, Jr. on February 3rd, 2012 Posted in Adoption, Asset Protection, DUI, Generation Skipping Tax Exclusion, Taxes

Seldom do news stories raise the attention of many lawyers; however, yesterday there was an exception. A wealthy individual killed a young man while allegedly driving under the influence and is now awaiting trial in Florida (the “Driver”). [My condolences to the victim’s family.]

In 1991, the Driver established a trust in Texas for the benefit of his two children by his first marriage with a gift of $1.5m. {There is a question of whether the funds were those of the grandfather or the Driver.] The 1991 trust has grown substantially and is reportedly worth over $100 million today as the family business was sold before the accident for $1.4billion. The proper application of Generation Skipping Tax Exclusion in 1991 could allow the trust to continue indefinitely. This is an estate planning attorney’s version of winning the lottery or the Super Bowl.

The Driver, age 49, adopted, in Florida, his girlfriend, age 42, whereupon she became the third eligible beneficiary of the trust because the language, written in 1991, included children born to or adopted by the Driver after the execution of the trust instrument. The language is not unusual or nefarious. The victim’s attorneys state that the adoption gives the girlfriend-daughter 70% of one-third of the income of the trust, $1,000,000 immediately, $3,000,000 in 2012 and about $4,750,000 each year thereafter. The 70% of her one-third share is reflected in an “Adoption Agreement” with the 30% being distributed to the other beneficiaries, the two children, and other restrictions.

The victim’s counsel claims that the adoption and Adoption Agreement give Driver the ability to use his assets as his own and extrapolate that, with each adoption, subsequently draining the 1991 trust. I suppose Driver would find enough volunteers willing to be adopted.

Why the attack? Clearly the 1991 trust predated the accident and cannot be attacked on grounds of being a fraudulent transfer. The answer is found in the pleadings in that Plaintiff’s counsel wants the side agreement and the adoption to be introduced as evidence of Driver’s financial resources “…..so the jury can assess a punitive damage verdict in an amount that will punish (the Driver). They go on to say it is not clear whether an attempt to collect any judgment would have to be made against the 1991 Trust. I cannot say whether Driver has undertaken asset protection making collection impossible or not. There is no indication that Driver attempted to make a fraudulent conveyance from other assets in his name.

What does this case stand for? I will leave the rules of evidence to others, but clearly admission of foregoing, for purposes of determining the financial resources of the Driver for assessing damages, impacts the asset protection aspect of the 1991 Trust. If matters surrounding the adoption and 1991 Trust are placed before a jury that is assessing damages and they react by raising the damage award, is there overall asset protection? You can be certain that the attorneys for the other two beneficiaries are watching.

Nostalgia

By James F. McDonough, Jr. on February 1st, 2012 Posted in Blog, Internal Revenue Code, IRS

I received an email from the AICPA about a seminar. The email described the Internal Revenue Code (“IRC”) as having 71,600 pages and its size is increasing at a rate of 3.28% a year. It went on to state that one must keep current of all of the changes and reminded the reader that revenue rulings, revenue procedures, information releases, chief counsel memorandum and private letter rulings were not included in calculating the increase of 3.28%. It also did not include the volumes of regulations that put the flesh on the bones of the IRC.

I thought back to my first job in 1980 where I met a sixty year old tax attorney. He had decades of tax experience and was very thoughtful. We were plowing through all of the law, regulations and rulings one night and he commented that there was so much more information to examine. He recalled that when he was in law school the IRC and regulations were in one volume and had just gone to two volumes. That night the IRC consisted of two volumes and the regulations were in three volumes. For those of us who are old enough, these volumes were printed on tissue paper and had to be supplemented by the Internal Revenue Bulletins issued periodically. There were no hyperlinks, just young law school graduates rummaging through the library and the offices of other attorneys looking for books. I know that I have crossed over when I can say “I remember when…”

Bloomberg Radio announced that Gross Domestic Product was 2.7%. I agree that when the rate of growth in the tax code of 3.28% exceeds GDP, the economy will feel stagnant. Washington talks about a simplified tax code, but as our old tax attorney had pointed out, there is much more information to examine in this area of law than one might suspect. [For example, it is very hard to treat the timber industry the same as a retailer or a service provider.] If Washington attempts this great feat, I wish them luck, but it is difficult for me to see this change. There are proposals for a Value Added Tax (VAT), but it appears every country that has a VAT also has income taxes. For every country that taxes on a territorial basis and not a worldwide basis, there will still be inter company pricing to address. Perhaps the IRC is a reflection of the fact that the world we live in is complicated, very complicated and inter-related.

Tax Issues that Impact Your Wealth: NJ Case Law

By Frank L. Brunetti on January 31st, 2012 Posted in Audits, Blog, Blog News, New Jersey Case Law, Tax Issues that Impact Your Wealth, Taxes, Video, YouTube

Part II: New Jersey Case Law

Today, Scarinci Hollenbeck launched, “New Jersey Case Law”, the second installment for their seven part video series, “Tax Issues That Impact Your Wealth”. When a taxpayer fails to maintain proper statutory records, or if the records are deemed unreliable, independent determinations are made. In this video, I provide a few case examples to show how these determinations can vary in favor for the State or the tax payer. Each new installment to the series will be posted to this blog and Scarinci Hollenbeck’s YouTube each week, so be sure to stop there and check out the rest!