IRS Announces May 2017 Applicable Federal Rates and 7520 Rates

Posted in Internal Revenue Code, IRS

The Internal Revenue Service (IRS) publishes a monthly update to the applicable federal rates (AFRs) and 7520 rates.

The May 2017 rates generally reflect a slight decrease from the April rates. Planning professionals and their clients should take note of fluctuations in these rates and be mindful of planning opportunities that come with rate changes.

The AFR is calculated by the IRS under Section 1274(d) of the Internal Revenue Code (the Code) and is used for many purposes. One of its most common applications is to establish the minimum interest rate that can be charged on an intra-family loan without income or gift tax consequences. These “safe harbor rates” are dependent upon two factors: (i) the term of the loan and (ii) the frequency of compounding of interest.

For these purposes:

  • Demand notes and notes with a term of three years or less are considered short-term obligations;
  • Notes with a term of more than three years but less than nine years are considered mid-term obligations; and
  • Notes with a term of more than nine years are considered long-term obligations.

The 2017 AFR rates are as follows:

AFR

The 7520 rates are used to calculate the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest. They are calculated by the IRS under Code Section 7520 (hence, the name 7520 rates) and are always 120% of the AFR for mid-term obligations with semi-annual compounding. The 7520 rates for 2017 are as follows:afr 2017

Rates are typically published on the 20th day of each month and provide planning opportunities for certain estate planning vehicles which are interest rate sensitive. For example:

  • Lower rates are generally preferable for intra-family loans, grantor retained annuity trusts (GRATs), installment sales to grantor trusts and charitable lead annuity trusts (CLATs).
  • Higher rates are generally preferable for qualified personal residence trusts (QPRTs) and charitable remainder annuity trusts (CRATs).

As rates continue to change, advisors and clients should maintain an open dialogue so that clients can take advantage of any planning opportunities tied to increasing or decreasing rates.

IRS Temporarily Halts PLRs on Certain GST Tax Issues

Posted in Estate, Gifts, IRS

On March 3, 2017, Melissa C. Liquerman, a branch chief for the IRS Office of Chief Counsel, announced at the Federal Bar Association Tax Law Conference that, due to “budget cuts and prolonged strain on agency resources,” the IRS is temporarily suspending the issuance of private letter rulings (PLRs) relating to certain generation-skipping transfer (GST) tax issues, including modifications of GST tax-exempt trusts. Liquerman also noted that, despite the budget cuts and downsizing in the number of branch attorneys, her branch issued over 300 PLRs related to estate, gift, and GST taxes in 2016, which was more than double the number of PLRs issued in 2012.

The IRS also has decided to temporarily halt pre-submission conferences between taxpayers and the IRS relating to ruling requests on estate, gift, and GST tax issues. These conferences provided taxpayers a chance to meet with the IRS prior to submitting a ruling request. However, given the tight budget and overwhelming amount of current rulings, the IRS does not presently have sufficient resources to hold such conferences.

To learn more about PLRs and pre-submission conferences, visit https://www.irs.gov/irm/part32/irm_32-003-002.html#d0e672.

*Admitted to the practice of law in Florida.

Mark Your Calendars for 2017 Health Care Decisions Day

Posted in Legacy Planning, Virginia

Whether resulting from age, illness, or accident, an extreme medical situation may occur at any time.  If you plan ahead and express in writing your preferences for health care at the time of incapacity or at the end of life, you can ensure that your family members are neither burdened with such decisions nor need to seek court order to address certain medical situations. In the Commonwealth of Virginia, Advance Medical Directives enable us to deal with these situations while other states may recognize living wills, medical directives, medical powers of attorney, or health care proxies. Regardless of terminology, all 50 states allow an individual to designate an agent to act on his or her behalf with regard to health care and to express medical preference in the case of incapacity resulting from terminal illness or injury. 

In an effort to educate and encourage individuals to consider the importance of addressing health care decisions in the event of incapacity before the need arises, nearly two thousand international, state, and local organizations, including the Virginia State Bar, have coordinated events surrounding National Health Care Decisions Day (and week – April 16, 2017 through April 22, 2017).  This year, the Commonwealth of Virginia will be celebrating its Tenth Annual Healthcare Decisions Week and has given the following themes to each day of the week:

Sunday (4/16): Prepare.  A day to get resources together.

Monday (4/17): Start with Yourself.  A day to think about your own healthcare decisions.

Tuesday (4/18): Family/Friends/Loved Ones.  A day to discuss your wishes with others (and learn their wishes).

Wednesday (4/19): Spread the Word.  A day to tell others that you’ve engaged in advance care planning and encourage them to do the same.

Thursday (4/20): Facilities Focus.  A day for healthcare providers of all sorts to promote advance care planning.

Friday (4/21): Professionals Preparedness.  A day to ensure that all professionals (healthcare, clergy, legal, and others) understand and can promote advance care planning.

Saturday (4/22): Reflection and Readiness.  Consider what worked well for NHDD week and file/share your advance care plans so they will be available if needed.

To learn more about National Healthcare Decisions Day and the organizations involved in the movement, visit http://www.nhdd.org/about/#about-us.

