Tag Archives: IRA

You’re Invited! Practical Planning for Your Legacy: Understanding Your IRA


We would be delighted if you could join us for our upcoming seminar for those seeking guidance with IRA planning. Williams Parker attorneys Colton F. Castro and Alyssa L. Acquaviva will provide the necessary knowledge to enable IRA account owners to make informed decisions about how to structure their estate plan and IRA beneficiary designations in a manner that best fits tax planning and personal goals.

Wednesday, March 27, 2019
8:30 – 10 a.m.
Art Ovation Hotel
1255 North Palm Avenue, Sarasota, FL 34236

TOPICS INCLUDE:

  • Wealth management strategies for IRA account owners
  • Minimum required distribution requirements and timing
  • Tax penalties and how to avoid them
  • Tax laws regarding the inheritance of IRAs, including rollovers and beneficiary designations
  • Charitable planning involving IRAs
  • Structuring an estate plan to maximize the benefits available to IRA account owners and their beneficiaries
Admission is complimentary and breakfast is provided; however, space is limited.

 

Please feel free to share this information with anyone who may be interested and please contact us with any questions. We hope to see you there!

Has Congress Finally Given a Tax Extenders Holiday Gift That Keeps on Giving?

Congress has once again passed “Tax Extenders” legislation with only two weeks remaining in the year, but retroactively applicable to January 1.  As a result, few will take advantage of its tax breaks in 2015.  In past years Tax Extenders legislation expired at the end of the year, also making it useless in the following tax year.

This year’s bill, however, includes permanent extensions of many useful provisions. Amongst others, permanent extensions applicable now and in the future include:

·       allowing tax-free distributions from IRAs up to $100,000 per year to qualified charities for persons at least 70 and ½ year old,

·       shorting of the post-C-corporation-to-S-corporation-conversion “built-in gains tax” period from ten years to five years,

·       increasing the annual deduction threshold and carryforward years for certain conservation donations,

·       allowing an optional state sales tax deductions for federal income tax purposes, in lieu of a state income tax deduction (particularly useful for residents of Florida, which has no personal income tax),

·       liberalizing depreciation rules for qualified leasehold, restaurant and retail improvements, and

·       increasing first year expensing opportunities for certain capital expenditures.

The bill extends other recurring provisions more than one year, but not permanently.  For example, bonus depreciation now applies through 2019, though the bonus depreciation percentage decreases by ten percent each year from the 50% 2015 percentage, to encourage investment sooner rather than later.

It remains frustrating that by once against waiting until December to act, Congress wasted the opportunity to give taxpayers a better opportunity to use these tax breaks in 2015.  We can, however, at least be grateful for more planning certainty in the years ahead.

Here is a link to a complete summary of the legislation published by the House Committee on Ways and Means: http://waysandmeans.house.gov/wp-content/uploads/2015/12/SECTION-BY-SECTION-SUMMARY-OF-THE-PROPOSED-PATH-ACT.pdf

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

2015 Tax Extenders Thanksgiving Treat?

Once again we approach the end of a year following the so-called “Tax Extenders” legislation, which addresses federal tax incentives that expire on December 31 of each year, unless renewed by Congress.  The2014 bill was enacted with retroactive effect in mid-December 2014, and expired December 31, 2014.  Will Congress give us a 2015 Thanksgiving treat by enacting a similar bill before the end of November?

Unfortunately, replicating the pattern from 2014, it appears 2015 legislation will pass no earlier than mid-December. Several bills exist which could become law before the end of the year.  As in prior years, the potential Tax Extender laws include special depreciation rules for qualified leasehold, restaurant and retail improvements, 50% bonus depreciation provisions, and first year expensing opportunities for certain capital expenditures. Also included is a reduction in S corporation recognition period for the built-in gains tax from ten years, to five years, but only for transactions closing in the year in which the Tax Extender legislation is in effect.  Potential legislation also includes special incentives for conservation-oriented transactions and charitable donations from IRAs.

We remain hopeful another Tax Extenders bill will pass before December 31, 2015.  In the best case, Congress would make some provisions permanent or extend provisions more than one year to give taxpayers a longer time horizon to plan.

If you have a 2015 transaction dependent on the legislation, be ready in advance, because you might have only a short time to act once the legislation passes.  After that, you may be stuck hoping for another chance in 2016.

Here are links to our prior posts relating to Tax Extenders legislation: http://blog.williamsparker.com/businessandtax/2015/10/21/tax-extenders-redux-deja-vu-all-over-again/

http://blog.williamsparker.com/businessandtax/2014/12/17/with-only-two-weeks-left-for-taxpayers-to-act-2014-tax-extenders-bill-finally-to-become-law-should-you-celebrate-yawn-or-yell/

http://blog.williamsparker.com/businessandtax/2014/11/05/with-republican-election-gains-2014-tax-extenders-legislation-could-boost-capital-expenditures-business-merger-and-acquisition-activity/

http://blog.williamsparker.com/businessandtax/2014/04/30/2014-tax-extenders-legislation-uncertainty-impairs-capital-expenditure-planning-business-acquisitions/

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

Tax Extenders Redux: Déjà Vu All Over Again

The great commentator—and occasional baseball player—Yogi Berra may have left us behind, but Congress continues to prove his words prophetic.   For yet another year, we are in the fourth calendar quarter awaiting federal tax legislation designed to spur economic activity as of the preceding January.

