Think Outside the Tax Box

Structured Installment Sales (SIS) have been making a comeback. Historically low interest rates starting in 2011 made them go out of favor. Starting in 2018, insurers started coming back into offering them. MetLife expanded its SIS solution to 49 states, Puerto Rico and D.C. in 2022. You need to know about SIS and it deserves a place in your toolbox. You might not be using it as often as the toolmakers imply. I took a look at SIS in 2023 and was a little more enthusiastic about it than I am now. Let’s dig in.

This podcast is meant for entertainment purposes only. For the more thorough, complete, and accurately written version of this article which includes citations, visit us at http://www.tottb.tax

I have a friend who has been retiring “in about two years” for the last five years. He is 67, runs a successful practice with about 400 returns, and specializes in tax planning. He has never had the practice valued. He also has no succession plan in the event he does not come back from his next fishing trip.

This is not unusual. This is typical. The 2020 American Institute of Certified Public Accountants (AICPA) firm succession survey found that only 6% of solo and sole practitioners had a practice continuation agreement in place. Nearly half of those surveyed said they knew they needed one and had no idea how to start.

That second figure is the one that gets me, because it is not denial. Our colleagues know exactly what is at stake and are stuck. Let us get unstuck.

This podcast is meant for entertainment purposes only. For the more thorough, complete, and accurately written version of this article which includes citations, visit us at http://www.tottb.tax

The story of Anne Milner Fields is one of the reasons family limited partnership (FLP) opinions appeal to me so much. Born in 1925, she grew up in a small town in Texas and then moved to Dallas where she got a job as a secretary and met prominent oil man Bert Fields Sr. They married, and she lived the life of a socialite until he died in 1963. She consciously turned herself into a businesswoman, going so far as to take accounting courses.

Judge Copeland seems to have become a fan of hers:

“Ms. Fields's approach ultimately served her well: Her schooling, charisma, drive, and curiosity yielded good business decisions, which over time compounded into considerable personal wealth. She did not remarry or have children after Mr. Fields's passing.”

Having no children or grandchildren, she took her grandnephew, Bryan Milner, under her wing, paying for his education and mentoring him. In 2010, the year she turned 85, she made him executor of her estate and gave him a general power of attorney. He was also set to inherit the residue of her estate after some specific bequests. I really think we have the elements of a novel or a TV miniseries here, but we are tax people, so we are going to focus on how Anne’s estate tax was handled after she passed. It didn’t go well...

This podcast is meant for entertainment purposes only. For the more thorough, complete, and accurately written version of this article which includes citations, visit us at http://www.tottb.tax

Following Betteridge’s Law of Headlines, the answer to the question posed in the headline is, “no.” Actually — because we’re talking about taxes here — we can say the answer is never so definitive, so let’s change it to “probably not.”

Alternative minimum tax (AMT) is a type of parallel tax system. It requires certain items to be added back in determining alternative minimum taxable income (AMTI).

And in some cases, a taxpayer may get an additional deduction for AMT purposes that they didn’t get for regular tax purposes.

All of this to arrive at AMTI. A special tax rate is applied to AMTI, and if the amount of AMT is larger than the taxpayer’s regular tax liability, then they’ll be liable for their AMT amount. Listen in as we dive into some details on this fascinating topic!

This podcast is meant for entertainment purposes only. For the more thorough, complete, and accurately written version of this article which includes citations, visit us at http://www.tottb.tax

We all know how messy tax returns can get when couples who used to file jointly divorce and there are children (and tax credits) involved. It’s often difficult to explain the rules surrounding Head of Household filing status and the various tax credits available to parent-clients who have separated or divorced. But what happens when the clients misunderstand and decide to fight about it in family or divorce court? The following case study says “nothing good” can be a horrifying and frustrating answer to this question.

This podcast is meant for entertainment purposes only. For the more thorough, complete, and accurately written version of this article which includes citations, visit us at http://www.tottb.tax

The IRS has issued a statement about a new settlement offer that is going out for conservation and historic preservation easement disputes. It is similar to previous offers, but there is one big difference. The partnership will not have to make a payment at the time that it accepts the offer. Other than that, it is a similar to the deal offered in 2020. Taxpayers get to deduct what they are out-of-pocket as an ordinary deduction and are subject to a 10% penalty. In general, the out-of-pocket donation might be around 20% to 25% of the claimed charitable deduction. The Tax Court, on average has been allowing 6%, although results vary. There is usually a 40% penalty in the decided cases.