Virginia residents also should consider visiting http://www.vsb.org/site/public/healthcare-decisions-day for additional information, form documents, and access to the Virginia Health Care Directive Registry – a free registry which allows Virginia residents to securely store important healthcare documents.

Greenberg Traurig Hosts Women’s Power and Purpose Networking Luncheon

Posted in Event

The Northern Virginia Women’s Initiative and the Washington Women’s Leadership Initiative of global law firm Greenberg Traurig, LLP recently hosted the Women’s Power and Purpose networking luncheon with Lisa A. Rickard, U.S. Chamber Institute for Legal Reform President, Workforce Freedom Initiative President, and Executive Vice President, U.S. Chamber of Commerce.  This moderated program discussed Rickard’s approach to success and how she has paved a path for generations of women to follow. To read the full press release, click here.

Greenberg Traurig Team Michelle Gambino, Nataliya Dominguez and Rebecca Manicone with keynote speaker, Lisa A. Rickard

Greenberg Traurig Team Michelle Gambino, Nataliya Dominguez and Rebecca Manicone with keynote speaker, Lisa A. Rickard

Greenberg Traurig’s Michelle Gambino moderating the discuss with Lisa Rickard

Greenberg Traurig’s Michelle Gambino moderating the discuss with Lisa Rickard

Greenberg Traurig’s Northern Virginia office hosts the WWLI luncheon

Greenberg Traurig’s Northern Virginia office hosts the WWLI luncheon

Greenberg Traurig Sponsors and Attends the National Capital Chapter of the Society of Financial Service Professionals 2017 Professional Night Gala Event

Posted in Event

Greenberg Traurig was proud to continue to support and sponsor the National Capital Chapter of the Society of Financial Service Professionals (FSP) 2017 Professional Night recently held at the Ritz-Carlton in McLean, Virginia.

The FSP brings together multidisciplinary, credentialed professionals to develop and foster business relationships and build professional networks within the community.  The primary goal is to deliver the highest level of ethical service to each members clients, while enhancing each professional’s knowledge base and growing their respective practices.  This year’s keynote speaker, The Honorable Newt Gingrich, provided valuable insight about the current political landscape and potential changes/legislation affecting the United States as a whole.  He was engaging and addressed many questions from the audience.

Greenberg Traurig’s team Todd Steinberg, Ashley Sawyer, and Michelle Soto, with long-term allied professionals and others.

Greenberg Traurig’s team Todd Steinberg, Ashley Sawyer, and Michelle Soto, with long-term allied professionals and others.

Greenberg Traurig’s Michelle Soto, Ashley Sawyer, and Todd Steinberg with The Honorable Newt Gingrich.

Greenberg Traurig’s Michelle Soto, Ashley Sawyer, and Todd Steinberg with The Honorable Newt Gingrich.

IRS Announces Slight Increase for April 2017 Applicable Federal Rates and 7520 Rates

Posted in Internal Revenue Code, IRS

The Internal Revenue Service (IRS) publishes a monthly update to the applicable federal rates (AFRs) and 7520 rates.

The April 2017 rates reflect a slight increase from the March rates. Planning professionals and their clients should take note of fluctuations in these rates and be mindful of planning opportunities that come with rate changes.

The AFR is calculated by the IRS under Section 1274(d) of the Internal Revenue Code (the Code) and is used for many purposes. One of its most common applications is to establish the minimum interest rate that can be charged on an intra-family loan without income or gift tax consequences.  These “safe harbor rates” are dependent upon two factors: (i) the term of the loan and (ii) the frequency of compounding of interest.

For these purposes:

  • Demand notes and notes with a term of three years or less are considered short-term obligations,
  • Notes with a term of more than three years but less than nine years are considered mid-term obligations, and
  • Notes with a term of more than nine years are considered long-term obligations.

The 2017 AFR rates are as follows:

Legacy ADV blog

The 7520 rates are used to calculate the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest. They are calculated by the IRS under Code Section 7520 (hence, the name “7520 rates”) and are always 120% of the AFR for mid-term obligations with semi-annual compounding. The 7520 rates for 2017 are as follows:

leg adv 2

Rates are typically published on the 20th day of each month and provide planning opportunities for certain estate planning vehicles which are interest rate sensitive.  For example:

  • Lower rates are generally preferable for intra-family loans, grantor retained annuity trusts (GRATs), installment sales to grantor trusts and charitable lead annuity trusts (CLATs).
  • Higher rates are generally preferable for qualified personal residence trusts (QPRTs) and charitable remainder annuity trusts (CRATs).

As rates continue to change, advisors and clients should maintain an open dialogue so that clients can take advantage of any planning opportunities tied to increasing or decreasing rates.

California Court of Appeal Holds Passive LLC Interest Does Not Create Nexus

Posted in Tax Planning

A non-California corporation’s only connection with California was its passive minority interest in a limited liability company (LLC) that was doing business in California. The California Court of Appeal held that this limited connection was not sufficient to subject the out of state corporation to California’s Corporation Franchise Tax. All taxpayers that have filed and paid California corporation franchise tax based solely on the ownership of a passive membership interest in an LLC that is doing business in California should consider whether they may be able to submit a refund claim.  To read the full GT Alert, click here.

 

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