Calculating Estate Tax Portability Exemption Amount: The .
Calculating Estate Tax Portability Exemption Amount:The Nuts and Bolts of DSUE ComputationsPlanning Opportunities and Compliance Challenges in Reporting the Deceased Spouse Unused Exemption AmountWEDNESDAY, JANUARY 20, 2016, 1:00-2:50 pm EasternIMPORTANT INFORMATIONThis program is approved for 2 CPE credit hours. To earn credit you must: Participate in the program on your own computer connection (no sharing) – if you need to registeradditional people, please call customer service at 1-800-926-7926 x10 (or 404-881-1141 x10). Straffordaccepts American Express, Visa, MasterCard, Discover. Listen on-line via your computer speakers. Respond to five prompts during the program plus a single verification code. You will have to write downonly the final verification code on the attestation form, which will be emailed to registered attendees. To earn full credit, you must remain connected for the entire program.WHO TO CONTACTFor Additional Registrations:-Call Strafford Customer Service 1-800-926-7926 x10 (or 404-881-1141 x10)For Assistance During the Program:-On the web, use the chat box at the bottom left of the screenIf you get disconnected during the program, you can simply log in using your original instructions and PIN.
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Calculating Estate Tax PortabilityExemption AmountJanuary 20, 2016Robert M. Maxwell, Esq.James Daneri, Esq.GlenmedeBlanchard Krasner & m
NoticeANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BYTHE SPEAKERS’ FIRMS TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANYOTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THATMAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING ORRECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.You (and your employees, representatives, or agents) may disclose to any and all persons,without limitation, the tax treatment or tax structure, or both, of any transactiondescribed in the associated materials we provide to you, including, but not limited to,any tax opinions, memoranda, or other tax analyses contained in those materials.The information contained herein is of a general nature and based on authorities that aresubject to change. Applicability of the information to specific situations should bedetermined through consultation with your tax adviser.
Calculating Estate Tax Portability ExemptionAmount: The Nuts and Bolts ofDSUE ComputationsPresented by:James R. Daneri, J.D., LL.M. TaxationJanuary 20, 2016800 Silverado St, 2nd Floor La Jolla, CA 92037 858.551.2440 jdaneri@bkflaw.com5
Tax Planning“Anyone may so arrange his affairs that his taxesshall be as low as possible; he is not bound tochoose that pattern which will best pay theTreasury; there is not even a patriotic duty toincrease one’s taxes.”—Judge Learned Hand,Gregory v. Helvering, 69 F2d 809, 810 (2d Cir. 1934).6
OutlineI.Portability – It’s Here to StayII.Deceased Spousal Unused Exclusion Amount (“DSUEA”)III.DSUEA on IRS Form 706 Estate Tax Return Part 6IV.DSUEA on IRS Form 709 Gift Tax Returns Schedule CV.Filing Form 706 Solely To Elect PortabilityVI.Planning OpportunitiesVII.Recent Developments in Estate Tax Reporting7
I.Portability – It’s Here to StayOverview:A. What is Portability?B. Legislative HistoryC. Federal Estate Tax BasicsD. Advantages of PortabilityE. Disadvantages of Portability8
I.Portability – It’s Here to StayA. What is Portability? The ability to transfer a deceasedspouse’s unused gift/estate tax exclusion amount to his/hersurviving spouse.B. Legislative History: Portability was introduced by Section303(a) of the Tax Relief, Unemployment InsuranceReauthorization and Job Creation Act of 2010(“TRUIRJCA”). The American Taxpayer Relief Act of 2012(“ATRA”) made portability permanent with the removal ofthe statute’s sunset provision.9
