The estate of pop music legend Michael Jackson owes $702 million in federal taxes and penalties, the Internal Revenue Service charged in U.S. Tax Court, accusing the estate of undervaluing some of the star's assets by hundreds of millions of dollars. The dollar amounts in dispute had not been previously disclosed in the court challenge that the Jackson estate filed in July to a bill from the IRS, the U.S. tax-collecting agency. At issue is the wide difference between what the estate said Jackson's legacy was worth versus what the IRS determined was its taxable value. An IRS spokesman and…
The U.S. Department of the Treasury and the Internal Revenue Service (IRS) has ruled that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. The ruling applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage. A press release by the Treasury Department says that the Department and the IRS will use a “place of celebration” rule in recognizing same-sex unions (recognition that was illegal before the Supreme Court struck down part of the Defense of Marriage…
When the children of art dealer Ileana Sonnabend inherited her valuable collection of artwork in 2007, among the pieces was a ground-breaking “combine” by Robert Rauschenberg titled “Canyon” (pictured right). The children paid $471 million in federal and state estate taxes on their mother’s estimated $1 billion collection, but they did not think they had to pay any tax on “Canyon.” The 1959 work, it turns out, can never be sold because it includes a stuffed bald eagle. Bald eagles are under federal protection and selling or trading one, even if it is part of a famous work of art,…
Are you a small business owner? Do you have any “independent contractors”? Really? Then, watch out! The IRS is looking for revenue. Surprised? Don’t be. If you use independent contractors, then you might need to exercise a bit more diligence. Why, the IRS may consider them to be “employees” masquerading in a tax-cheating disguise. It’s quite common for small business owners to rely on independent contractors, especially in lean times. And, from the perspective of the IRS, the difference can be huge in tax and legal terms. Why? An employer doesn’t have to withhold taxes or pay any benefits (instead,…
On August 5, 2011, the IRS published long-awaited guidance for executors of estates of people who died in 2010. Notice 2011-66 explains how these executors can opt out of the estate tax, and Revenue Procedure 2011-41 explains the special tax rules that apply to assets when executors opt out of the estate tax. After a bit of biding our time, we finally have something official with which to work regarding 2010 estate taxes. Nevertheless, there is a bit more waiting to do. The IRS recently published its guidance in the form of Notice 2011-66 and Revenue Procedure 2011-41. As you…
The Internal Revenue Service has a low-profile but sweeping effort under way to use state land-transfer records for evidence of omissions in reporting gifts of real estate to family members. New tax rules make big gifts to family members popular this year. If you made a gift of real estate (or are considering making one) be warned – the IRS is scrutinizing land-transfer records looking for folks who may have made a reporting error. As The Wall Street Journal reports, the IRS has begun requesting state land-transfer records and checking them against reports of the past few years to find…
There are a number of good reasons that you might be eying your IRA as it sits there with years to go before you turn age 59-1/2. You could see it as potential, as rescue capital, or if you’re in a really good place you could see it as the start of an early retirement. Of course, there are a few good reasons for leaving it alone – heavy tax hits and penalties – and for that Forbes has recently offered some uncommon advice for withdrawing from your IRA early and penalty free. The general wisdom is to leave your…
We frequently hear from individuals who have gifted $12,000 each to their children and grandchildren, over the past few years. However, this gifting is a myth. In fact, the $12,000 figure is now $13,000. But this is an IRS rule regarding filing a gift tax return. This has nothing to do with Medicaid law. If you make a gift, within five (5) years of qualification of Medicaid, you will penalized. For example. If you gift to your family $68,000, within the five (5) year period, you will be penalized for TEN (10) months, before you receive Medicaid. Therefore, who will…
If you’re over age 50, have substantial assets in your qualified retirement plan, and always dreamed of being your own boss, you are not alone. In fact, you may decide to join the growing number of baby boomers who are tapping their retirement savings for start-up capital on a new business. The Wall Street Journal, along with SmartMoney, recently discussed the trend, the possibilities, and the potentially dangerous risks involved. Here is the strategy, which the IRS called a Roll Over as Business Startup (ROBS). First, you create a legal corporation with its own 401(k) plan into which you can…
If you’re a high-earning taxpayer, with an adjusted gross income of more than $500,000 – well, first, congratulations! and second – beware. It appears that the IRS may be gunning for you. As the Wall Street Journal recently reported in their MarketWatch section, the IRS is stepping up audits of wealthier taxpayers as part of their offensive to crack down on tax avoidance. According to the IRS’s most recent statistical report, audits are increasing on most high income groups and increase as the tax brackets get greater. The percentage of taxpayers who were audited increased in every category of adjusted…
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