The Internal Revenue Code prescribes minimum imputed interest rates and time-value-of–money factors applicable to certain loan transactions and estate planning techniques. These rates are tied formulaically to market interest rates. The Internal Revenue Service updates these rates monthly.
These are commonly applicable rates in effect for February 2014:
Short Term AFR
(Loans with Terms <= 3 Years) 0.30%
Mid Term AFR (Loans with Terms > 3 Years and <= 9 Years) 1.97%
Long Term AFR (Loans with Terms >9 Years) 3.56%
7520 Rate (Used in many estate planning vehicles) 2.4%
The Federal Estate Tax Law sometimes allows a surviving spouse to “inherit” a deceased spouse’s unused estate tax exemption. This reduces the estate tax to the family when the surviving spouse dies, under current law saving the family as much as 40 cents of estate tax for every dollar of “inherited” exemption. This is only possible, however, only if an estate tax return claiming the transferred exemption is timely filed for the deceased spouse’s estate.
The IRS has announced that a surviving spouse of a person who died before January 1, 2014, will be granted an limited extension to file such a return. For some, this creates a second opportunity to revisit taking advantage of this tax benefit.
The IRS has backtracked on its guidance from 2012, by exempting certain self-rental income from the new 3.8% Medicare surtax. The new guidance applies common sense by aligning the tax treatment of self-rental arrangements with the passive loss rules under Section 469. Taxpayers should be able to avoid the surtax with a little pre-planning. Continue reading →
A recent Tax Court case, Pool v. Commissioner, is the first court opinion in many years describing the limits of a popular capital gain tax planning technique used by real estate investors and developers. Continue reading →