California tax attorney Blog

Articles Posted in Tax Controversy

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) ruled yesterday that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. The ruling applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage.

The ruling implements federal tax aspects of the June 26th Supreme Court decision invalidating a key provision of the 1996 Defense of Marriage Act.

“Today’s ruling provides certainty and clear, coherent tax filing guidance for all legally married same-sex couples nationwide. It provides access to benefits, responsibilities and protections under federal tax law that all Americans deserve,” said Secretary Jacob J. Lew. “This ruling also assures legally married same-sex couples that they can move freely throughout the country knowing that their federal filing status will not change.”

A check written in 2012 that does not clear until 2013 is at risk of being a 2013 gift, not a 2012 gift, since the donor could have stopped payment in 2013 before it cleared. The issue with using checks to make gifts is that until the check clears the bank, the donor can revoke the gift by issuing a stop payment or by removing adequate funds from the bank account. A gift that can be revoked is not complete until revocability ends. The U.S. Supreme Court said as much in the case of Smith v. Shaughnessy, 318 U.S. 176 (1943).

The Tax Court and the Federal Court of Appeals (of the 4th Circuit) spell out when gifts by check will “good” gifts. Those cases are Gagliardi Est. v. Comr., 89 T.C. 1207 (1987); Metzger Est. v. Comr., 100 T.C. 204 (1993), aff’d 38 F.3d 118 (4th Cir. 1994).

The IRS in 1996 issued Revenue Ruling 96-56, 1996-2 C.B. 161 which provides a safe harbor mechanism to assure last minute 2012 gift tax treatment in the waning days of this year.

A tax loophole is “something that benefits the other guy. If it benefits you, it is tax reform.”

– Russell B. Long, U.S. Senator

“People who complain about taxes can be divided into two classes: men and women.”

Martindale-Hubbell Peer Review Ratings just came out with it’s rating of me. I have been honored with an “AV Preeminent” rating which is a significant rating accomplishment- a testament to the fact that a lawyer’s peers rank him or her at the highest level of professional excellence. My piers gave me a rating of 5 out of 5 in all possible areas analyzed: Legal Knowledge, Analytical Capabilities, Judgment, Communication Ability, Legal Experience. I’m pleased and honored. The Ratings are an objective indicator of a lawyer’s high ethical standards and professional ability. Attorneys receive a Peer Review Ratings based on evaluations by other members of the bar and the judiciary in the United States.

The following questions and answers provide information to same-sex domestic partners, same-sex individuals in civil unions and same-sex couples whose marriage is recognized by state law.

Publication 555, Community Property, provides general information for taxpayers, including registered domestic partners and same-sex spouses, who reside in community property states.

Q. Can a same-sex partner itemize deductions if his or her partner claims a standard deduction?

You are legally responsible for what’s on their tax return even if it is prepared by someone else. So, it is important to choose carefully when hiring an individual or firm to prepare your return. Choose your preparer wisely.

As a reminder, the IRS encourages you to use only preparers who sign the tax returns they prepare and enter their Preparer Tax Identification Numbers (PTINs).

Here are a few points to keep in mind when someone else prepares your return:

How do I request a copy of my tax return for last year?

It is easy to get a copy of an old tax return.

If you need an exact copy of a previously filed and processed return and all attachments (including Form W-2 (PDF)), you must complete Form 4506 (PDF), Request for Copy of Tax Return, and mail it to the IRS. You will need to include a $57.00 check made payable to “U.S. Treasury”. The fee may be waived if you reside in an official disaster area as declared by the President. It may take the IRS 60 days to process your request and mail your tax return copy or copies.

The California Franchise Tax Board says that if you qualify, your delinquent taxes, penalties and interest can be “compromised” so that your payment of an agreed-upon portion will be treated as if you paid the full amount. Here’s what you need to do to pay pennies on the dollar when you owe income taxes in California:

What you should know before preparing an Offer in Compromise

Are you an Offer in Compromise candidate?

Using a common estate planning device in California, Anna Smith created a pourover will which provided that all her property not already in her living trust would be transferred to her living trust to be distributed under the terms of her trust. Anna died in 1991 and the trust provided that after all expenses and taxes of the trust were paid, a residual distribution to certain named beneficiaries would occur. A significant asset of the estate was shares of stock in a corporation. Anna’s fiduciaries elected to defer a portion of her estate taxes under Internal Revenue Code §6166.

In 1992, the trustees of the trust distributed assets of the trust to the beneficiaries. Because of the deferral under §6166, the estate taxes were not yet paid in full and the beneficiaries agreed to be responsible for the unpaid estate taxes.

In 2002, the corporation went bankrupt. The beneficiaries received nothing on their shares beyond some minimal amounts received. The next year, after having paid only $5 million of the $6.871 million in taxes due, the estate defaulted on its unpaid estate taxes . The IRS then sought to collect the unpaid taxes from the personal representatives of Anna’s estate (who were also trustees of the Trust), and from the beneficiaries.