Michael Jackson is back in the news. The IRS added some $700 million to the reported value of Jackson’s estate, based on posthumous publicity rights valued by the estate at $1200. The news brought to light an interesting issue: To get a regular trial with a district judge on a tax deficiency, you have to pay the tax first. (more…)
Tell It to the (Tax Court) Judge: If You Prefer District Court, Pay the Tax First and Then Ask for a Refund
Estate planners are taking a second look at portability—the use of a deceased spouse’s lifetime exclusion by the surviving spouse—now that the law on this subject has been made permanent. (more…)
Filed under: Elder Law, Estate Planning, Legal Topics, Tax Law | Tagged: bypass trust, death tax, deceased spouse, Estate Planning, estate tax, lifetime exclusion, marital deducation, portability, wills and trusts | 1 Comment »
In a swift and decisive ruling, the IRS concluded that same-sex couples lawfully married in the state of celebration are married for federal tax purposes regardless of residence. Rev Rul 2013–17. The ruling effectively extends same-sex marriage to couples nationwide.
Here’s how the ruling works: in states that permit nonresidents to marry, including recognition states such as Maryland, New Hampshire, Vermont, and Washington, couples from states that don’t recognize same-sex marriage can come and get married, go home, and are then married for federal tax purposes (although Vermont does have a residency requirement for divorce).
This is what happened in Obergefell v Kasich (SD Ohio, July 22, 2013) 2103 US Dist Lexis 102077. Same-sex Ohio residents flew to Maryland, got married in the plane on the tarmac, and then flew home. A federal court held that they were married under state law, because Ohio generally recognizes foreign state marriages. Interestingly, the IRS ruling implies that they would be still married for federal tax purposes even if they weren’t married for state law purposes in Ohio.
The IRS ruling did not directly address the surviving spouse in the U.S. Supreme Court decision in Windsor because she was married in Canada, although the IRS has since made clear that the ruling also applies to same-sex spouses married in a foreign jurisdiction. The Windsor decision emphasized that the marriage was recognized by the state of New York, her state of residence. In Cozen O’Connor, P.C. v Tobits (ED Pa, July 29, 2013) 2013 US Dist Lexis 105507, the district court concluded that a same-sex surviving spouse was married for federal employment law purposes because her Canadian marriage was recognized by the state of Illinois, even though she couldn’t be married there.
With little analysis, the IRS ruling also concludes that the term “marriage” doesn’t include registered domestic partners and civil unions or other formal similar relationships that aren’t denominated as a marriage under state law. In the past, the IRS had given advice that opposite-sex couples in Illinois civil unions could file joint returns because they were treated as spouses under state law. Not anymore. The same applies to California registered domestic partners.
Here’s the bottom line: if you want the federal benefits of being married, you have to get married. At least in California, you won’t have to leave the state.
For continuing coverage of tax issues for same-sex spouses and registered domestic partners, turn to CEB’s Estate Planning & California Probate Reporter.
Related CEB blog posts:
- Going to the Chapel or Staying Alive: Marital Deduction for Registered Domestic Partners after Windsor
- Whither Windsor: What to Do About the Estate Tax Marital Deduction While the Court Considers DOMA
- Second Bite at the Apple: How Unregistered Domestic Partners (and Other Cotenants) Can Still Avoid Property Tax Reassessment
© The Regents of the University of California, 2013. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.
Filed under: Estate Planning, Legal Topics, New Legal Developments, Tax Law | Tagged: DOMA, federal tax filing, federal tax return, IRS, IRS ruling, Rev Rul 2013–17, same-sex marriage | Leave a Comment »
Most people feel really great when they donate to charity, and the accompanying tax deduction can make the gift even sweeter. But recent cases show that the IRS is demanding strict compliance with its rules on substantiating charitable contributions, and messing up can mean losing the entire deduction. (more…)
Filed under: Business, Legal Topics, Tax Law | Tagged: charitable contributions, charitable deduction, charitable donation, charitable giving, IRS, qualified appraisal, qualified appraiser, tax deduction | 2 Comments »
Second Bite at the Apple: How Unregistered Domestic Partners (and Other Cotenants) Can Still Avoid Property Tax Reassessment
Do you own a house with someone and don’t want to register as domestic partners, but you still want an exclusion from a change in ownership for property tax purposes when you die? Now you can. Here’s how it works. (more…)
Filed under: Estate Planning, Legal Topics, Real Property, Tax Law | Tagged: change in home ownership, coowner, cotenant, domestic partners, property tax, property tax reassessment, same-sex couples | 3 Comments »
The American Taxpayer Relief Act of 2012 (ATRA-2012) (Pub L 112-240, 126 Stat 2313) allows IRA owners to make retroactive direct distributions to charity for 2012. It could be a good deal for you or your clients, but you have to act by January 31, 2013—this week!—to take advantage of it.
Updated January 4, 2013: The American Taxpayer Relief Act of 2012 restores the original 3 percent phaseout of itemized deductions for income above $300,000 for married taxpayers filing jointly and $250,000 for single taxpayers. The Act also restores the 39.6 percent top rate for income above $450,000 for married taxpayers filing jointly and $400,000 for single taxpayers.
Most readers are aware that many provisions of the tax law “sunset” or expire at the end of 2012 if nothing happens before the end of the year. One little-noticed provision could help both sides move beyond the current impasse. (more…)
Filed under: Estate Planning, Legal Topics, New Legal Developments, Tax Law | Tagged: American Taxpayer Relief Act of 2012, fiscal cliff, high-income taxpayers, Pease phase out, tax law, tax rates | 2 Comments »
Updated: The Supreme Court heard oral argument in Windsor v U.S. on March 27, 2013, with negative implications for domestic partners, as discussed in the April 2013 issue of CEB’s Estate Planning & California Probate Reporter.
The U. S. Supreme Court’s grant of review in Windsor v U.S. puts the marital deduction in doubt for same-sex surviving spouses but it doesn’t change the advice: for now, practitioners should keep filing estate tax returns claiming the marital deduction until someone tells them to stop. (more…)
Filed under: Estate Planning, Family Law, Legal Topics, Tax Law | Tagged: DOMA, domestic partnerships, Estate Planning, estate tax, IRS, marital deduction, registered domestic parternships, same-sex marriage, Windsor | 8 Comments »
The unexpectedly decisive re-election of President Obama, and the apparent stability of his electoral coalition, confronts estate planners with a new political reality. Here are my thoughts on where tax law is likely to go. (more…)
Filed under: Elder Law, Estate Planning, New Legal Developments, Tax Law | Tagged: capital gains, charitable gift, Estate Planning, estate tax, estate tax exemption, gift tax, gift tax exemption, tax planning, taxes | Leave a Comment »
It’s hard to argue that a decedent who died at home was a resident of somewhere else, but the estate of Marilyn Monroe, who was found dead in her Brentwood home in 1962, has always maintained that she was a domiciliary of New York. The estate’s executor took that position in probate proceedings and in dealings with California tax authorities, which found that most of Monroe’s assets were exempt from state inheritance taxes. But now Monroe’s heirs are claiming she was domiciled in California because they prefer California law on the right of publicity. (more…)
Filed under: Business, Estate Planning, Legal Topics, New Legal Developments, Tax Law | Tagged: domicile, inheritance, judicial estoppel, Marilyn Monroe, posthumous right of publicity, right of publicity | 2 Comments »