Tag Archives: Tax Law

Applicable Federal Rates for April 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 April 2017:

Short Term AFR (Loans with Terms <= 3 Years)                                          1.11%

Mid Term AFR (Loans with Terms > 3 Years and <= 9 Years)                    2.12%

Long Term AFR (Loans with Terms >9 Years)                                              2.82%

7520 Rate (Used in many estate planning vehicles)                                     2.6%

Here is a link to the complete list of rates: https://www.irs.gov/pub/irs-drop/rr-17-08.pdf

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

Applicable Federal Rates for March 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 March 2017:

Short Term AFR (Loans with Terms <= 3 Years)                                          1.01%

Mid Term AFR (Loans with Terms > 3 Years and <= 9 Years)                    2.05%

Long Term AFR (Loans with Terms >9 Years)                                              2.78%

7520 Rate (Used in many estate planning vehicles)                                     2.4%

Here is a link to the complete list of rates: https://www.irs.gov/pub/irs-drop/rr-17-07.pdf

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

UHF Antennas Become Even More Obsolete, But Broadcasters Get a Tax Break

Remember adjusting an oddly shaped TV antenna to improve reception on channels higher than 13?  If you do, the memory is likely distant.

Congress noticed a few years ago and mandated that the Federal Communications Commission (the “FCC”) repurpose Ultra High Frequency (a.k.a. “UHF”) broadcast spectrum that carried some of those channels, to create more room for mobile broadband.  The FCC gave licensees holding rights to the repurposed spectrum the option of selling their existing licenses or accepting inferior rights.

One licensee wanted to sell and reinvest in other rights of their choosing without paying capital gains tax on the sale. The licensee asked the Internal Revenue Service to rule that Internal Revenue Code Section 1033, the same provision that allows tax-free reinvestment when the government takes real estate by condemnation, applies to allow tax-free reinvestment of the UHF license rights.  The IRS agreed, even though the taxpayer technically was not forced to sell. The IRS ruled that the option to accept other rights did not prevent Section 1033 tax deferral because the inferiority of the substitute rights the FCC offered justified ignoring that alternative. The IRS found the transaction amounted to a forced sale and therefore qualified for tax deferral.

If the government gives you a “false” choice between selling your property or accepting an inferior alternative, this ruling explains how to defer tax on the sale if you reinvest the proceeds. But we do not recommend trying this strategy with your old UHF TV antenna. You probably won’t recognize gain to defer anyway.

Here is a link to the IRS ruling: https://www.irs.gov/pub/irs-wd/201702034.pdf

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

Applicable Federal Rates for February 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 February 2017:

Short Term AFR (Loans with Terms <= 3 Years)                                          1.04%

Mid Term AFR (Loans with Terms > 3 Years and <= 9 Years)                    2.10%

Long Term AFR (Loans with Terms >9 Years)                                              2.81%

7520 Rate (Used in many estate planning vehicles)                                     2.6%

Here is a link to the complete list of rates: https://www.irs.gov/pub/irs-drop/rr-17-04.pdf

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

Applicable Federal Rates for January 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 January 2017:

Short Term AFR (Loans with Terms <= 3 Years)                                          0.96%

Mid Term AFR (Loans with Terms > 3 Years and <= 9 Years)                    1.97%

Long Term AFR (Loans with Terms >9 Years)                                              2.75%

7520 Rate (Used in many estate planning vehicles)                                     2.4%

Here is a link to the complete list of rates: https://www.irs.gov/pub/irs-drop/rr-17-02.pdf

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

Applicable Federal Rates for December 2016

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 December 2016:

Short Term AFR (Loans with Terms <= 3 Years)                                          0.74%

Mid Term AFR (Loans with Terms > 3 Years and <= 9 Years)                    1.47%

Long Term AFR (Loans with Terms >9 Years)                                              2.26%

7520 Rate (Used in many estate planning vehicles)                                     1.8%

Here is a link to the complete list of rates: https://www.irs.gov/pub/irs-drop/rr-16-27.pdf?_ga=1.114444423.1043379965.1429544687

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

Post-Election Flashback: A Tax Break For Federal Executive Office Appointees

With President-elect Donald Trump’s cabinet appointments at the forefront, we revisit our August 2016 post examining a capital gains tax break for federal executive appointees who must sell assets to avoid conflicts of interest.  We noted that appointees with unrealized capital gains in undiversified assets could use the law to diversify without paying capital gains tax, creating a tax break vastly more valuable than anything else they earn from their positions.

