Archive for the ‘Estate Tax’ Category

IRS Extends Estate & Gift Tax Returns to July 15th

Friday, March 27th, 2020

If you have to file an Estate Tax return (Form 706) or Gift Tax return (Form 709), the IRS announced today that those are being extended to July 15th. The details are in Notice 2020-20. Here is the legalese:

The Secretary of the Treasury has determined that any person (as defined in section 7701(a)(1) of the Code) with a Federal gift tax or generation-skipping transfer tax payment due or the requirement to file Form 709 (United States Gift and Generation-Skipping Transfer Tax Return) on April 15, 2020, is also affected by the COVID-19 emergency for purposes of the relief described in this section III (Affected Taxpayer)…

For an Affected Taxpayer, the due date for filing Forms 709 (United States Gift and Generation-Skipping Transfer Tax Return) and making payments of Federal gift and generation-skipping transfer tax due April 15, 2020, is automatically postponed to July 15, 2020.

This relief is automatic; there is no requirement to file Form 8892 (Application for Automatic Extension of Time to File Form 709 and/or Payment of Gift/Generation-Skipping Transfer Tax) to obtain the benefit of this filing and payment postponement until July 15, 2020. However, an Affected Taxpayer may choose to file Form 8892 by July 15, 2020, to obtain an extension to file Form 709 by October 15, 2020 (any Federal gift and generation-skipping transfer tax payments postponed by this notice will still be due on July 15, 2020).

Defalcations Send Randolph Scott to ClubFed

Sunday, September 13th, 2015

When I hear the name Randolph Scott, I think of the late actor. He played leading men (generally heroes in Westerns) during his long and illustrious career. This Randolph Scott is anything but a hero.

Randolph Scott of Doylestown, Pennsylvania (near Philadelphia) was an estate and probate attorney. He represented an estate, one valued at more than $6 million (at date of death in 2005), so an Estate Tax Return needed to be filed. Estate tax of $520,351 should have been paid to the IRS. That didn’t happen.

Instead, Mr. Scott diverted “approximately $2,317,917.67” from the estate to his tax office. That’s theft. In 2009, the executor of the estate died. From the Department of Justice press release:

Scott failed to disclose the executor’s death so that Scott could continue to receive money intended for the estate at his law firm. Scott would then forge the deceased executor’s signature and deposit funds intended for the estate into accounts under his control. Scott had the successor executor sign a document renouncing the position of successor executor so that Scott could continue to forge the signature of the deceased executor and divert money belonging to the estate.

Mr. Scott pleaded guilty back in March to mail fraud, tax evasion, attempting to interfere with administration of internal revenue laws, and three counts of failure to file income tax returns. He was sentenced on Thursday to four years at ClubFed and must make of the $2.3 million he stole. Unlike a Randolph Scott movie, the only happiness with this ending is that this Randolph Scott won’t be doing this to anyone else.

Trust Attorney Showed No Trust

Wednesday, February 6th, 2013

Kenneth Hoesch was an attorney in Zeeland, Michigan. Mr. Hoesch specialized in trusts and estates. This is definitely an important specialty area; the correct application of trusts can increase the amount of money that flows to beneficiaries and decrease the money lost to federal and state estate and inheritance taxes. Unfortunately, Mr. Hoesch had other ideas.

Bluntly, he embezzled from the trusts to the tune of between $800,000 and $900,000. A third of the funds were stolen directly from trust accounts meant for beneficiaries (including charities). The remaining two-thirds was stolen from a pre-disbursement account. With interest, the balance due is now $1.295 million.

A potpourri of federal agencies and the local sheriff’s department investigated Mr. Hoesch. He was indicted and pled guilty last year to mail fraud and tax evasion (yes, the money he stole should have been on his tax return). He was sentenced today to 6 1/2 years at Club Fed. He also must make restitution to the victims and to the IRS (he owes nearly $212,000 to the IRS).

It’s very important that if you have trusts that the trustees be trustworthy. Having multiple trustees may not be feasible, but make sure you check references and review the accounts. Thankfully, it’s rare to see a trust attorney falling into distrust.

