Marital Deduction

The trust was to terminate at the end of five years, at which time the accrued but unpaid income was to be paid to the taxpayer’s wife, and the principal returned to taxpayer. The United States Supreme Court ruled in Helvering v. Clifford that the income earned by the trust would be taxable to the grantor, even though the income was actually distributed to the beneficiary, because of the amount of control retained by the grantor.

Alimony payments are deductible by the individual making the payments, and they are taxable income to the person receiving the payments. For divorce agreements executed after 1984, alimony payments must meet the following requirements:

Decedent made a transfer within 3 years of death. Under Section 2035(a), nothing is included in Decedent’s gross estate, because it’s a cash gift. However, under Section 2035(b), the amount of the gross estate shall be increased by the amount of any tax paid on any gift made by the decedent during the 3-year period ending on the date of the decedent’s death. So the amount of gift tax of this gift the decedent paid is included in his gross estate.

Chapter 5; IRC Secs. 101, 102, 103, & 108; All are excluded from gross income.

* Estate Tax: combine with taxable gifts; to derive taxable estate, you are entitled to subtract contributions to spouse & charity. Only eligible for exemption if not used for gift tax purposes.

There are more than 1,100 federal statutory provisions in which marital status is a factor in determining or receiving benefits or privileges. (GAO). Married partners receive tax benefits, allowing them to file joint income tax returns; receive estate planning benefits, by inheriting from the deceased spouse’s estate and receiving an estate and gift tax exemption for all property left for the living spouse; and government benefits, including receipt of Social Security, Medicare, and disability benefits attach to married couples. (Nolo).

Tiebreaker rules: If a child is claimed as a qualifying child by two or more taxpayers in a given year, the child will be the qualifying child of:

with one stroke of the pen on a divorce petition. Under federal law, spouses filing a

Therefore, IRS provides taxpayers with the set of rules and tax court cases which help to identify the possible tax consequences. Through the above case study, $5,000 in legal fees spent by Bill in the divorce process are nondeductible personal expenses. On the other hand, Hillary is able to claim a deduction of $2,000 for legal fees related to collecting alimony taking into account that her adjusted gross income is $100,000 or

I.R.C. § 2056(d)(1). Congress has provided an exception to this general rule in the form of a qualified domestic trust (QDOT), which allows the property to qualify for the marital deduction if the trust meets certain requirements. I.R.C. § 2056(d)(2)(A). For a trust to qualify for QDOT status and the marital deduction, it must meet the seven requirements contained in the tax code and accompanying treasury regulations. I will separately discuss each requirement below and whether the currently language of Form M effectively fulfills that requirement.

In eliminating the IRS 's requisition for summary judgment in the case, the Tax Reckoning stated that it would no longer follow its opinion in McCord, in which it had held that "in advance of the death of a person, no recognized method exists for approximating the burden of the estate tax with a sufficient degree of certitude to be effective for Federal gift tax purposes" (McCord, 120 T.C. at 402). Therefore, under McCord, no discount would be allowed on a gift tax return for a potential estate tax liability.

For regular taxpayers, personal exemptions and the standard deduction are tax benefits since these are deducted in the calculation of regular tax. However, AMT has become an obligation for some married taxpayers with children, since personal and dependency exemptions are disallowed in the calculation of AMT. Therefore, family size does not make a difference under the obligation of AMT. Additionally, state and local sales taxes, which are benefits for regular taxpayers, are disallowed under AMT rules. Consequently, more taxpayers living in high tax states fall under AMT rules. Under regular tax rules, the deduction of state and local sales tax acts as an incentive for local governments to increase taxes, but the effects of this is counteracted under AMT (Tritz, 2015).

Whenever separate funds are used to pay for community expenses a spouse may be entitled to reimbursement in a divorce action Dupree v. Dupree, 41-0572 (La. App. 2d Cir. 12/20/06), 948 So. 2d 254, 261 . In Dupree, the family enjoyed benefits flowing from the plaintiff’s separate property for many years. The court reasoned that without the plaintiff’s separate funds, the family would not have enjoyed the lifestyle to which they were accustomed. Id. At 258. She provided a comfortable living environment for her family as well as private schooling for her children, thus benefitting the community. Id. At 258. Although the defendant

Over the past few months, the federal estate tax has been a popular topic in the news. Also known as the death tax, this tax is applied to the transfer of an estate at passing away of an individual. Generally, said estate includes all assets of the person who passed away, including financial assets like stocks, bonds, and mutual funds; real assets, like houses, land, or other tangible property; and proceeds from life insurance policies. The United States federal government established the estate tax that is currently implemented in 1916. Since then, the estate tax was phased out in 2001, so that the rates dropped until eliminated in 2010. However, this legislation was not lasting, and the estate tax returned in 2011.

Remainder beneficiaries will not only receive their share of the assets owned at the date of death, but will also receive their share of the income generated by estate assets while the estate is being administered until its closing. For example, if the estate has $500,000 cash in an interest-bearing account, the interest earned after the date of death until the cash is distributed and the estate is closed is taxable income to the remainder beneficiary. They will receive a Schedule K-1 from the income tax return that the Estate files for the year. The income reported on the beneficiary’s Schedule K-1 should be included on the beneficiary’s Form 1040 as taxable income. It will not equal the amount of the inheritance, nor necessarily agree to any amount actually received by the