I.Portability – It’s Here to StayC.Federal Estate Tax Basics: “A tax is hereby imposed on the transfer of the taxableestate of every decedent who is a citizen or resident of the United States.” (IRC § 2001(a))Federal Estate Tax Rate – The Federal Estate Tax Rate is graduated with a maximum rate of 40% on taxable estates over 1,000,000. (IRC § 2001(c))Basic Exclusion Amount – Each taxpayer has a 5,000,000 Basic Exclusion Amount from Federal Estate and Gift Tax,which is indexed for inflation adjustments for decedents dying after 2011. The Basic Exclusion Amount for decedentswho died in 2015 is 5,430,000 and for decedents dying in 2016 is 5,450,000. (IRC § 2010(c)(3))Applicable Exclusion Amount – The Applicable Exclusion Amount is the Basic Exclusion Amount plus any DeceasedSpouse’s Unused Exclusion Amount (“DSUEA”) from a prior spouse. (IRC § 2010(c)(2))Unified Federal Estate & Gift Tax Credit – The Applicable Exclusion Amount is unified with the Federal gift taxexclusion and is lowered by the value of taxable gifts made during the life of a decedent or a deceased spouse for whichno gift tax was paid.Estate Tax Deductions – A decedent’s “taxable estate” is the gross estate including taxable gifts for which no gift tax waspreviously paid, net of the Estate Tax Marital Deduction, Charitable Deduction, and costs necessary to the administrationof the decedent’s estate. (IRC §§ 2053, 2055, and 2056)10
I.D.Portability – It’s Here to StayAdvantages of Portability:1.Allows full advantage of Applicable Exclusion Amount2.Simplified Trust Administration – AB Trusts no longer necessary3.Obviates need to segregate assets upon 1st Spouse’s death4.Enables a Basis Adjustment on Second Spouse To Die5.Potential Expansion of Applicable Exclusion Amount if multiplepredeceased spouses6.Possible Avoidance of State Transfer Taxation in Decoupled States11
I.E.Portability – It’s Here to StayDisadvantages of Portability:1.Future growth still inside the estate2.Requires filing of a Form 706 Estate Tax Return for a deceasedspouse’s nontaxable estate3.Unexpected state estate tax if survivor relocates4.Planning issues for couples with children from prior marriage5.Family discord with regard to making the election6.GST Exemption not portable12
II.Deceased Spousal Unused ExclusionAmount (“DSUEA”)Overview:A. DSUEA Calculation - IRC § 2010(4)B. DSUEA ExampleC. Election RequiredD. Gifts By Surviving SpouseE. “Last Deceased Spouse”F. Miscellaneous Special Rules13
II.A.Deceased Spousal Unused Exclusion Amount(“DSUEA”)DSUEA Calculation - IRC § 2010(4): With respect to a survivingspouse of a deceased spouse dying after December 31, 2010, the term“deceased spousal unused exclusion amount” means the lesser of:1.The Basic Exclusion amount in the year the deceased spouse died;OR2.The Applicable Exclusion amount of the last such deceased spouseof such surviving spouse minus the sum of the deceased spouse’s taxable estate and theamount of adjusted taxable gifts of the deceased spouse for which no gift tax was paid.14
II.Deceased Spousal Unused Exclusion Amount(“DSUEA”)B.DSUEA Example: Harry Husband made 3.5 million in gifts in 2002,when the applicable exclusion amount for gift tax purposes was 1 million. Harrypaid gift tax on 2.5 million in gifts. In 2015, Harry died with a taxable estate of 3million. Harry’s DSUEA is the lesser of:(1) 5,430,000 (Basic Exclusion Amount at the time of Harry’s death)OR(2) 5,430,000 (Basic Exclusion Amount)MINUS 4,000,000 ( 1 million of adjusted taxable gifts 3 million taxable estate) 1,430,000Harry’s DSUEA Amount is 1,430,000.Note, for the purpose of this calculation only, Harry’s DSUEA calculation does not include taxablegifts for which gift tax has already been paid.15
II.Deceased Spousal Unused Exclusion Amount(“DSUEA”)C.Election Required: The availability of DSUEA is not automatic and must beelected. Under IRC § 2010(5), DSUEA may only be factored into a surviving spouse’sapplicable exclusion amount if the executor of the deceased spouse files an estate tax returnfor the deceased spouse on which such amount is computed and makes a DSUEA election onsuch return that such amount may be so taken into account.1. Election Irrevocable: Once made, the DSUEA election is generallyirrevocable. An executor, on or before the due date of the return (including extensionsactually granted) can make or supersede a portability election previously made.2. Election Deadline: The DSUEA election must be made on a timely filed Form706 (including extensions) and cannot be made retroactively, with two limited exceptions:a. Treasury Regulation 301.9100-2 – For taxpayers who filed an estate taxreturn without an extension, but failed to make the DSUEA election, anautomatic 6 month extension applies.b. Treasury Regulation 301.9100-3 – For taxpayers failing to timely file adeceased spouse’s estate tax return, relief may be requested under TreasuryRegulation 301.9100-3 if such failure was reasonable and in good faith, but suchrequest must be made by private letter ruling.16
