Pending Limits on Valuation Discounts Associated with Family Estate Planning are Ominous


Section 2704 is the section of the Internal Revenue Code (the tax bible) used to set the rules for how discounts are computed for transfers of businesses or rights within a family.  The Internal Revenue Service is proposing changes on these rules.

One of the most popular structures utilizing this Code, and my personal favorite, is the family limited partnership (FLP).  The FLP is created by the family to hold assets.  Normally the assets belong to Mom and/or Dad (Parent) and they desire to get the potential growth in these assets, and the asset value itself, out of their estate.  Parent creates the entity and transfers the assets into it.  Parent normally owns a general partner interest and controls the entity.  Parent gifts the limited interest to heirs.  Because the recipient is not able to vote, leverage, or sell their interest the fair value of the interest given is less than the value of the underlying assets.

The technique is a very powerful way of savoring the current estate tax exemption.  If the gifting can utilize a 35% discount of value, an estate exemption of $5.3M allows you to give entities with underlying assets of $8.15M!

This new Proposed Regulation, will make the calculation of the fair value more difficult and certainly, at least initially (until we figure something else out) reduce the discount eligible to the gift.

HOWEVER, the other goal of the planning tool is to remove the value of the gift from the estate and retain control of the total earning power of the assets given.  THESE attributes are not lost with the proposed regulation.

Are you interested in learning more about FLP’s?  Please give us a call at 314-993-4285.


Moving Expenses Can Be Deductible


Did you move due to a change in your job or business location? If so, you may be able to deduct your moving expenses, except for meals. Here are the top tax tips for moving expenses.

In order to deduct moving expenses, your move must meet three requirements:

  1. The move must closely relate to the start of work.  Generally, you can consider moving expenses within one year of the date you start work at a new job location. Additional rules apply to this requirement.
  2. Your move must meet the distance test.  Your new main job location must be at least 50 miles farther from your old home than your previous job location. For example, if your old job was three miles from your old home, your new job must be at least 53 miles from your old home.
  3. You must meet the time test.  After the move, you must work full-time at your new job for at least 39 weeks in the first year. If you’re self-employed, you must meet this test and work full-time for a total of at least 78 weeks during the first two years at your new job site. If your income tax return is due before you’ve met this test, you can still deduct moving expenses if you expect to meet it.

See Publication 521, Moving Expenses, for more information about these rules. It’s available on anytime.

If you can claim this deduction, here are a few more tips from the IRS:

  • Travel.  You can deduct transportation and lodging expenses for yourself and household members while moving from your old home to your new home. You cannot deduct your travel meal costs.
  • Household goods and utilities.  You can deduct the cost of packing, crating and shipping your things. You may be able to include the cost of storing and insuring these items while in transit. You can deduct the cost of connecting or disconnecting utilities.
  • Nondeductible expenses.  You cannot deduct as moving expenses any part of the purchase price of your new home, the cost of selling a home or the cost of entering into or breaking a lease. See Publication 521 for a complete list.
  • Reimbursed expenses.  If your employer later pays you for the cost of a move that you deducted on your tax return, you may need to include the payment as income. You report any taxable amount on your tax return in the year you get the payment.
  • Address Change.  When you move, be sure to update your address with the IRS and the U.S. Post Office. To notify the IRS file Form 8822, Change of Address.

Premium Tax Credit – Changes in Circumstances. 

If you or anyone in your family purchased health coverage through the Marketplace and had advance payments of the premium tax credit paid in advance to your insurance company to lower your monthly premiums, it is important to report life changes to the Marketplace when they happen. Moving to a new address is one change you should report. Other things to report include changes in your income, employment, family size, and gaining or losing eligibility for other coverage. Reporting life changes as they happen allows the Marketplace to adjust your advance credit payments. This will help you avoid a smaller refund or unexpectedly owing taxes when you file your tax return.

If you have any questions please do not hesitate to give us a call at our office, 314-993-4285.

This information was received from IRS Tax Tips Issue “IRS Summertime Tax Tip 2016-20”

Are You Planning for the Changes in Estate Taxes?

Last chance to REALLY plan for the Future:

On December 31, 2012 an opportunity to plan for the future of your family expires. By now we have all heard about the change in the estate tax, as the line goes, Republicans want the tax on estates eliminated and Democrats want to tax all of the value of an estate for redistribution. the only sure bet now is that the estate tax provisions are going to change.

The only real consensus in the industry holds that Congress will take some sort of action on the estate tax issue, however, few believe the current estate provisions will be renewed at present levels.

We believe You should be prepared regardless of which way the wind blows. And we believe much of the industry is missing the REAL opportunity the current law allows.

Generational skipping.

We are able to structure your estate, now, to gift valuable assets to your heirs and still retain control. Under current law, we can accomplish this goal to a successive generation without tax. We of course won’t “skip” your kids in the sense of allowing them to benefit from your assets when you no longer do, but we can skip the estate tax for you kids and allow them to benefit.

Interesting? Let us show you how.