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• Reduce the unified estate, gift and Generation-Skipping Transfer (GST) exclusion amounts from the current $5,120,000 to $3,500,000 for estate and GST purposes and to $1,000,000 for gift tax purposes (effective 1/1/2013);
• Increase the top tax rate for estate, gift and GST to 45% from the current 35% (effective 1/1/2013);
• Impose a consistency in value requirement for transfer tax and income tax purposes (effective on date of enactment);
• Modify the rules on valuation discounts available under current law by further restricting the use of discounts in family-controlled entities (effective generally for transfers after date of enactment);
• Require a minimum 10 year term for Grantor Retained Annuity Trusts (GRATs) (effective for trusts created after enactment);
• Limiting the duration of the GST exemption (effective generally for trusts created after date of enactment);
• Require coordination of certain income and transfer tax rules applicable to grantor trusts (effective generally for trusts created after date of enactment); and
• Extend the estate tax lien period for estate tax deferral provided under Section 6166.

There still is a 10 month window for estate, gift and GST planning under the existing 2012 rules discussed below.  The current rules can provide significantly better planning opportunities than  either the President's proposals discussed above or the sunset provision discussed below.

Generous new estate and gift tax provisions are available only through the end of this year:

• Temporary two year provisions were enacted as part of the overall extension of the Bush tax cuts.
• Most significant provision was to reunify the estate, gift and generation-skipping tax (GST) exemptions and increase those exemptions to $5,000,000 ($10,000,000 for a married couple) while reducing the top transfer tax rate to 35%.
• The exemptions have been adjusted for inflation for 2012 to $5,120,000 ($10,240,000 for a married couple).
• Previously, the gift tax exemption was only $1,000,000.

Transfer Tax Rules will "sunset" effective December 31, 2012:

• This will happen automatically if Congress takes "no action" (a skill that they have honed into a fine art).

On January 1, 2013 the exemptions will revert to $1,000,000 and the top estate, gift and GST rate will go back up to 55%.

Please contact Ronald Marini or Robert Blumenfeld at (305) 374-4424 for further assistance.

The 6-3 ruling affirms a decision by the U.S. Court of Appeals for the Ninth Circuit that found that, under the immigration statutes, Akio and Fusako Kawashima could be removed for filing a false corporate tax return.

“The elements of willfully making and subscribing a false corporate tax return, in violation of 26 U.S.C. § 7206(1), and of aiding and assisting in the preparation of a false tax return, in violation of 26 U.S.C. §7206(2), establish that those crimes are deportable offenses because they necessarily entail deceit,” wrote Justice Clarence Thomas for the court's majority.

In her dissent, Justice Ruth Bader Ginsburg argued that aliens should not be subject to deportation under Sections 7206(1) and (2) because the Immigration and Nationality Act singles out tax evasion—and no other tax crimes—as an aggravated felony for deportation purposes.

Penalties are also much harsher.Under the new rules, delinquent taxpayers are sent a tax notice with a 60-day deadline. If the Florida Department of Revenue does not receive payment within the 60 days, a warrant is filed and the taxpayer's bank account is frozen.  

The administration called for U.S. taxes on excessive profits from the offshore use of transferred intangibles.

The plan also called for a credit against income tax equal to 20 percent of the expenses paid or incurred in connection with “insourcing” a U.S. trade or business. Deductions for expenses paid or incurred in connection with “outsourcing” a U.S. trade or business would be disallowed.

Also in the Green Book, the administration proposed disallowing the deduction for domestic production activities for oil and other fossil fuel production.

In a fact sheet, the administration said that in addition to stopping transfer pricing abuses, the budget would delay the deduction for the interest expense attributable to overseas investment.