Planning Potpourri


Grantor Retained Interests:

Proposed revisions to Reg. 20.2036-1 (found in REG-119532-08 ) provide a method to determine the portion of trust corpus includible in a deceased grantor's estate if the grantor reserves a graduated retained interest, which is a retained interest that increases annually during the term of the trust. The proposed method measures the amount of principal needed to generate sufficient income to produce the payments that would have been due even after the decedent's death. This is done as if the decedent had survived and continued to receive the retained interest. The proposed regulations make other changes as well, including clarification of the includable amount if the decedent retained the right to receive an annuity or other payment, rather than income, after the death of the current recipient of that interest.

New York will tax non-residents on gains on sales of real estate entities starting May 7, 2009.

Example: You live in New Jersey and own 40% of an LLC that owns an apartment building in NY. If the LLC sells the building at a $1M profit, you'll have to report $400,000 in gain to NY.

Caution: Depending on how your home state taxes your LLC gain, and what it does by way of a credit for taxes paid to NY, you could pay taxes in both states! Sing the jingle: "Double your pleasure Double your fun With Doubletax Doubletax…"

Complexity: Ya need more rules to keep your CPA employed, so: Interests in a partnership, LLC, S corporation, or a C corporation is treated as NY real estate if 50% or more of its assets are real estate located in NY and it has 100 or fewer owners. ■ So you get smart and transfer enough cash into the LLC the week before you sell the property so that the real estate constitutes only 49% of the assets and you avoid the tax. No so fast Slick. Only assets owned for 2 years before the sale count.

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