View Recent Blog Posts in this Area of Practice

• A Taxpayer's Post-Closing Remorse Relating to Tax Allocations by Dean P. Cazenave The federal First Circuit Court of Appeals recently rejected a taxpayer’s claim for a refund based on recharacterization of a payment for a non-competition agreement. Muskat v. United States, 2009 WL 211067 (1st Cir. 2009). In connection with the sale of a business structured as an asset sale, the Buyer and the CEO (who was also the largest shareholder of the Seller) agreed in definitive documents that $1.0 million of the retained CEO’s new compensation package would be allocated to his non-compete covenants. Although the CEO initially recorded that payout as ordinary income for his 1998 taxes, in 2002 he filed an amended return for 1998, recharacterizing the $1 million payment as consideration of his personal goodwill, which he argued entitled him to capital gain treatment (which would have entitled him to a refund of over $200,000). The IRS denied Muskat’s request so he brought an enforcement action against the IRS. The district court, too, ....
• New Law Suspends Required Minimum Distributions for 2009 By Kevin C. Curry On December 23, 2008, President Bush signed the Worker, Retiree, and Employer Recovery Act of 2008 (the Act) into law.  Section 201 of the Act waives any required minimum distributions (RMDs) for 2009 from retirement plans that hold each participant's benefit in an individual account, such as § 401(k) plans and § 403(b) plans, and certain § 457(b) plans.  The Act also waives any RMD for 2009 from an Individual Retirement Arrangement (IRA).This means that most participants and beneficiaries otherwise required to take minimum distributions from these types of accounts are not required to withdraw any amount in 2009.  If they do make a withdrawal in 2009 (that is not an RMD for 2008), they might be able to roll over the withdrawn amount into other eligible retirement plans.  Of course, they must still include any previously untaxed portion of the withdrawal that they do not roll over in their gross income.  See Individual ....
• IRS Requires Employer Identification Numbers for Disregarded Entities Beginning in 2009 By Kevin C. Curry Historically, the IRS has said that a disregarded entity could (and maybe should) use the owner's taxpayer identification number for income and other tax purposes. For employment tax reporting, the IRS issued Notice 99-6, 1999-1 CB 321 , which said that employment taxes for employees of a disregarded entity could be reported by a disregarded entity in one of two ways: (1) Calculation, reporting, and payment of all employment tax obligations with respect to employees of a disregarded entity by its owner (as though the employees of the disregarded entity are employed directly by the owner) and under the owner's name and taxpayer identification number; or (2) Separate calculation, reporting, and payment of all employment tax obligations by each state law entity with respect to its employees under its own name and taxpayer identification number.Beginning next year, disregarded entities with employees must have their own employer identification numbers (EIN's) for ....
• IRS Provides Safe Harbor For Like Kind Exchange by Kevin C. Curry Taxpayers often own a vacation home or other residential property that they desire to exchange in a tax-deferred like kind exchange under Section 1031 of the Internal Revenue Code. Under Section 1031, no gain or loss is recognized on the exchange of property held for use in a trade or business or for investment if the property is exchanged solely for property of like kind that is to be used in either a trade or business or for investment. Personal residences and similar personal-use property generally do not qualify as property held for investment or used in a trade or business within the meaning of Section 1031. When it comes to vacation homes and similar property that a taxpayer uses occasionally for personal use, there has generally been uncertainty as to whether or not that property would qualify for a Section 1031 exchange.  The IRS has issued Revenue Procedure 2008-16 which provides a new safe harbor for applying Section 1031 in these situations. Under this ....
• IRS Issues Notice Explaining Go Zone Recapture Rules For Like Kind Exchanges of Go Zone Property by Kevin C. Curry The IRS issued Notice 2008-25 explaining how the recapture rules for the 50% bonus depreciation under the GO Zone legislation applies to GO Zone property involved in either a like kind exchange under Section 1031 of the Internal Revenue Code (the "Code") or an involuntary conversion under Section 1033 of the Code.   In general, for qualified GO Zone property, taxpayers can claim a 50% bonus depreciation deduction for the qualified Go Zone property. However, this depreciation deduction is subject to recapture if the property ceases to be substantially used in the GO Zone or in the active conduct of a trade or business by the taxpayer. If GO Zone property is no longer GO Zone property in the hands of the same taxpayer at any time before the end of the GO Zone property’s recovery period under the normal depreciation rules, then the taxpayer must generally recapture in the taxable year in which the GO Zone property is no longer GO Zone property (the ....