II.Deceased Spousal Unused Exclusion Amount(“DSUEA”)D.Gifts By Surviving Spouse: The DSUEA is available for use by asurviving spouse at any time following the deceased spouse’s death, whetherfor gifts or testamentary transfers, assuming a timely and effective portabilityelection is made on Form 706 for the decedent, and the decedent is the lastdeceased spouse at the time of transfer by the surviving spouse. (Regs. §§20.2010-3(a)(1) and 25.2505-2(a)(1))17
II.E.Deceased Spousal Unused Exclusion Amount(“DSUEA”)“Last Deceased Spouse”:1.The DSUEA only applies to the unused exclusion amount of asurviving spouse’s last deceased spouse.2.The last deceased spouse is the most recently deceased individual who,at that individual’s death after December 31, 2010, was married to the survivingspouse, regardless of whether such deceased spouse made a portability election.The identity of the last deceased spouse is unaffected by marriage to a new spouseor subsequent divorce.3.Note, when a survivor makes a taxable gift in a given year, anyavailable DSUEA amount is applied first, before the survivor’s own basicexclusion amount.4.Further, because the DSUEA amount available to a survivor at a givenmoment is the DSUEA amount of the survivor’s last deceased spouse, it ispossible for a busy survivor to use the DSUEA amount of an unlimited number ofdeceased spouses to shelter gifts far in excess of the typical exclusion amounts.18
II.Deceased Spousal Unused Exclusion Amount(“DSUEA”)F. Miscellaneous Special Rules:1.Persons Permitted to Make a Portability Election: Aportability election for a deceased spouse may be made by an appointedexecutor or administrator of the decedent OR if no person has been appointedexecutor or administrator a non-appointed person in actual or constructivepossession of the decedent’s property.2.Property Passing to QDOTs: The DSUEA amount for anyproperty passing to a QDOT is tentative, subject to reduction for any tax dueon distributions made from QDOT or any other taxable event relating to theQDOT.19
III.A.B.C.DSUEA on IRS Form 706 Estate Tax Return Part 6Portability Election on Form 706 – The estate of a decedent with a survivingspouse elects portability of the DSUEA by completing and timely filing Form706. No further action is required to elect portability.Opting Out – The estate of a decedent with a surviving spouse which files Form706 but does not wish to elect portability may opt out by checking the box on Part6, Section A.DSUE Amount Portable to Surviving Spouse – Section C of Form 706 sets forthe basic calculation which incorporates items reported on Part 2 of Form 706.Effectively a decedent’s DSUEA is the:Applicable Exclusion Amount plus Taxable GiftsMINUSThe Gross Value of Decedent’s Estate net of any allowable deductions, plus anyTaxable Gifts other than those for which gift tax was paid or payable20
IV.A.B.C.DSUEA on IRS Form 709 Gift Tax Return Schedule CIRS Form 709, Schedule C, Part 1: A surviving spouse can apply the DSUEAfrom the survivor’s last deceased spouse to gifts made during the survivorsremaining life. For a particular reporting year, all current and prior gifts for whicha survivor is applying DSUEA from a last deceased spouse should be reported inPart 1.IRS Fom 709, Schedule C, Part 2: A surviving spouse who is properly applyingthe DSUEA of the survivor’s other deceased spouses to gifts made during thesurvivor’s life should report the amount of such gifts in Part 2.Survivor’s Applicable Credit: The Survivor’s Applicable Credit against gift taxfor a given year is the Survivor’s basic unified estate and gift tax exclusionamount, plus any DSUEA properly applied from the survivor’s last deceasedspouse, plus any DSUEA properly applied previously from the survivor’s otherpredeceased spouses. The Applicable Credit is then applied against all taxablegifts made by a taxpayer in current and previous years in determining whetherany gift tax is owed.21
