Tax and estate planning update

To our friends who are tax and estate planning professionals, we hope you are doing well – and enjoying the fall weather. I attended an in-person breakfast event yesterday hosted by East King County Estate Planning Council. It was great to see old faces and catch up in person. Oh, and the speaker was excellent, too. Craig Janes of Deloitte gave us a federal tax update with humor and wisdom. I got a lot out of it, and I bet you would have, too. (Let me know if you’re interested in attending future meetings. You can invite yourself as my guest.) Since a recording of Mr. Janes’s informative and entertaining talk isn’t available, I thought I’d do the next best thing and share a few tax-related articles you might find interesting.

Analyzing Biden’s New “American Families Plan” Tax Proposal, Jeffrey Levine, Nerd’s Eye View

• New (Again) Top Ordinary Income Tax Rate Of 39.6%
• New Top Long-Term Capital Gains Rate of 25% (As Of September 14, 2021)
• Application Of The 3.8% Net Investment Income Tax (NIIT) To High-Income S Corporation Owners
• New 3% Surtax For Ultra-High-Income Taxpayers
• Creation Of A Cap on The Maximum Amount Of A Taxpayer’s QBI Deduction
• Prohibition On Conversions Of After-Tax Amounts (backdoor Roth conversion)
• New Required Minimum Distributions For Taxpayers With High Income And Mega-Sized Retirement Accounts
• “Defective” Grantor Trusts Eliminated
• Reduction In The Unified Credit Amount For Estate And Gift Taxes
• Expanded Child Tax Credit Extended
• Wash Sale Rules To Apply To Additional Asset Types (Including Cryptocurrencies) And Individuals

Reconciliation Bill Tax Provisions: Overview and What’s to Come, KPMG Tax (registration required)
 
Reconciliation Bill Tax Provisions: Implications for Asset Management, KPMG Tax (registration required)
 
Personal Planning Strategies - September 2021, Nathaniel Birdsall, JDSupra
You have probably heard that the House Ways and Means Committee released proposals for increasing gift and estate taxes in order support legislation being advanced by the Democratic majority in Congress. The purpose of this newsletter is to provide our top thoughts for planning now while the current law is still in effect.
 
A New Feudalism: Selfish Genes, Great Wealth and the Rise of the Dynastic Family Trust, Eric A. Kades
Today’s record levels of economic inequality are infecting our future as the top 0.01% bequest vast wealth to their descendants. With the death of the Rule Against Perpetuities (RAP), this inequality has the potential to harden social class lines not just for a generation or two but forever. Although it may sound implausible, interviews with estate lawyers serving very high net worth clients reveal that some of the wealthiest tier of testators are already exploiting the RAP’s elimination, along with a tax loophole, to establish dynasty trusts that will financially empower their bloodline as long as it continues.
 
Ways and Means releases list of tax provisions for budget bill, Alistair M. Nevius, The Tax Advisor
The House Ways and Means Committee on Monday released legislative text for proposed tax changes to be incorporated in the budget reconciliation bill known as the "Build America Back Better" act. The committee plans to mark up the bill on Tuesday and Wednesday. The proposal would raise tax rates for corporations and individuals and make many other changes to the Internal Revenue Code. Here are highlights of the proposed changes.
 
Individual Tax Update, David R. Baldwin, et al, The Tax Advisor

• The American Rescue Plan Act, P.L. 117-2, made significant changes to the child tax credit for 2021, including the amount of the credit and the phaseout levels for it.
• With respect to the Paycheck Protection Program (PPP), the IRS issued guidance that allows expenses paid with 2020 PPP loans to be deducted on 2021 tax returns under certain conditions.
• Cases involving the theft loss deduction highlight that taxpayers need to prove all the requirements for a theft loss, including that a theft occurred under the law of the state in which the theft occurred.
• The IRS issued final regulations regarding the rules for rollovers of qualified plan loan offset (QPLO) amounts from qualified employer plans to address changes made by the law known as the Tax Cuts and Jobs Act (TCJA).
• In June, the U.S. Supreme Court held that Texas and several other states lacked standing to sue over the constitutionality of the Sec. 5000A mandate that requires individuals to obtain minimum essential health coverage.
• Other recent cases have dealt with early distributions from retirement accounts, passive activity losses, hobby losses, substantiation requirements related to net operating losses, and other topics.

​Stay healthy.

We do not provide legal or tax advice. You should consult their own legal or tax advisor. This information is intended for educational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services.