Recent Celebrity Estate Planning Blunders

This week, I have decided to take a break from our normal more technical writing and discuss some recent celebrity estate planning blunders that have come to light. Not only are these cases interesting and entertaining, but they also can provide valuable lessons when it comes to estate planning. In a previous article, I wrote…
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RERI Revisited on Appeal, $33M Deduction Denial Upheld

The Tax Court’s denial of a $33 million charitable deduction was affirmed by the D.C. Circuit Court of Appeals in a decision handed down on May 24, 2019. While the purported dollar value of the donation makes this case stand out, it involves a number of important issues including gift substantiation, substantial compliance, valuation, and…
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Sixth Circuit Clarifies Substance Over Form Doctrine in “MidCo” Case

After the Summa Holdings case, the substance over form doctrine was left with a significant black eye by the Sixth Circuit. On May 15, 2019, the Sixth Circuit, upheld a transferee liability claim against shareholders of a Tennessee corporation while also clarifying its holding is Summa Holdings. While the Summa Holdings discussion is certainly interesting, the…
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Tax Court Acknowledges Remote Material Participation

Can the material participation tests of Section 469 be met remotely? The Tax Court says yes. In a recent Memorandum Opinion, the Tax Court (the “Court”) held that Fred Barbara (“Barbara”) satisfied the requirements for materially participating in his Chicago based business despite living in Florida approximately 60% of the year. The Internal Revenue Service (the…
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DDIY: Don’t Do it Yourself

Introduction The do-it-yourself (DIY) movement has been very popular in recent years. Some people are attracted to the idea of DIY because they like the feeling of satisfaction that comes with accomplishing a task, whatever it may be. Others perceive DIY as a way to save money (i.e., they are just cheap). Some tasks are…
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Can My Trust Take a Charitable Deduction?

After the Tax Cuts and Jobs Act which came into effect in 2018, charitable deduction planning has changed. This is a result of a handful of changes, but the primary changes for purposes of this discussion relate to a doubling of the standard exemption, elimination of most itemized deductions, and reduction in individual income tax…
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Finish that Rollover before Declaring Bankruptcy

In the recent case of In Re Jones, 123 AFTR 2d 2019-_________ (Bktcy. Ct. IL), an individual taxpayer and petitioner for bankruptcy relief under chapter 7 was able to withdraw $50,000 from his individual retirement account (“IRA”), deposit the funds into his personal account, spend $30,000 of the funds on personal items (primarily lottery tickets),…
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When Your Captive Is Not In the Insurance Business

In a recent Tax Court Memorandum opinion, the Tax Court (the “Court”) held that a microcaptive insurance arrangement did not meet the requirements to be classified as insurance for federal income tax purposes, and thus upheld the Internal Revenue Service’s (the “IRS”) Notice of Deficiency (the “Notice”) against the company and its related taxpayers who…
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Cavanaugh – Deduction Denied for CEO Misconduct Settlement Payments

In Cavanaugh v. Commissioner, the Fifth Circuit Court of Appeals addressed the deductibility of settlement payments made by a corporation to avoid liability arising from the misconduct of a shareholder-employee. Affirming the Tax Court ruling from 2012, the Fifth Circuit held that the settlement payments at issue in Cavanaugh were not deductible under IRC § 162(a) because the…
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Court Finds IRS’ Attempt to Foreclose on Trust Property Plausible

Are assets transferred by your parents into a trust for your benefit subject to your tax liabilities? In general, no, provided the trust has the proper spendthrift language. Longstanding common law has recognized spendthrift clauses in trusts which restrain voluntary alienation of trust assets, thereby preventing a beneficiary’s creditors from reaching trust assets to satisfy…
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