• Victims of 2005 Hurricanes Get Additional Year to Sell Vacant Land by Kevin C. Curry In IRS News Release 2007-134 issued on July 31, 2007, the Internal Revenue Service has granted an additional year to the time limit for victims of Hurricanes Katrina, Rita and Wilma to sell the vacant land upon which their home had sat and was destroyed as a result of the hurricanes. Section 121 of the Internal Revenue Code generally grants an exclusion of up to $250,000 of gain ($500,000 for joint returns) on the sale of a home owned and used as a principal residence. With respect to homes that were destroyed by the hurricanes, in order for the sale of the vacant land to qualify for the exclusion, the land would generally have to be sold within two years of the home’s destruction. This news release grants the victims of the hurricanes an additional year to sell the vacant land and still qualify for the exclusion. ....
• Intellectual Property Due Diligence In a Community Property State by Anthony G. Boone The purpose of due diligence in the acquisition of licensing of intellectual property assets (namely patents and copyrights) is to give a buyer an opportunity to investigate and evaluate the asset concerned in some detail. More particularly, due diligence involving patens and copyrights can present ownership issues if the author/inventor is or was married and resides in a community property state. Whatever level of diligence is required for the particular transaction, the buyer should consider inquiring as to the current and past marital status of the inventor/author of the intellectual property if the inventor/author is either the seller; a direct owner of the seller; or in some cases, even a past owner of the intellectual property.  Federal law vests ownership of copyrights and patents to the author/inventor of the intellectual property; however, in a community property state, a non-contributing spouse can be given an ownership interest in what would ....
• IRS Issues New Grantor Trust Ruling by Kevin C. Curry On February 16, 2007, the IRS issued a formal ruling approving a sale of a life insurance policy to a grantor trust. This ruling is a rare formal ruling by the IRS in the grantor trust area. Grantor trusts, or intentionally defective grantor trusts, are used often in a variety of estate planning situations. Grantor trusts are typically used in estate planning situations where the parties want the income of the trust to be taxed to the grantor of the trust (the person who set up the trust) or where they want the grantor to be deemed to be the owner of the trust property for income tax purposes. One situation where grantor trusts have been utilized is in restructuring the ownership of a life insurance policy to cure problems which may exist in an existing irrevocable life insurance trust. For example, a person may set up an irrevocable life insurance trust for estate planning purposes. However, if the person’s family or financial situation ....
• Louisiana Estate Planning - Some Information You Should Know The need for "estate planning" is often dismissed by individuals as being a luxury which can only be utilized by the wealthy. However, anyone who owns any property has need for at least some knowledge of estate planning in order to determine who will receive his or her property at the time of death. The term "estate planning" is not restricted to planning or drafting of wills for individuals who will have a federal estate tax consequence at death. "Estate planning", when used in its broadest sense, is necessary for the husband and wife who want to leave as much as they can to their surviving spouse for that surviving spouse's economic well-being and protection. It is also necessary for the young husband and wife who have several children, a house with a large mortgage, a small savings, and life insurance. Estate planning is also necessary for the single individual with no children who desires to distribute his or her property in a manner different from the statutory course. Do not let ....
• Annual Gift Tax Exclusion Increased for 2006 The annual gift tax exclusion for the federal gift tax has increased to $12,000 for 2006. The annual exclusion had been $11,000. The annual exclusion is the amount any individual can give another individual per year without triggering a taxable gift for federal gift tax purposes. Only gifts of present interests qualify for the annual exclusion. Any gifts in excess of the annual exclusion will use some of the donor's lifetime exemption amount (currently $1,000,000) and could trigger federal gift tax if all of the lifetime exemption amount is used. Louisiana allows the same annual exclusion as the federal gift tax so Louisiana's annual exclusion will increase as well. However, Louisiana has a lifetime exemption of only $30,000, not $1,000,000. For more information, please contact Kevin C. Curry. ....
