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New York State Renews the Three-Year Clawback for Gifts

New York State Renews the Three-Year Clawback for Gifts

Generally, Federal estate and gift taxes are imposed on a person’s right to transfer property to another person during life or upon death.  State rules may differ from the Federal regime, imposing either an estate tax, inheritance tax, or gift tax or some combination of these taxes.  New York State limits its taxation to an estate tax on the transfer of property at the time of death.  There is no gift or inheritance tax.  But, as of April 1, 2014, gifts made by a N.Y. resident between April 1, 2014, and December 31, 2018, were clawed back into the taxable estate if the gifts were made within three years of death.  The clawback has been extended to cover gifts made through December 31, 2025.  Rusudan Shervashidze and Nina Krauthamer explain.

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Valuation – More Art than Science

Valuation – More Art than Science

In a recent case, the Tax Court was asked to evaluate two Old Masters paintings from the 17th century.  Sotheby’s provided the valuation for estate tax purposes on a gratuitous basis.  The appraised value totaled $600,000 for the two works.  The estate retained the same auction house to sell one of the paintings.  The sale price at auction was $2.1 million before buyer’s premium, and the auction took place within 34 months of the issuance of the appraisal report.  Kenneth Lobo and Nina Krauthamer explain why the court had no difficulty finding that the estate’s expert was not independent and that the subsequent sale was relevant

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Cross-Border Complexities: What You Need to Know Before Your Non-U.S. Client Invests in the U.S.

Cross-Border Complexities: What You Need to Know Before Your Non-U.S. Client Invests in the U.S.

When foreign tax counsel advises a client on a personal investment in the U.S., it is common for a U.S. tax adviser to comment on the scope of U.S. income, gift, and estate taxes.  Sometimes the investment is made through a trust and other times it is made directly.  In their article, Kenneth Lobo and Fanny Karaman answer questions raised in the context of fact patterns often used.

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Tax 101: Foreign Settlors, U.S. Domestic Trusts, and U.S. Taxation

Non-U.S. tax advisers to high net worth individuals are familiar, to some degree, with U.S. tax rules involving trusts, settlors, and beneficiaries.  While they may know that a grantor trust allows for income to be taxed to a grantor, they are not always conversant with the differences between U.S. income tax rules for grantors and the U.S. gift and estate tax rules that cause trust property to be included in the taxable estates of trust settlors.  Fanny Karaman, Kenneth Lobo, and Stanley C. Ruchelman explore the way these rules exist side by side – highlighting the differences, in the context of a nonresident, non-citizen settlor establishing a U.S. domestic trust for the benefit of an adult U.S. child wishing to acquire an apartment in the U.S.

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I.R.S. Issues Proposed Regulations Affecting Valuation Discounts for Gift and Estate Tax Purposes

For corporate tax purposes, the I.R.S. maintains the view that a transaction between a taxpayer and a disinterested party – meaning a person that does not have an adverse interest to a taxpayer because tax neither increases nor decreases as a result of a particular term agreed upon – is not the result of arm’s length bargaining and can be disregarded where appropriate.  Now, the I.R.S. proposes to expand that approach to estate plans. The proposal is embedded in regulations issued under Code §2704. As a result, commonly used tools may no longer be available to reduce gift or estate tax.  Minority ownership discounts and unilateral governance rights that disappear at death are valuation planning tools that are at risk because of the common goals of the participants. Fanny Karaman, Stanley C. Ruchelman, and Kenneth Lobo explain.

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