In the early morning hours of Jan. 1, 2013, the Senate, by a vote of 89-8, passed H.R.8, the “American Taxpayer Relief Act” (the Act). Late on that same day—hours after the government had technically gone over the “fiscal cliff”—the House of Representatives, by a vote of 257 to 167, also passed the bill. The Act, which the President is expect to quickly sign into law, would prevent many of the tax hikes that were scheduled to go into effect this year and retain many favorable tax breaks that were scheduled to expire. However, it would also increase income taxes for some high-income individuals and slightly increase transfer tax rates. This article provides an overview of the Act’s key provisions. Highlights of the Act include […]

We await details, but the last minute deal includes a provision to continue the $5.12 million estate tax exemption-and (subject to confirmation) the $5.12 million lifetime gift tax exemption as well! Whether such amounts remain indexed to inflation is not yet clear.  The status of the Generation Skipping Transfer Tax Exemption is not yet known.  Like other legislative changes before it, modifications of the new law, if passed, will be anticipated via technical corrections and IRS rulings. Based on a quick assessment of our clients who engaged in planning and gifting to beat the fiscal cliff, we believe that: 1) year end gifts remain valuable to remove future appreciation in the value of gifted property from the estate tax; 2) until other technical provisions of […]

The Obama Victory increases the chances of success for his administration’s estate and gift tax proposals, highlighted in the last post.  This is a middle ground compromise between the horror of returning to 2001 Exemptions and Rates, and the generosity of the 2012 $5.12 million exemption and 35% rate. Huge uncertainty remains.  At this point, it appears that the administration is threatening to let the economy go over the fiscal cliff to force Republican cooperation, but neither camp will accept culpability.  The result is a potential stalemate until the spring, when the you know what hits the fan, and they take action (best bet is Obama’s proposal), and pass the law retroactively to December 31st.  Pure speculation, but something to chew on. Looking down the road […]

Estate, Gift, and GST Tax Parameters (thanks to David Lane) ____________________________________________________________________________________ Rule in Effect in 2012 Rule scheduled to go into effect after Dec 31, 2012 Rule proposed by Obama Administration (General Explanations of the Administration’s Revenue Proposals, so called “Green Book”) Highest Federal  estate tax   rate 35% 55% (plus 5% surtax between $10 andapprox. $17.2 Million) 45% Federal estate taxequivalent exemption $5,120,000 $1 Million $3.5 Million Portability of estate tax  equivalent exemption to     surviving spouse Yes No Yes Basis adjustment rule Date of Death(or AVD) Value Date of Death(or AVD) Value Not stated explicitly but appears to endorse Date of Death (or AVD)Value Highest Federal gifttax rate 35% 55% (plus 5% surtax between $10 andapprox.  $17.2 Million) 45% Federal gift tax equivalent  exemption $5,120,000 $1 Million $1 […]

Evaluation Services, Inc., an appraisal firm, conducted an August survey of its client attorneys.  Here is what they reported: In our August poll, none of our respondents expect any resolution before the election while 35% think an answer will be forthcoming between the election and end of the year.  65% believe Congress will not address this issue until 2013!

See below: the rates are hard to believe.  My first home mortgage was 11%! Applicable Federal Rates (AFR) for September 2012 Period for Compounding Annual Semiannual Quarterly Month Short-Term AFR .21% .21% .21% .21% 110% AFR .23% .23% .23% .23% 120% AFR .25% .25% .25% .25% 130% AFR .27% .27% .27% .27% Mid-Term AFR .84% .84% .84% .84% 110% AFR .92% .92% .92% .92% 120% AFR 1.01% 1.01% 1.01% 1.01% 130% AFR 1.09% 1.09% 1.09% 1.09% 150% AFR 1.26% 1.26% 1.26% 1.26% 175% AFR 1.48% 1.47% 1.47% 1.47% Long-Term AFR 2.18% 2.17% 2.16% 2.16% 110% AFR 2.40% 2.39% 2.38% 2.38% 120% AFR 2.62% 2.60% 2.59% 2.59% 130% AFR 2.84% 2.82% 2.81% 2.80%

Click on the link below, to find your bracket and liability.  Let’s hope it stays this way next year! 2012 Tax Tables, SLG

Unless something changes, the demise of the Bush tax cuts in conjunction with the 3.8 percent Medicare surtax will result in the following maximum federal rates on investment gains and income recognized by individuals and trusts in 2013 and beyond.  These DO NOT include State Income Taxes: 23.8 percent (20 percent plus 3.8 percent) on long-term capital gains (versus 15 percent for 2012). 43.4 percent (39.6 percent plus 3.8 percent) on short-term capital gains (versus 35 percent for 2012). 43.4 percent (39.6 percent plus 3.8 percent) on income from dividends, interest, rental activities, royalties, and annuities (versus 15 percent on qualified dividends for 2012 and 35 percent on these other types of income for 2012). 43.4 percent (39.6 percent plus 3.8 percent) on ordinary income from passive business activities […]

The IRS just issued  proposed Regulations to provide guidance for our use of this wonderful new tax benefit. Portability, a concept available since 2010,  in which a surviving spouse is allowed to use a predeceased spouse’s unused applicable exclusion amount, effectively doubles the amount that a married couple may pass on to their beneficiaries free of estate taxation.  It is particularly important for those wealthy clients who never get around to creating trusts which normally protect these benefits. This law provides for portability between spouses of the $5 million estate tax exemption amount, ($5,120,000, as indexed for inflation, in 2012) for estates of decedents dying in 2011 or 2012.  This option is available only in the event that both spouses die after 2010, but before […]

The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (the “2010 Act”) made significant changes to the federal gift tax laws. Among other things, the 2010 Act provided that in 2011, the total lifetime gift tax exemption increased from $1,000,000 to $5,000,000. With indexing for inflation, the current lifetime exemption from gift tax is $5,120,000 ($10,240,000 for married couples who agree to “gift split”). Unless Congress acts to extend the provision, the gift tax exemption will revert to $1,000,000 (indexed for inflation), with a 55% tax rate on gifts exceeding the exemption, on January 1, 2013. Given the current budget crisis, Congress may also act to reduce the exemption amount prior to 2013. Accordingly, if you are in a position to do […]