V. Filing Form 706 Solely To Elect PortabilityA. Special Rule Under the special rule of TreasuryRegulations § 20.2010-2(a)(7)(ii), executors of estates whoare not required to file Form 706 because the gross value ofthe estate and previous taxable gifts is below the basicexclusion amount, but who are filing solely to electportability of the decedent’s DSUEA to the surviving spouseare not required to report the value of certain propertyeligible for either the marital deduction or the charitablededuction.B. Reporting - The value of any of those assets must beestimated and included in the total value of the gross estate,rounded down to the nearest 250,000, but needn’t beitemized on the recapitulation in Form 706, Part 5.22
VI. Planning OpportunitiesA.B.C.D.E.F.FlexibilityMarried Couples with Tweener EstatesMarried Couples with Disproportionate AssetsPlanning for Difficult AssetsSurviving Spouse Gift PlanningDisclaimer Trusts23
VII. Recent Developments in Estate TaxReportingA. Basis Tracking Under IRC § 6035 – Executors of estate’s requiredto file an estate tax return must furnish the IRS and an estate’sbeneficiaries a statement identifying the value of each propertyinterest reported on Form 706 within 30 days of filing return. IRSNotice 2015-57 delayed the initial due date of this requirementuntil February 29, 2016. In December, IRS released draft Form8971, Information Regarding Beneficiaries Acquiring PropertyFrom a Decedent.B. Estate Tax Return Closing Letters – Will no longer beautomatically issued. Taxpayers will need to specifically request aclosing letter by calling (866) 699-4083 at least four months afterthe return has been filed.C. Tightening of Valuation Discount Rules Under IRC § 2704 ?24
Robert M. Maxwell, Esq.
Lori Silpada (wife)Fred Crooger (husband)1/3/2014Lori Silpada dies3/17/2014Fred Crooger marries LisaVanderflatts2/2/2015Lisa Vanderflatts dies12/31/2015Fred Crooger dies26
1,511,000 gift to sister Monica in 2002 11,000 annual gift tax exclusion 1,000,000 annual credit equivalent-gift tax due when lifetime gifts exceed 1,000,00027
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SUMMARY: 1,511,000 gift to sister 11,000 annual gift tax exclusion 1,500,000 net taxable gift 210,000 gift taxTax is on amount of the gift over 1,000,000Tax is on 500,00032
Fred M. Crooger – surviving spouse Moses Fine - son33
1,000,000 Transworld life insurance Beneficiary: Son 2,000,000 house -- joint tenancy withhusband 500,000 Charitable Remainder Unitrust Now payable to Germantown YMCA – Charity 500,000 IRA – Beneficiary: husband34
5,340,000 filing threshold for Form 706 – FederalEstate Tax Return 1,000,000 1,000,000 500,000 500,000 3,000,000------life insurance½ of jointly owned houseCharitable Remainder UnitrustIRAgross estate 1,500,000 -- 2002 taxable gift 4,500,000 -- gross estate plus taxable gifts35
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Box 11:If you are estimating the value of assetsincluded in the gross estate on line 1pursuant to the special rule of Reg. section20.2010-2T(a)(7)(ii), check here XX37
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Estimated assets to spouse or charity: 1,000,000 500,000 500,000 2,000,000-----½ of jointly owned houseCharitable Remainder UnitrustIRAestimated assets43
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1,000,000 life insurance to son 1,500,000 taxable gift to sister 2,500,000 uses applicable credit amountMarital and charitable items do not use credit48
3,340,000 DSUE to surviving spouse49
1/3/14 Lori Silpada diesFred M. Crooger is surviving spouse10/3/14 – Lori’s executor files a Federal Estate TaxReturn and elects portability3/17/14 Fred M. Crooger marries LisaVanderflatts6/1/14 Fred M. Crooger gives 2,014,000 to JanetCrooger (his daughter)50
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1/3/14 Lori Silpada diesFred M. Crooger is surviving spouse10/3/14 – Lori’s executor files a Federal Estate Tax Return and electsportability 3,340,000 DSUE portable to Fred M. Crooger3/17/14 Fred M. Crooger marries Lisa Vanderflatts6/1/14 Fred M. Crooger gives 2,014,000 to Janet Crooger (his daughter)4/15/15 Fred M. Crooger files gift tax return2/2/15Lisa Vanderflatts dies56