• IRS Grants Tax Relief to Katrina Victims The IRS has granted various extensions to taxpayers in areas affected by Hurricane Katrina. Generally, this relief extends the due dates for any business or individual return due on or after August 29, 2005 until January 3, 2006. The due date for quarterly estimated income tax payments have been extended until January 3, 2006 as well. Finally, although the extension for filing employment tax returns may not extend the time for making employment tax deposits, the IRS will waive any penalties for failing to make the deposits between August 29, 2005 and January 3, 2006. For a more detailed discussion of the applicable relief areas, the extensions and the penalty waivers, see IRS Notice 2005-73. Download file ....
• Transferring the Family Business to Your Children By Carey J. Messina So you've built a successful business that provides you a good salary and employment for several of your children. Things are going fine, but you are worried about what happens to the business when you retire in a few years, or die. What are you going to do? (i) sell to that "national group" for cash and a nice consulting arrangement; (ii) sell to several loyal employees who have helped grow the business, but have not participated in management; or (iii) transfer the business to the children working in the business.The first two options may be the easiest ones to accomplish as you are negotiating with third parties. Transferring the business to children can take a lot of twists and turns. The following issues deserve consideration when passing the business to family members: The Family Feud. Any transfer of the business to less than all of the children has the potential for ill feelings for many years to come. There may always be that underlying feeling that those ....
• Videotaping the Last Will and Testament By: Carey J. Messina The Governor has signed into law Act no. 79 of the 2005 Louisiana Legislature which creates New Code fo Civil Procedure Article 2904 allowing for the admissibility of videotape of the execution of a testament. The videotape evidence may be entered in a contradictory trial to probate a testament or in an action to annul a probated testament. For the videotape evidence to be admissible, the testator must be sworn by a person authorized to take oaths and the oath must be recorded on the videotape. The videotape of the execution and reading of the testament by the testator may be admissible as evidence of any of the following: 1. The proper execution of the testament. 2. The intentions of the testator. 3. The mental state or capacity of the testator. 4. The authenticity of the testament. 5. Matters that are determined by a court to be relevant to the probate of the testament. Videotape is defined broadly under the new provision. This opens a whole new pandora's box to ....
• Estate Planning - It's For Everyone By Carey J. Messina The need for "estate planning" is often dismissed by individuals as being a luxury which can only be utilized by the wealthy. However, anyone who owns any property has need for at least some knowledge of estate planning in order to determine who will receive his or her property at the time of death. The term "estate planning" is not restricted to planning or drafting of wills for individuals who will have a federal estate tax consequence at death. "Estate planning", when used in its broadest sense, is necessary for the husband and wife who want to leave as much as they can to the surviving spouse for that surviving spouse's economic well-being and protection. It is also necessary for the young husband and wife who have several children, a home with a mortgage, savings, and life insurance. Estate planning is also necessary for the single individual with no children who desires to distribute his or her property in a manner different from the statutory course. Do not ....
• New Louisiana Homestead Exemption May be a Trap for the Unwary By Kevin C. Curry In November 2004, the Louisiana voters approved a new Constitutional Amendment to revise Louisiana's Homestead exemption law for ad valorem tax purposes. While this new law is helpful in clarifying a number of issues, it does create a trap for the unwary. Specifically, the new law has been interpreted to deny the homestead exemption for individuals who transfer their homes into revocable trusts (also known as living trusts). While not as common as it is in other states, some Louisiana residents have used revocable or living trusts for estate planning purposes. Basically, these trusts hold title to an individual's property during his or her lifetime and can be managed by a successor trustee if the individual becomes incapacitated. Upon the individual's death, the property passes to the beneficiaries (heirs) under the terms of the trust. The new law allows for the homestead exemption for irrevocable trusts but not for revocable trusts. Before the new law was enacted, ....