Focus on Tax - FOT-03-05

May 2003

Receive Email Notices When New Issues Are Available !

This Issue Covers:

	Is a QPRT the right tool for the times?
	Strategy critical in managing employee stock options
	Tax consequences abound when S corp stock is redeemed
	Changes in FASB rules affect M&A considerations involving foreign companies
	In case you didn't have a chance to read April's Focus on Tax

Previous Issue

Is a QPRT the right tool for the times?

Appreciating assets, such as a home, add to the complexities in creating a bulletproof estate plan. A Qualified Personal Resident Trust (QPRT) can help that process. CCH's tax editors note that the primary advantage in creating a QPRT is that the full value of the residence can be transferred ultimately to the owner's children, but for federal gift tax purposes, the property is valued at a discount. In addition, the value of the house is "frozen" for gift tax purposes, meaning any appreciation in the value of the house after it is transferred to the trust is not subject to gift tax. The taxable value of the gift is only a fraction of the full value of the house. The actual value of the gift (and the gift-tax savings) depends upon the donor's age, the length of the QPRT term, and the Section 7520 federal interest rates in effect at the time of the transfer. For example, the longer the QPRT term, the lower the gift value for gift tax purposes and the greater the gift tax savings.

For a complete copy of the Federal Tax Weekly article discussing this issue, click here.

To subscribe to Federal Tax Weekly, click here.

Related Titles to this Article:

Real Estate Taxation
Journal of Practical Estate Planning
U.S. Master Estate and Gift Tax Guide, 2003

Was this article useful?
Send us your comments: CCH-FocusOnTax@cch.com

Strategy critical in managing employee stock options

Now more than ever, wealth managers need to have a thorough grasp of how employee stock options operate. They also need to assist clients in developing coherent strategy that is implemented in a disciplined fashion, according to S. Timothy Kochis, the author of CCH's new Wealth Management: A Concise Guide to Financial Planning and Investment Management for Wealthy Clients. In his chapter on stock options, Kochis outlines all of the issues to be dealt with in this complex but potentially lucrative field. Securities law, timing, IRS rules, expensing options and other issues (including numerous potential "land mines") all come into play and need to be considered in developing effective strategies with stock options. Kochis, the CEO of Kochis Fitz in San Francisco and Menlo Park, California, is a former national director of personal financial planning for both Deloitte & Touche and Bank of America. He serves as the chairman-elect of the Board of Governors of the Foundation for Financial Planning.

For a complete copy of this chapter from Wealth Management, click here.

For the complete table of contents for CCH's Wealth Management: A Concise Guide to Financial Planning and Investment Management for Wealthy Clients, click here.

To order CCH's Wealth Management: A Concise Guide to Financial Planning and Investment Management for Wealthy Clients, click here.

Tax consequences abound when S corp stock is redeemed

There are numerous permutations and combinations of tax consequences that can occur when an S corporation shareholder redeems the stock of a shareholder. Many factors come into play, such as whether or not the redemption qualifies as an exchange, the existence of corporate E&P, whether cash or property is used to redeem the stock, and the nature and deductibility of any loss by the shareholder. Authors Michael A. Yuhas, professor of taxation at Grand Valley State University and James Fellows, professor of taxation at the University of South Florida discuss the many pitfalls and problems that await the practitioner dealing with an S corp redemption in a recent article from the Journal of Taxation of Corporate Transactions. This article not only provides easy-to-understand discussion of the laws and regulations involved, but it shows their application through numerous detailed examples.

To read the full text of this article, click here.

To subscribe to the Journal of Taxation of Corporate Transactions, click here.

Changes in FASB rules affect M&A considerations involving foreign companies

In the Spring 2003 issue of the Journal of Taxation of Global Transactions, tax planning expert Paul A. Smith of Ernst & Young, outlines several potential scenarios involving the latest FASB standards that will affect determining the effective tax rates used in accounting for mergers and acquisitions involving foreign targets or domestic targets that have foreign subsidiaries. Smith notes that the changes to U.S. accounting rules with regard to goodwill make many of the older merger and acquisition strategies detrimental for companies seeking to avoid unnecessary income tax expenses.

For a full explanation of these issues in the full article from the Journal of Taxation of Global Transactions, click here.

To subscribe to The Journal of Taxation of Global Transactions, click here.

If you didn't have a chance to read April's Focus on Tax...

We know many of you have a busy month during April and keeping up on your reading is difficult at best in the last-minute rush of returns, extensions and panic that come with working with clients. In case you didn't have a chance to read the April Focus on Tax, here's a recap of what we covered and a reminder that you can still access all of these items by clicking here.

From Sales & Use Tax Alert, we featured an article on how an Illinois law firm is taking an unusual approach under the state's whistleblower law to force out-of-state mail order and internet sellers to collect sales and use taxes on sales made into Illinois. The firm stands to reap a huge windfall if the strategy succeeds. Click here for more information.

From CCH's newly-published Consolidated Returns Guide by James Warner, a principal in Ernst & Young's National Tax Department, we featured a chapter on the earnings and profits system and how this affects consolidated returns. For more information and access to the full chapter from this new book, click here.

Want to wish your clients a real Happy Birthday and give them some tax tips based on their birthday? A recent issue of CCH's Federal Tax Audio Advisor by seasoned tax experts and educators, Sidney Kess and Barbara Weltman, shows how to do just that. Click here for more information.

The IRS has taken aggressive positions in recent estate tax cases. How should you deal with a valuation challenge? A recent article by nationally known estate planner and tax litigator, Owen Fiore, in the Journal of Practical Estate Planning shows you how. Click here for more information and access to the full text of this article.

Introducing CCH^® ViewPlan Advanced^TM Estate Planning Software

CCH ViewPlan Advanced Estate Planning Software is a powerful new combination of the best features of CCH ViewPlan® software and all new, expanded functionality to provide unprecedented productivity. With fast, easy input and manipulation, you can quickly generate sophisticated reports and graphs to present - in one planning environment — different actuarial charitable and intrafamily wealth transfer planning techniques for affluent clients.

For more information on CCH ViewPlan Advanced, click here.

Spotlight Products:

Journal of Practical Estate Planning

Offers valuable advice from experienced practitioners, who provide sound, practical guidance to help simplify even the most complex estate planning strategies.

Asset Protection Planning Guide

Covers every aspect of the subject—describing the various asset protection plans, when to use them, why to use them, and which countries to go to for protection.

Investments and Taxes: A Practical Guide for Financial Advisors

A brand-new, cutting edge guide that provides an overview of practical tax planning strategies that can be incorporated into an overall financial and estate plan.