Here is a link to our original post:  http://blog.williamsparker.com/businessandtax/2016/08/17/want-diversify-appreciated-asset-position-without-paying-capital-gains-tax-take-federal-government-job-conflict-interest/

Here is a link to a November 8 International Business Times article quoting our post and further examining the tax deferral law: http://www.ibtimes.com/political-capital/wall-street-titans-could-get-tax-benefit-taking-jobs-trump-or-clinton-white-house

Are any potential Trump appointees likely to benefit?  Decide for yourself after reviewing a roster of potential appointees:   https://www.washingtonpost.com/graphics/politics/trump-administration-appointee-tracker/?hpid=hp_hp-top-table-main_cabinet-graphic-135pm%3Ahomepage%2Fstory

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

Applicable Federal Rates for November 2016

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 November 2016:

Short Term AFR (Loans with Terms <= 3 Years)                                          0.68%

Mid Term AFR (Loans with Terms > 3 Years and <= 9 Years)                    1.33%

Long Term AFR (Loans with Terms >9 Years)                                              2.07%

7520 Rate (Used in many estate planning vehicles)                                     1.6%

Here is a link to the complete list of rates: https://www.irs.gov/pub/irs-drop/rr-16-26.pdf?_ga=1.111173892.1043379965.1429544687

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

2704 Regulations Explained: Proposed Rules Are Set to Further Expand Value Differences between Family-Controlled Entities and Other Companies

The IRS is focused on reducing valuation discounts associated with transfers of interests in family-controlled businesses, but this focus will result in family members being deemed to receive a different value than non-family members.  This also means that an appraiser will be required to establish two different values based on ignoring certain restrictions for family members, while taking those same restrictions into consideration for non-family members.

Consider, for example, a trust that provides that 50 percent of a decedent’s family-controlled business interest will go to charity and the remaining 50 percent will go to family members.  The IRS will be expecting that the interest being conveyed to the family members to result in a higher value when compared to the same percentage interest being conveyed to charity.  This ultimately means that the interest conveyed to family will result in higher estate taxes and the interest conveyed to charity will result in a smaller charitable deduction for estate tax purposes.  The end result is the IRS receives more estate tax from the estate even though the same restrictions apply to all members (both the family members and charity).

This post is part of a series of blog posts addressing the proposed 2704 regulations and the parties that should be reviewing their plans as a result.

View previous posts:

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

What Do Estate Tax Laws in Other Countries Tell Us About the Presidential Candidates’ Proposals?

Under current law, the federal government imposes a 40% estate tax to the extent an individual’s estate exceeds a $5.45 million exemption. Republican presidential nominee Donald Trump advocates eliminating the tax. Democratic presidential nominee Hillary Clinton previously previously proposed reducing the exemption to $3.5 million and increasing the tax rate to 45%. Last week, she further proposed increasing the tax rate to 50% to the extent an estate exceeds $10 million, 55% to the extent an estate exceeds $50 million, and 65% to the extent an estate exceeds $500 million.

According to a 2015 Tax Foundation study, the current top 40% federal estate tax rate was the fourth highest amongst the 34 countries in the Organization for Economic Cooperation and Development (OECD) at that time. Japan had the highest top rate, 55%. Spain had the next highest rate behind the U.S., 34%. Chile rounded out the top 10, at 25%. 15 countries imposed no estate tax.

Adopting the Clinton proposal would make the U.S. top estate tax rate 10% higher than any other OECD country’s top rate. Even if we ignore the 65% rate applicable only to estates over $500 million, a 55% top rate would tie the U.S. with Japan for the highest rate. Even a 50% top rate would tie the U.S. with South Korea for the second-highest rate.

What does this tell us? The candidates’ proposals are at the opposite extremes of worldwide estate tax policies. While neither proposal seems likely to pass into law, the divergence underscores the tax policy polarization between the candidates.  Rather than “fitting in,” each pushes our nation’s tax policy to an extreme.

There is also a question whether adoption of either policy would serve the proposing candidate well as President.  How would Mr. Trump’s disgruntled blue collar supporters react to estate tax repeal?  One also can wonder whether Ms. Clinton’s proposal would motivate more of the wealthiest Americans to surrender their citizenship and move capital out of the U.S., not a result she relishes.

Here is a link to the Tax Foundation estate tax study: http://taxfoundation.org/article/estate-and-inheritance-taxes-around-world

Here are links to recent media coverage regarding the candidates’ estate tax proposals: http://www.wsj.com/articles/hillary-clinton-proposes-65-tax-on-largest-estates-1474559914

http://www.latimes.com/nation/politics/trailguide/la-na-trailguide-updates-1474577545-htmlstory.html

http://www.forbes.com/sites/robertwood/2016/09/23/hillary-clintons-65-estate-tax-or-donald-trumps-repeal/#450664385bf7

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