On Death, Taxes, and Estate Planning

Tuesday, October 16th, 2012

Today is October 16th. I just had a client fax me his signature documents, hoping that a day late isn’t a dollar behind. He’s getting a refund, so it won’t be that big of a deal.

October 15th and 16th are always difficult days for me. In 2006, my father passed away on the evening of October 15th. That was a Sunday night, so the tax deadline was the next day. I only had one tax return left to file, and I did that on Monday morning, October 16, before heading to my mother’s home near Los Angeles. By contrast my firm likely filed over 100 returns yesterday. Most of these returns had already been completed (we were just waiting for signature documents), so it was just pressing buttons.

But that’s not the point of this post.

I want to talk about our mortality. We are mortal. At some point in the future, I won’t be here. Thanks to the Internet, my words will be here. My family will be able to see pictures of me, but I won’t be here. That’s reality.

Back in the early 1990s my parents met with an estate planning attorney. They had a will, but my parents owned a home in an expensive area. It was likely that upon death 55% of their assets would go to the estate tax. They sought professional planning, and regularly met with the estate planning attorney to update the plan. When my father passed away, my mother had almost no economic worries because they planned well.

I sought professional planning a few years ago. I own a home, and while the estate tax exemption today is over $5 million, it could be just $1 million in 77 days. Look at your assets. Consider the value of your life insurance, the value of your 401(k) or IRAs, the value of your home. Is it over $1 million? And even that $1 million figure is too high in some areas. Some states have estate taxes, and they can begin at levels well under $1 million.

Do you have children? You have a will, of course, even if you haven’t written one. Everyone does, courtesy of your state. If you don’t want the state choosing who cares for your children should something happen to you, get professional help today. Make that appointment now.

I’m often asked about inexpensive services, such as LegalZoom and store-bought will kits. You get what you pay for is a common theme of the world. If you have a simple estate, and you’re not likely going to be subject to an estate or inheritance tax (yes, some states have inheritance taxes), and all you need is a will to make sure that your children are cared for by the ones you choose, this may be a possible choice. For anyone else, spend the money and seek out a local estate planning attorney.

Estate planning is a touchy subject, in that we feel immortal. But we’re not, and as the saying goes, “There but for the Grace of God go thee.” Life is fleeting and temporary, but the wealth you’ve earned doesn’t have to be. Get good planning. If you are one of our clients and would like a referral to an estate planning attorney, contact our office and we’ll put you in touch with someone local to you. This is definitely an area where local advice is necessary. When I moved from California to Nevada, I found that much of the paperwork that I had needed to be redone. This was especially true with my health care directive; Nevada law is different from California law.

Whether or not you believe in the hereafter, sooner or later you won’t be here. While my hope is that all my clients will outlive me (while I live a normal lifespan, of course), the cold hard reality of statistics refutes that. Like the tax filing deadline, you can’t make changes to your estate plan once you’re gone.

A Golden Ending

Sunday, September 23rd, 2012

Walter Samaszko, Jr. passed away in May of this year. He had been a recluse, and when odors started emanating from his Carson City, Nevada home, neighbors called the authorities. They discovered his body. No one knew his relatives were, so the house was cleaned out by the Clerk-Recorder’s office before the modest home (listed for just over $100,000) could be placed on the market.

They found quite a surprise: Austrian ducats, South African Kruggerrands, English Sovereigns, and US $20 gold pieces. All told, the gold is valued at about $7 million. The estate will be subject to the federal estate tax–the exclusion amount this year is $5.12 million–so the IRS will get about around $750,000. A first cousin in the San Francisco Bay Area will get the rest (after probate fees are paid), likely around $6 million. It doesn’t hurt that the current price of gold is just under $1,800 an ounce.

