Insurance policy included in estate-absent proper planning
Article Abstract:
Results of a Tax Court case showed the importance of proper real estate planning. The court held that proceeds from a life insurance policy can be included in a decedent's gross estate if the individual had the incidents of ownership on the policy before transferring the policy to a trust within three years of his death. The court also argued that Section 2042 lists various types of incident of ownership, including the power to change the beneficiary of the policy and pledging the policy for a loan. The case shows how the decedent could have avoided having his policy included in an estate by avoiding incidents of ownership by arranging for the trust or his wife to purchase the policy. The decedent could have also satisfied requirements under Reg 20.2056(b)-6 to qualify for marital deductions to prevent his policy from being included in an estate.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1998
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Lack of formalities hurt tax treatment of investment loss
Article Abstract:
The Tax Court rejected a taxpayer's claim for ordinary capital loss treatment because he failed to meet a key requirement of Section 1244 regarding deductions. The taxpayer, an attorney, claimed a Section 1244 loss for his investment in a software company and a Section 162 business expense for money paid under computer leases and for the investigator services. However, the IRS did not allow the loss treatment because Section 1244 states that a taxpayer may deduct an ordinary loss from small business stock only if the stock is issued for money or other property. Since the taxpayer received his shares in exchange for legal services, he was not entitled to ordinary loss treatment for which he settled when his investment in the software company became worthless. The Tax Court ruled in favor of the IRS.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1998
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R&D credit is again restored - with changes
Article Abstract:
The Section 41 credit for research and development credit was restored with the passage of the Small Business Job Protection Act of 1996. Taxpayers were hoping that the credit would be reinstated retroactively to its expiration date of June 30, 1995, but the 1996 Act allowed the credit's restoration for only the 11-month period between July 1, 1996 and May 1, 1997. A gap in coverage therefore exists since the retroactive restoration was not extended to cover the 12-month period between the credit's expiration and its reinstatement. Consequently, R&D expenses incurred during this period do not qualify for the credit. While the new law has made taxpayer compliance more complicated, it has added new provisions that are intended to expand the number of taxpayers who can avail of the R&D credit.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1997
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