Missives

Take-Away: There are many technical rules associated with a qualified opportunity zone investment or fund. Those technical rules were amended with the One Big Beautiful Bill Act (OB3) last year, seemingly making opportunity fund investments even more mysterious. A couple of the OB3 amendments were ‘clarified’ (if you believe the IRS) in a recent Notice.

Under IRC 1(f)(6)(B) Treasury is supposed to adjust for inflation each year several dollar amounts that are used in the Tax Code. The measuring period runs from September 1 to August 31. Due to the government ‘shut-down’ in October 2025 there are no reliable inflation numbers to include in the 12-month period that just concluded. Assuming that a hypothetical inflation number is used for October 2025 that represents the average inflation rate for the other 11 months in the most recent measurement period that just concluded, some estimated adjustment amounts can be predicted that would start on January 1, 2027.

A decedent’s IRA that is payable to his probate estate can be carefully managed by his Personal Represenative to avoid the possible acceleration of the taxable distribution of the decedent’s IRA.

As advisors we tend to take the availability of a portability election for granted. We shouldn’t. The election can be costly to make, and only the surviving spouse (and his/her descendants) will benefit from the election. And there are plenty of ‘hoops to jump through’ to claim portability and the failure to timely file the Form 706 return can cause it to be lost. And the fact that there is no statute of limitations on the DSUEA calculation means that it can always be revisited by the IRS on the death of the second spouse. In short, the ability to claim portability is not a simple decision, and if the election is made, it will probably be expensive, so the decedent’s Will (or trust) should clearly identify who should pay for filing an estate tax return that might not be required to be filed.

As noted, it is highly unlikely that this Bill will get the attention of a Congress that is preoccupied with doing nothing, other than conducting investigations to demean retired government officials, and then waiting until the last minute to scramble to adopt a budget to avert yet another government shutdown. Still, it is clear from this Bill that ‘fat’ IRAs and other retirement accounts will continue to be targeted as a source to deal with diminishing tax revenues.

A beneficiary’s withdrawal rights over an irrevocable trust can add significant flexibility to the trust, avoid transfer taxes,  and save or shift income taxes. However, broadly described withdrawal rights can also expose trust assets to unwanted creditor claims.

New IRC 68 poses a significant challenge to the administration of trust and estates, more than just how income tax returns are prepared, as it creates phantom income tax liability that affects fiduciary administration in several significant ways.

First, that while there is a safe harbor for contributions to a Trump Account that will cause the transfer to be treated as a transfer of a present interest, it does not create an ‘extra’ annual exclusion gift opportunity (‘in addition to’)  for the contributor.

More and more advisors feel comfortable recommending that their clients consider funding a DAF, not only for income tax purposes, but also because they are easy to understand and workable for complex asset giving and family philanthropy.