2010 Estate Tax Returns Now Due Later

Wednesday, September 14th, 2011

As I continue to wait for the IRS to release Form 8939, the IRS continues to postpone deadlines:

WASHINGTON — The Internal Revenue Service announced today that large estates of people who died in 2010 will have until early next year to file various required returns and pay any estate taxes due. In addition, the IRS is providing penalty relief to certain beneficiaries of these estates on their 2010 federal income tax returns.

This relief is designed to give large estates, normally those over $5 million, more time to comply with key tax law changes enacted late last year. Revised versions of the estate tax forms are now available on, and the carryover basis form will be released this fall.

The IRS is providing the following relief:

  • Large estates, opting out of the estate tax, now will have until Tuesday, Jan. 17, 2012, to file Form 8939. This special carryover basis form, required of estates making this choice, was previously due on Nov. 15, 2011. Because this is a change in the specified due date rather than an extension, no statement or form needs to be filed with the IRS to have this new due date apply.
  • 2010 estates that request an extension on Form 4768 will have until March 2012 to file their estate tax returns and pay any estate tax due. Normally, a six-month filing extension is automatically granted to estates filing this form, but extensions of time to pay are granted only for good cause. As a result, most 2010 estates that timely file Form 4768 will have until Monday, March 19, 2012 to file Form 706 or Form 706-NA. For estates of those dying late in 2010 (after Dec. 16, 2010 and before Jan. 1, 2011), the due date is 15 months after the date of death. No late-filing or late-payment penalties will be due, though interest still will be charged on any estate tax paid after the original due date.

 I have one Form 8939 to complete…and as I tell my clients, we’re in hurry up and wait mode. Or as my niece says, “Soon…maybe.”

While I Was Out…

Wednesday, August 10th, 2011

…Nothing much happened, right? (I’m ignoring that AAA/AA+ thing, of course.)

The IRS announced that Form 8939 for estates for 2010 will be due on November 15th. However, the form has yet to be released.

Joe Kristan noted that the Wesley Snipes strategy didn’t work (again), this time in nearby Bakersfield. A Mark DeVries didn’t like the results of his audit, and among his other brilliant ideas he sued the IRS Revenue Officer and Revenue Agent handling the case…for $50 million (plus punitive damages). As Joe noted,

Suing your IRS agent for “libel, slander, nuisance, intentional and negligent infliction of emotional distress, trespass, conspiracy and imposition of a constructive trust” hasn’t worked yet. Perhaps a less confrontational approach to IRS exams would have been wise.

Peter Pappas noted that low taxes lead to economic growth. Well, I knew that but a lot of people in Washington don’t.

Phil Hodgen is running a series on PFIC’s. If you deal with them, it’s a must read.

The Franchise Tax Board has a new amnesty program (aka “Voluntary Compliance Initiative 2”). This program is for taxpayers who avoided California tax through either Offshore Financial Arrangements or Abusive Tax Avoidance Transactions. Filing period for this amnesty runs through the end of October. Taxpayers who sign up for this amnesty must file amended returns, sign a participation agreement, and pay all tax, penalties and interest by the end of October. Note that the Noneconomic Substance Transaction Understatement Penalty, the Accuracy Related Penalty, the Interest Based Penalty, and the Fraud Penalty are removed with this amnesty; however, the Large Corporate Understatement Penalty (if applicable) and the Amnesty Penalty cannot be waived.

Finally, I feel relaxed and ready for ten days of tax work to be squashed into the rest of the week. Yes, I enjoyed my vacation.

The Estate Tax

Monday, January 12th, 2009

The Wall Street Journal reported this morning that Democratic leaders in Congress expect to introduce legislation continuing the Estate Tax in 2010. Under current law the Estate Tax is scheduled to disappear in 2010 but reappear in 2011 at the old rate of 55% with a $1 million exemption. In 2009 the Estate Tax is 45% with a $3.5 million exemption. (Note that the exemption mentioned above is the lifetime Estate Tax exemption. Gift Tax returns are figured into this exemption.)

President-Elect Obama pledged to keep the Estate Tax at its current level ($3.5 million exemption with a 45% tax rate). I expect such a measure would pass Congress.