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1,000,000 to Jiggy Vanderflatts (son) 8,450,000 residue to Fred M. Crooger(husband)59
DSUE to Fred Crooger: 4,430,00060
1/3/14 Lori Silpada diesFred M. Crooger is surviving spouse10/3/14 – Lori’s executor files a Federal Estate Tax Return and elects portability(DSUE 3,340,000)3/17/14 Fred M. Crooger marries Lisa Vanderflatts6/1/14 Fred M. Crooger gives 2,014,000 to Janet Crooger (his daughter) (uses 2,000,000 DSUE)2/2/15 Lisa Vanderflatts dies11/2/15 Lisa’s executor files a Federal Estate Tax Return and elects portability(DSUE 4,430,000)12/31/15 Fred M. Crooger dies61
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Residue of estate to daughter64
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18,000,000( 250,000) 2,000,000 19,750,000gross estatedeductionsgiftssubject to estate tax67
5,430,000 basic exclusion amount 6,430,000 DSUE from predeceased spouses 11,860,000 applicable exclusion amount68
Taxable estate: 19,750,000Federal estate tax: 3,156,00069
Amount of gifts on which gift tax was paidincreases the DSUEFiling a 706 for portability only – possible toestimate assets passing to a spouse or charityDSUE applied to surviving spouse’s lifetimegifts first“Last deceased spouse rule”70
Jan 20, 2016 · III. DSUEA on IRS Form 706 Estate Tax Return Part 6 A. Portability Election on Form 706 – The estate of a decedent with a surviving spouse elects portability of the DSUEA by completing and timely filing Form 706. No further action is required to elect portability. B. Opting Out – The estate of a decedent with a surviving spouse which files Form
The Unified Credit connects the Estate Tax Exemption to Lifetime Gifting and the Generation Skipping Tax ("GST") Tax Cuts and Job Act of 2017 - Increased Individual Federal Estate Tax Exemption to 11.18M with inflation adjustment, maintained portability With Inflation Adjustment, the 2021 Federal Estate Tax Exemption is now 11.7M
Jan 10, 2020 · The homestead exemption form is also for filing 100% Disabled Veteran’s Exemption, and Surviving Spouse of _ Exemption. JO & Co. THE HOMESTEAD EXEMPTION FORM IS ALSO USED FOR DISABLED PERSON EXEMPTION AND AGE 65 OR OLDER EXEMPTION. Montgomery Country has a s
Exemption 7(C) Exemption 7(C) provides protection for personal information in law enforcement records. This exemption is the law enforcement counterpart to Exemption 6. (See the discussions of the primary privacy-protection principles that apply to both exemptions under Exemption 6, above.)
estate is not subject to the federal estate tax if the value of your estate is less than the exemption amount. In 2020 the exemption amount was 11.58 million and in 2021 it is 11.7 million.11 This exclusion amount includes life insurance death benefits. Even if your estate is under the current tax threshold, life insurance proceeds could put
farmer must complete a pA Exemption Certificate (REV-1220) for the supplier. Farmers are not required to obtain a sales tax license number or sub - mit a sales tax license number to a supplier prior to receiving a sales tax exemption on purchases of tax-exempt tangible personal property directly used in farming operations. one exemption .
Estate Planning . 7. The Estate Tax Landscape . Federal Estate Taxes . Year . IRS . Top Tax Rate . 2011-2012 . 2013 and beyond . 35% . 40% . In 2018, the federal estate tax exemption is generally 11,180,000 for individuals and 22,360,000 for married couples . Forbes.com 1/2017 *Internal Revenue Service, Rev. Proc. 2018-18
Tax Basics -- Federal Estate Tax Estate tax applies to transfers made at death Generally does not apply to transfers made to spouse or charity 5,340,000 exempt from all transfers (gifts and estates) combined in 2014 Any portion of exemption used for gifts will be unavailable to the estate Your Estate Beneficiary Transfer at Death
A) To inform the reader that bleeding needs to be controlled. B) To describe the scene of an accident. C) To persuade the reader to attend a First Aid course. D) To instruct the reader on what to do if they come across an accident. ACCIDENT: Treatment aims 1. Control bleeding 2. Minimise shock for casualty 3. Prevent infection – for casualty .
