Monthly Archives: October 2017

IRS Sees the Light and Withdraws §2704 Proposed Regulations

The Treasury Department’s issuance of proposed regulations under Code Section 2704 were met with significant criticism and confusion. The §2704 proposed regulations were intended to provide the IRS with an additional sword to reduce and in some cases eliminate valuation discounts on family-controlled business entities.

After thousands of comments were received and a public hearing was held where numerous taxpayer advocacy groups, business advisors, and valuation experts provided their concerns, the IRS finally blinked. On October 20, 2017, the IRS published a withdrawal notice of proposed rulemaking, which removes the potential for these proposed regulations to be finalized. The elimination of the proposed regulations is fantastic news for all family-controlled business owners that would be subject to estate and gift taxes. More information regarding the withdrawal is available at federalregister.gov.

Thomas J. McLaughlin
tmclaughlin@williamsparker.com
(941) 536-2042

Tax Residency and the 2017 World Rowing Championships

The Sarasota-Manatee area recently hosted the 2017 World Rowing Championships, bringing nearly a thousand athletes from seventy countries to the world class rowing facilities at Nathan Benderson Park. The tax consequences of such a visit were probably far from the thoughts of the rowers, coaches, support teams, and fans arriving from all over the world. At what point should someone consider how their visits to the United States could create tax problems? Could you owe tax to the United States just by visiting the country for a rowing competition?

The United States taxes the worldwide income of those who are United States citizens and residents. Generally, any person born or naturalized in the United States will be considered a United States citizen. A person will be considered a resident of the United States by receiving U.S. permanent resident status in the way of a green card or by meeting the substantial presence test. Frequent visitors to this country or those who stay in the country for extended periods must be aware of how the substantial presence test could affect their residency status.

The substantial presence test looks at the number of days a person has spent in the United States over the past three years. Seasonal visitors to the United States, those who make frequent trips to the country for business purposes, or those who vacation in the United States may all establish residency by spending too many days on U.S. soil.

Those in the United States competing in sports may have a slight glimmer of good news. Professional athletes receive a partial exception from counting days for the substantial presence test, but only for days where a professional athlete is temporarily in the United States to compete in a charitable sporting event that is organized to benefit a tax-exempt charity, contributes 100 percent of the proceeds to charity, and uses volunteers for substantially all the work needed to run the event.

If the 2017 World Rowing Championships was your first and only trip to the United States then you likely won’t run into residency problems. But those that have fallen in love with the Sarasota-Bradenton area and plan to return for more visits need to be aware of how your stay in the United States could create tax consequences.

Jamie E. Koepsel
(941) 552-2562
jkoepsel@williamsparker.com

Applicable Federal Rates for October 2017

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 October 2017:

Short Term AFR (Loans with Terms <= 3 Years)                                          1.27%

Mid Term AFR (Loans with Terms > 3 Years and <= 9 Years)                    1.85%

Long Term AFR (Loans with Terms >9 Years)                                              2.5%

7520 Rate (Used in many estate planning vehicles)                                     2.2%

Here is a link to the complete list of rates: https://www.irs.gov/pub/irs-drop/rr-17-20.pdf.

E. John Wagner, II
jwagner@williamsparker.com
941-536-2037