Last year we followed the saga of the so-called “Tax Extenders” legislation, which addresses tax incentives that expire on December 31 of each year, unless renewed by Congress.  The2014 bill was enacted in mid-December 2014, and expired December 31, 2014.  Although the law applied retroactively to January 1, 2014, taxpayers could not act during the first fifty weeks of the year because it was unclear whether the incentives would become law once again.  The mid-term Congressional elections provided a convenient scapegoat for the delayed enactment, but the bill still did little good.

2015 Tax Extenders legislation is playing out similarly, but the budget, debt ceiling, and Speaker of the House of Representatives vacancy are this year’s scapegoats. Several bills exist which could become law before the end of the year.  As in prior years, the potential Tax Extender laws include special depreciation rules for qualified leasehold, restaurant and retail improvements, 50% bonus depreciation provisions, and first year expensing opportunities for certain capital expenditures. Also included is a reduction in S corporation recognition period for the built-in gains tax from ten years, to five years, but only for transactions closing in the year in which the Tax Extender legislation is in effect.  Potential legislation also includes special incentives for conservation-oriented transactions and charitable donations from IRAs.

We aren’t holding our breath for legislation in the next few weeks, but are hopeful another Tax Extenders bill will pass before December 31, 2015.  If you have a transaction dependent on the legislation, be ready in advance, because you might have only a few weeks to act once the legislation passes.  It will be “late early out there” before you know it.  After that, you will be stuck hoping for another chance in 2016.

Here are links to our prior posts relating to Tax Extenders legislation:

http://blog.williamsparker.com/businessandtax/2014/12/17/with-only-two-weeks-left-for-taxpayers-to-act-2014-tax-extenders-bill-finally-to-become-law-should-you-celebrate-yawn-or-yell/

http://blog.williamsparker.com/businessandtax/2014/11/05/with-republican-election-gains-2014-tax-extenders-legislation-could-boost-capital-expenditures-business-merger-and-acquisition-activity/

http://blog.williamsparker.com/businessandtax/2014/04/30/2014-tax-extenders-legislation-uncertainty-impairs-capital-expenditure-planning-business-acquisitions/

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

Using your Rollover IRA to Buy Yourself a Job? Think Twice and Carefully!

A common retirement / employment technique that looks enticing is to rollover your substantial 401(k) account after terminating employment to an IRA and then use the IRA to purchase or start up a business for you to run.  What could be better?  A job for you, a profitable investment for your IRA that you control, and the investment funds remain tax deferred in the IRA.  What an excellent idea!  No, not so much!

While this business start-up technique may look like the perfect use of your accumulated retirement funds, there are a lot of technicalities that can cause the arrangement to blow up, triggering huge taxes and penalties.  The 8th Circuit Court of Appeals (in Ellis v. Commissioner) recently confirmed that such an arrangement done through an IRA disqualified the entire IRA (making the entire IRA taxable).  The taxpayer owed taxes and penalties amounting to more than 50% of the IRA’s value.

In the case reviewed by the court, the IRA owner caused the IRA to purchase 98% of a used car sales business and then used his control of the company to have the company pay him compensation for his services running the business. The court held that the IRA owner’s exercise of control over the company causing the company to pay him compensation violated the tax law’s prohibited transaction rules for the IRA.  The holding resulted in the IRA’s loss of tax deferred status as to all funds in the IRA.  The prohibited transaction rules that the court said were violated was direct or indirect use of the plan’s income or assets for the benefit of the IRA owner as well as dealing with the IRA’s income or asses for his own interest.

The 8th Circuit case involved investment in the business start-up by the taxpayer’s IRA.  Similar techniques are offered through C corporation business start-ups.

While it is clear that an IRA investment of this nature is extremely dangerous, often destroying the tax deferred status of the IRA, the same technique can be successful if done in a C corporation using the corporation’s qualified plan instead of the IRA.  But there are significant expenses and dangers involved. Individuals should not consider this technique unless the investment funds involved are large enough to justify the expense and risk, and the individual has a high tolerance for details and complications.

To use the this business start-up technique in a C corporation, the typical approach is first transfer the rollover funds into a qualified plan established by the new start-up business and then have the qualified plan purchase stock in the business that is sponsoring the qualified retirement plan.  The IRS and DOL calls these types of transactions “ROBS” for “rollover business startup”.  While we do not assist clients in creating ROBS arrangements we routinely assist clients in understanding the risks and rewards inherent in the arrangements.

Carol L. Myers
cmyers@williamsparker.com
941-893-4001