The IRS’s assertion of the step-transaction doctrine is a tax trap that can be planned for, and around, with forethought and attention to details. When thinking about any transfer tax strategy that uses a lifetime gift, whether it is to a SLAT or any other transfer to an irrevocable trust, the potential assertion of the step-transaction doctrine always needs to be in the back of the mind of the planner and his/her clients. It can be avoided with advance planning, yet it is more apt to occur if there is haste in putting the plan in place. Time and following formalities are the best protection from the step-transaction doctrine.

Ever heard of a Ulysses Clause in estate planning? Admittedly, it is a rare provision sometimes found in either a will or a trust. With the world becoming more and more aware of elder abuse and the financial exploitation of the elderly, some individuals might consider the utilization of some type of a Ulysses Clause to provide both a defined procedure and more protection for their estate planning documents.

Equity looks at the substance of an undertaking, not to its form. Consequently, the equitable proceeding for a trust’s reformation can be a powerful remedy to use, especially now that the MCL 700.7415 permits such a reformation, even if the trust’s terms are unambiguous, and even if the mistake was in fact or in law, and whether the mistake was in expression or inducement. Less clear, so far anyway, is who has legal standing to assert the trust reformation remedy, now that courts are no longer strictly adhering to privity to the transaction. Probably more clear is that a trustee should not be filing any trust reformation proceedings in light of the trustee’s many fiduciary duties associated with the trust- as written.

The benefits of a Qualified Small Business Stock (QSBS) exclusion from capital gains taxes may soon get even better. This is only a proposal in the Senate’s version of the budget reconciliation bill, not the House’s version, so it remains to be seen if these QSBS proposals will ever make their way into amendments to the Tax Code. Perhaps they will be viewed as just one more tax break for the wealthy. Who knows?

Naming a trust as the designated beneficiary of an IRA creates considerable confusion since it triggers multiple factors and conditions set-forth in the Tax Code. This private letter ruling provides some insight and guidance into how beneficiary designations might be structured when a trust is named as the beneficiary of a decedent’s IRA. The questions ask and the scope and complexity of the IRS’s response, does suggest however that it would have been much easier for Irv to have set up the private foundation during his lifetime, and directly name the private foundation as the beneficiary one of Irv’s IRAs, and that Irv could have simply named the individuals directly as the beneficiaries of his remaining IRAs, all without incurring the expense of the need to ask for a private letter ruling.

Both versions of the House and Senate budget reconciliation bills include the new savings vehicles for minors, the Trump Account. Apparently Trump accounts are intended to introduce more Americans to wealth-building opportunities. But the Tax Code already has about 10 savings inducement provisions and adding yet another just is another layer of complexity While that may be so, these accounts seem to be very complicated, and highly unlikely to be used lower-income families. Perhaps it would have been easier to expand the scope of permissible tax-free distributions using a 529 account that many are familiar with than create yet another set of rules and restrictions. Better yet, Congress should explore creating a Universal Savings Account for all Americans, without so many conditions.

The IRS recently provided guidance on how to identify digital assets held by a broker when the digital assets are sold or exchanged for the purpose of determining tax basis and the holding period for the transferred digital assets. As more individuals decide to speculate and hold digital assets, the need to identify those digital assets sold or exchanged by their owner will become even more important for tax reporting purposes, along with the tax revenues that Congress expects to receive from this higher level of tracking and reporting.

If a parent/grandparent is asked to personally guarantee a loan to a family member, it would be wise to report that personal guarantee on a Form 709 Gift Tax Return each year that the guarantee is outstanding.

The 2017 Tax Act eliminated like-kind exchanges for property other than real estate. Under the Biden Administration, several proposals were offered to eliminate like-kind exchanges for real estate, but those proposals went nowhere. It’s probably that IRC 1031 will remain as part of the Tax Code. This PLR is an interesting example of how the distribution of tenant-in-common interests in real property to trust beneficiaries on the trust’s termination can also benefit from a like-kind exchange.

The best way to navigate these IRA rollover rules is to completely avoid them by using a custodian-to-custodian direct transfer and skip the many mistakes associated with the 60-day rollover deadline, including those which cause the entire distribution to be immediately taxed along with the 10% early distribution penalty.