Posts Tagged ‘defined value clause’

Tax Roundup, 11/1/2012: IRS walks away from defined-value fight.

Thursday, November 1st, 2012 by Joe Kristan

IRS withdraws appeal of non-charitable defined value gift case.  The IRS hates “defined value” charitable gifts of property.  These gifts specify that a donee will receive a certain amount of property; if the IRS successfully challenges the gifts, the donor agrees to give more property to make up the difference, so the charitable deduction stays the same and the IRS gets nothing for its efforts.  This result has been upheld in three different circuits.

But what if you have a non-charitable donee?  Then you would want to make the donee pay back part of the gift if the IRS challenges the value to avoid an increased gift tax.  The Tax Court upheld the concept in the Wandry case.  Now the IRS has withdrawn its appeal, reports Tax Analysts ($link).  Does this mean you can use a defined-value clause to limit gift tax exposure safely?  The article says it may be premature to think so:

“Practitioners will not be comfortable with the Wandry clause until at least two circuits have approved it, or at least one circuit and the full Tax Court,” said estate planning consultant Howard M. Zaritsky. “I feel that a Petter-style defined value clause, with a charitable residuary gift, is very safe, after the Tax Court and three circuits have approved it. I simply do not have that same degree of comfort about Wandry,” he said.

Stay tuned.

Related:  IRS loses another ‘defined value’ gifting case

 

Who says you can’t make money in your vacation home in the off-season?  A North Carolina couple found a lucrative use for their cottage while the neighbors were away.  From the Asheville Citizen-Times:

A Western North Carolina couple pleaded guilty to an elaborate scheme in which they filed some 1,000 false tax returns, bilking the government out of more than $3.5 million.

 Senita Birt Dill and Ronald Jeremy Knowles used tax preparation software programs and fraudulently obtained personal identification information to obtain refunds, according to a criminal complaint.

They rented a home on a lake surrounded by vacation homes in Polk County and used neighboring addresses on the fraudulent tax returns, then surreptitiously collected government checks from mailboxes.

Sure, we’ll pick up your mail while you’re away!  There must have been a flaw in their cunning plan, as both face potentially long prison terms for tax fraud and identity theft.

 

Just another hard-working public servant.  If you ever think a municipal income tax would be a great idea, this story from the Washington Examiner might give you pause:

An employee at the District’s Office of Tax and Revenue pleaded guilty Wednesday to filing more than a thousand fraudulent tax returns that netted more than $4 million in unwarranted refunds from D.C. and the federal government.

Kimberle Y. Davis, a “control technician” at the OTR, pleaded guilty to conspiracy to defraud the government and first-degree theft through her part-time job at a District-based tax service. She’s at least the third employee in Chief Financial Officer Natwar Gandhi’s 12-year tenure to be caught stealing, prompting Mayor Vincent Gray to press Gandhi for plans to overhaul the tax office.

It is apparently against the rules at OTR to have a tax-prep job.  I can’t imagine why…

Sacrebleu — More French Taxes.  David Brunori notes that the barbarians have crashed the gates in Paris:

 It is bad enough that the French have a 75 percent top marginal tax rate. Now the Socialists in power want to raise the tax on beer.

Because beer is apparently a big problem in France?

 

Brutal Assault on Reason Watch: 

TaxProf, Fleischer: The Winners and Losers Under Romney’s Tax Plan

 

TaxGrrrl,  Helping Out After Hurricane Sandy

Daniel Shaviro,  Post-storm update.  He lives in Manhattan and remains without power.

Trish McIntire,  Sandy Adjustments

Andrew Mitchel,  Expatriates for the Third Quarter of 2012

Robert D. Flach,  A YEAR-END TAX PLANNING RERUN – AVOIDING AN UNDERPAYMENT PENALTY

Kay Bell,  Happy Halloween tax breaks!

RIP: Remembering the DECEASED Iowa Pumpkin Tax (Joseph Henchman, Tax Policy Blog)

Going Concern, Dumb: Iowa Once Tried to Implement a Pumpkin Tax

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Defined values: When an IRS victory leaves them with no tax.

Friday, March 30th, 2012 by Joe Kristan

The Tax Court this week again upheld a “defined value clause” gift valuation.  Defined Value gifts are given under the condition that if the IRS successfully reduces the claimed value of a charitable gift, the donor will give (or receive back) additional property (usually closely-held business interests) to get the value to that originally claimed.  The IRS hates these because when they win, the deduction stays the same anyway because of the required adjustment.  Roger McEowen explains what this means for estate planning.  The TaxProf has a related post, “Gerzog: Defined Value Clauses and FMV.”

Cite: Wandry, T.C. Memo 2012-88

Related: IRS loses another ‘defined value’ gifting case

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