In one of my harsher moments, I referred to syndicated easements as an industry based on nonsense. The trade association, Partnership For Conservation, promoted the notion that an easement on property could be worth more than the current value of the property. This was necessary in order for the deals to work since promoters would acquire an interest in property and mark it up to sell partnership interests to investors who would be promised a deduction typically four to five times their investment (sometimes more) which would allow them to pay their taxes effectively for about fifty cents on the dollar, more or less. The Senate Finance Committee refers to inflated appraisals as being the engines of syndicated conservation-easement transactions. The inflation of the appraisals is being borne out in Tax Court. Overall, you can see why the settlement looks like a good deal... let's take a deeper look.

This podcast is meant for entertainment purposes only. For the more thorough, complete, and accurately written version of this article which includes citations, visit us at http://www.tottb.tax

Astute subscribers of Think Outside the Tax Box may recognize that writer Matt Metras frequently writes on Cryptocurrency and also on Tax Court cases. So, it feels like Christmas for him to be able to write about a tax court case about crypto. This is only the Third Tax court case to even mention crypto, and the first to look at the underlying principles of taxation. (The other two were about including crypto assets in a CDP hearing and a frivolous tax protester argument). Today’s case, Paschall v. Commissioner, is about the taxation of staking income.

This podcast is meant for entertainment purposes only. For the more thorough, complete, and accurately written version of this article which includes citations, visit us at http://www.tottb.tax

Many taxpayers have lived with a frustrating mismatch since the Section 163(j) limitation tightened after 2021 – the business may generate plenty of cash, yet its interest deductions are limited because adjusted taxable income (“ATI”) is too low, e.g., due to capex. The 2025 restoration of depreciation and amortization addbacks makes ATI planning relevant again, especially for groups that own valuable intangible property (“IP”), and the choice of legal entity to house group IP may have very different tax consequences as discussed in this podcast.

This podcast is meant for entertainment purposes only. For the more thorough, complete, and accurately written version of this article which includes citations, visit us at http://www.tottb.tax

The Internal Revenue Service has made no secret of its increased scrutiny of captive insurance arrangements, particularly those involving the small insurance company election. For taxpayers and their advisors, this has created understandable concern and, in some cases, hesitation about whether captive insurance remains a viable risk management and tax planning tool.

Yet heightened scrutiny does not mean prohibition. The Internal Revenue Code continues to recognize captive insurance, Congress has refined it, and courts evaluate it based on well-established insurance principles. The real issue is not whether captives are allowed, but whether a specific taxpayer has a legitimate business need for insurance, has structured the arrangement properly, and has implemented it in a manner consistent with both tax law and insurance fundamentals.

Understanding where scrutiny arises, how elections function, and what separates compliant captives from problematic ones is critical for CPAs advising closely held businesses today.

This podcast is meant for entertainment purposes only. For the more thorough, complete, and accurately written version of this article which includes citations, visit us at http://www.tottb.tax

The Jeffrey Winick tax story is about one of the simplest methods of not paying taxes. That simple method of not paying is simply not paying. Winick is a very successful real estate broker specializing in retail leases. The company he founded, Winick Realty, now rebranded RTL has in the past been listed as one the top five of retail brokers in New York City. According to the RTL site:

"Jeff has personally overseen millions of square feet of leasing transactions, working on behalf of clients such as AT&T, Duane Reade and Chase Bank, as well as prominent property owners and developers like SL Green, Brookfield, The Moinian Group, Chetrit Group, Related Companies, Lalazarian Developers, TF Cornerstone, Vornado and the Stahl Organization, among many others. Jeff has successfully negotiated retail leases for new locations for such renowned retailers as Paris Baguette, Burlington, Five Below, Home Goods, Those House of Cannabis; THCNYC, The NBA Store, Nordstrom Men’s Store, Nordstrom Rack, TJ Maxx, REI, Whole Foods and countless others."

As far as my friend Grok can discern, Winick managed all this with no formal education beyond high school. That makes it extra impressive. I identify with him just a bit. He grew up in Kew Gardens Hill, Queens, New York and is 75 years old. I also grew up not far from Manhattan and am 74. I sometimes fantasize about living in Manhattan. He's living there and apparently he was really living. His lifestyle was a major topic in the litigation.

This podcast is meant for entertainment purposes only. For the more thorough, complete, and accurately written version of this article which includes citations, visit us at http://www.tottb.tax