Tax, Trusts & Estates Law Monitor : Estate Planning Lawyer & Attorney : Cole Schotz Meisel Forman & Leonard Law Firm : NJ, Mid-Atlantic Gift Tax & Trust Issues

The IRS and New Jersey Division of Taxation have extended this year’s tax return filing deadline for residents of 12 New Jersey counties due to the flood emergency in the state.  Residents of these counties now have until May 11, 2010 to file their returns.

See the IRS Press Release on this topic by clicking here.

See the NJ Division of Taxation announcement by clicking here.

The extension applies to residents of Atlantic, Bergen, Cape May, Essex, Gloucester, Mercer, Middlesex, Monmouth, Morris, Passaic, Somerset, and Union counties.

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The IRS recently announced in Revenue Procedure 2009-50 that the gift tax annual exclusion amount available to taxpayers in 2010 will remain unchanged at $13,000. The Tax Reform Act of 1997 tied the then $10,000 gift tax annual exclusion to cost of living adjustments based on increases in the Consumer Price Index. As a result, since 1998, the annual exclusion has increased from $10,000 to $13,000. The annual exclusion permits a taxpayer to gift $13,000 annually to any beneficiary without being required to use his or her $1 million lifetime gift exemption amount.

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Late in 2008, the Worker, Retiree and Employer Recovery Act of 2008 was enacted, which provided for a one-year suspension of the required minimum distribution rules in 2009 due to the economic meltdown. This means that IRA and 401(k) participants and beneficiaries are not required to take minimum distributions in 2009. Unfortunately, the enactment of the law in late 2008 resulted in many participants unknowingly taking their minimum distributions in 2009.

On September 24, 2009, the IRS issued Notice 2009-82 to provide relief for taxpayers who already took minimum distributions in 2009 but now want to take advantage of this one-year suspension rule. Basically, taxpayers now have until November 30, 2009 to rollover their mistaken 2009 minimum distributions without any adverse tax consequences.
 

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The IRS has issued the Applicable Federal Rate (“AFR”) for September, keeping the AFR rate under Code §7520 unchanged from August at 3.4%. What this means is that GRATs are still very attractive estate planning devices for taxpayers. The AFR rate is the interest rate the IRS requires taxpayers to apply to the amount gifted to the GRAT to value the gift at zero. If the gifted assets appreciate at an amount greater than 3.4%, then notwithstanding any valuation discounts attributable to the gifted assets, the appreciation in excess of 3.4% would pass gift tax-free to the GRAT’s beneficiaries. Thus, the lower the AFR rate, the more attractive GRATs are to taxpayers.

In light of proposed legislation in Congress requiring only long term GRATs and limiting valuation discounts, now may be the time to implement a GRAT.
 

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The Internal Revenue Service (IRS) said it will aggressively prosecute people with undisclosed foreign bank accounts.  At the same time, the agency recently announced a program that can help people avoid prosecution and reduce their financial exposure.  David Kohane, a member of the Litigation Department and Jeffrey Schechter, a member of the Tax, Trusts & Estates Department, had an article on the subject published on July 2, 2009 in the "Ask The Experts" column of The Record.  Click here to read the article.

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