The Future of Valuation Discounting…

Earlier this month, a long awaited hearing was held on the proposed regulations that would reduce the availability of valuation discounting when transferring closely held business interests.  Close to forty individuals testified at the IRS hearing and all but one individual opposed the proposed regulations.  Among several of the reasons why critics opposed the regulations included the following: (a) the potential for a ‘deemed put right’; (b) the creation of a three-year look back period; (c) the forced use of the ‘investment value’ standard for determining fair market value versus the ‘willing buyer – willing seller’ standard; and (d) the use of family attribution rules that could extend the reach of the proposed regulations.  An attorney-advisor from the Treasury Office of Tax Legislative Council tried to assuage some of the concerns and even commented that it would be surprising if the regulations were finalized given the new administration. 

What does the hearing mean for planning?  It means that planning is still very much up in the air.  For some, there has been a push to complete transactions by the end of year before the regulations are finalized.  For others, any potential transactions are now on hold.  Either way, the issue is not dead, but may be tabled until the next election and individuals and their advisors would be wise to monitor the situation to avoid getting caught without having planned. #valuationdiscounts #2704regulations #businessvaluations #estateplanning #businessplanning @bgnthebgn

Five Considerations for Year-End Charitable Giving

As the year draws to an end, many of you look to make your charitable donations or are advising individuals regarding their charitable donations.  Of course, there are a variety of ways in which one can make such a charitable gift.  The IRS recently published IR-2016-154, which is part of a series of articles providing taxpayers with relevant information so they can be ready for the next tax season.  In this recent article, the IRS reminded taxpayers of certain aspects of charitable giving in an effort to help taxpayers avoid problems come tax time.  I have summarized these helpful tips below. 

For starters, individuals can only receive a tax deduction if the charity to which they donate is an ‘eligible organization.’  The IRS has a website, Select Check, that is a searchable online database of ‘eligible organizations’ that can be used to verify the status of an organization.

Next, charitable donations can only be deducted if the taxpayer itemizes their deductions.  For some this can be a hassle because that means maintaining accurate records and receipts.  If the gift is larger than $250 to the charity, then a written acknowledgement is required.  The IRS has provided Publication 56 on charitable contributions to help explain what records are necessary.   

Additionally, if an individual is looking to donate tangible personal property like clothing or household items, those items have to be in ‘good used or better’ condition.  Household goods include furniture, furnishings, electronics, appliances and linens.  The taxpayer must obtain a detailed receipt in which the donated items are described for donations worth $250 or more.  Items in which a deduction of more than $500 is claimed usually have to include a qualified appraisal. 

Another factor to keep in mind is if the taxpayer receives any ‘benefit’ in the form of merchandise, meals, tickets or other items.  The value of such ‘benefit’ will reduce the available deduction amount.  For example, a contributor membership to the Kennedy Center is valued at $120, but only $80 of that amount is eligible to be deducted.

One alternative to keeping lots of records and receipts from every organization is the creation of a donor advised fund.  An individual can make a single larger contribution to his or her donor advised fund and from that donor advised fund specific charitable donations can be made.  There are a variety of terms and conditions to follow, but the single contribution means that is what is reported on one’s tax returns.   Here is just one person’s rationale behind the creation of a donor advised fund that also allowed her to get more involved with her community. 

Ultimately, any gift is welcomed by the charity and you should feel free to reach out to the charity or your professional advisor if you have questions or need assistance in making year-end charitable donations.  @CFNOVA @bgnthebgn #donoradvisedfunds #taxplanning #charitablegiving

Notice of Observation Status – Update on Implementation

money-2In August 2015, Congress passed the Notice of Observation Treatment and Implication for Care Eligibility Act (the Notice Act“).  The Notice Act requires hospitals to give individuals who are receiving observation services as an outpatient for more than 24 hours, oral and written notification of observation status within 36 hours of the beginning of such services.  This notice is critical for individuals on Medicare because Medicare will only cover nursing home care following a hospitalization if the individual is classified as an inpatient for three (3) days prior to needing nursing home care.  If the individual is not classified as an inpatient, Medicare will not cover the hospitalization or subsequent care, such as rehabilitation or skilled nursing, which can be financially devastating to a family. 

Implementation of the Notice Act was to have taken effect in August of this year, and the Centers for Medicare and Medicaid Services (“CMS”) indicated that the final rules associated with the Notice Act would be effective October 1st. However, the written notice does not become effective until 90 days following approval of the Medicare Outpatient Observation Notice by the Office of Management and Budget and such written notice does not yet have approval.  What this all means is that the Notice Act has not yet been fully implemented and may not be until early next year.  In the interim, the Center for Medicare Advocacy has created an infographic to help individuals understand observation status and what it means as it relates to the cost of their care so that families can be engaged in the process.  #AskAboutObservation #elderlaw #observationstatus @bgnthebgn

FLASH UPDATE: The Medicare Outpatient Observation Notice and instructions are now available online.  The standardized form is giving individuals notice of their ‘observation status.’ Hospitals and critical access hospitals are required to start using this Notice no later than March 8, 2017.

Special Needs Trust Fairness Act – Update

open-bookAn update for those interacting with seniors and disabled individuals as it relates to the creation of special needs trusts.  In September, the House of Representatives passed the Special Needs Trust Fairness and Medicaid Improvement Act (the “SNT Fairness Act“), which the Senate had passed last year.  The SNT Fairness Act fixes an omission in Section 1917(d)(4)(A) of the Social Security Act where the disabled individual was not listed as someone who could create a first-party or self-settled special needs trust.  Under the SNT Fairness Act, the disabled individual will have the authority to create such a special needs trust thereby eliminating the need, in certain circumstances, for court intervention.  Unfortunately, the earlier House and Senate bills had some differing provisions and the bills could not be signed into law.  Recently the House passed a major health care package known as the 21st Century Cures Act that includes the SNT Fairness Act (buried at Sec. 5007 of the close to 1000 page bill).  The SNT Fairness Act will apply to trusts created on or after enactment.  Provided the Senate passes this health care package, it is expected that the SNT Fairness Act will be signed into law giving disabled individuals more control in managing their assets and benefits.   #SNTFairnessAct #SpecialNeeds #estateplanning

FLASH UPDATE: Senate has passed H.R. 34 in which the SNT Fairness Act was included. The President signed the bill on December 13th.