Brown & Streza Blog
By David Keligian on 6/20/2017 12:35 PM
Although tax reform in general and estate tax repeal in particular have been sidetracked as a result of other issues facing the Trump administration, even if the estate tax is “repealed", it will not eliminate the possibility of taxes being due at death.  That is because one of the long standing features of our estate tax law is the increase of a decedent's income tax basis in any assets that are included in their estate for estate tax purposes.  

For example, under current law, if I own a piece of vacant land that cost me $1,000 and it has appreciated to $10,000,000 on my death, my estate would include an asset valued at $10,000,000 on which I would have to pay estate tax.  However, for income tax purposes, my heirs could sell that property with a “stepped-up" income tax basis of $10,000,000, thus avoiding income taxes on the sale of the property at it’s date of death value.

For example, the estate tax previously was repealed for just one year in 2010.  Anyone who died that year didn't pay estate...
By David Keligian on 7/12/2016 9:34 AM
In my previous articles on avoiding California residency, we saw that residency questions are ultimately decided by establishing the state with which someone has the "closest connection" during a tax year. It was noted that relying on presumptions and mechanical tests (including the 29 factor test listed in the Corbett case) will not necessarily win the day.

As pointed out in the prior articles, certainly someone who wishes to avoid California residency should align and document as many favorable objective (Corbett) factors as they possibly can. But if the stakes are high (such as leaving California in advance of a major stock sale), an understanding of the practicalities of a Franchise Tax Board ("FTB") challenge is important.

For example, I'm frequently asked "how long do I have to stay out of California after the sale?" The practical answer is "at least 4 years". That is because, assuming a California tax return is filed for the year of the sale, that return may not be selected for audit for...
By David Keligian on 5/28/2014 8:52 AM
The Salary Whipsaw. What is being “whipsawed”? As far as the IRS is concerned, it means them taking different positions on an issue depending on what position results in the most tax. One emerging area where the IRS “whipsaws” taxpayers involves what constitutes a “reasonable” salary. A “reasonable” (i.e. deductible) salary for income tax purposes is really a factual question. Multiple factors can be considered—education, experience, company size, industry, operating results, and “market” salaries. Issues involving “all facts and circumstances” are always the hardest to argue with the IRS and Franchise Tax Board (“FTB”). But on the salary issue, the IRS devotes much more attention than the FTB to the issue. The reason has to do with the high level of federal employment taxes (Social Security, Medicare, FICA, and FUTA). A good example of the salary “whipsaw” involves a comparison of a sole shareholder owned C-corporation to a sole shareholder owned S-corporation. C Corporation Example. Because C-corporations...
By David Keligian on 3/24/2014 12:26 PM
My previous California residency articles have discussed how simply applying mechanical factors (such as where your driver’s license is, where you’re registered to vote, and using an out of state mailing address) can still result in you being found a California resident. One overlooked aspect of the California residency test is where one maintains their “domicile”.

Domicile is the place where an individual has his true, fixed, permanent home and principal establishment, and to which place they have, whenever they are absent, the intention of returning. An individual can only have one domicile at a time.

This means that you can be completely absent from California for a certain period of time (say a year), but the Franchise Tax Board can still claim that California was your “domicile” because you always intended to return here. The domicile test is essentially a test of your intent.

Of course, intent is very difficult to prove and can always change. When you consider how aggressive the...
By David Keligian on 12/10/2013 3:36 PM
There are many misconceptions about the rules governing whether someone is taxed as a California resident. This article provides more information as a follow up to my August 20, 2012 article.

BASIC TEST. A very common misconception is that someone can avoid being taxed as a California resident by relying on mechanical tests, such as staying out of California for certain periods of time. This is not necessarily true.

The ultimate test for determining whether or not you are a California resident is whether you have a “closer connection” to California than to any other state during a taxable year. This means it is possible that someone can be taxed as a California resident even if they spend very little time in California during a tax year.

California describes the test as being whether someone is in California “for other than a temporary or transitory purpose”. Someone who visits California for an extended vacation of 3 months and who does not engage in any business activity in California...
By Kathy Mericle on 11/12/2013 1:54 PM
We are pleased to announce that Brown & Streza LLP has been featured in the 2013 Super Lawyers Business Edition. We received this honor because of the number of attorneys from our firm who were selected to a Super Lawyers list within a business-related practice area. Super Lawyers Business Edition is an annual resource that serves as the go-to guide for general counsel and executives in charge of making legal hiring decisions. This publication features top firms from all sizes specializing in: • Business and Transactions • Construction, Real Estate and Environmental • Employment • Intellectual Property • Litigation Super Lawyers, a Thomson Reuters business, is a research-driven, peer influenced rating service of outstanding lawyers who have attained a high degree of peer recognition and professional achievement. The mission of Super Lawyers is to bring visibility to those attorneys who exhibit excellence in practice. Super Lawyers Business Edition is distributed annually to more than 50,000 general...
By David Keligian on 5/21/2013 2:28 PM
The end of 2012 was a tumultuous time for estate planning. No one—Congress, planners, or clients—knew anything for certain other than the high estate and gift tax exemption might (and temporarily did) go away at the end of 2012.

Congress and the administration soon agreed that for 2013, both the estate and gift tax exemptions would be “permanently” set at $5,250,000, with inflation adjustments. Some people who rushed into 2012 planning may have thought that the rush was unnecessary. Those who procrastinated breathed a sigh of relief, thinking they could wait to do their planning.

President Obama’s fiscal year 2014 budget illustrates how uncertain the situation remains, and how quickly the rules for estate planning can again change. While budgets represent something of a “wish list” for different types of tax increases, there are several key points about the 2014 budget.

First, President Obama has proposed returning the 2018 estate tax rates to the 2009 levels—estate and gift tax rates...
By Casey S. Hale on 12/21/2012 9:38 AM

 

Here's a short video on the history of the charitable deduction. Interestingly, just like today, it was on the Congressional chopping block back in 1917 when the country was faced with a huge budget crisis precipitated by World War I. It survived that crisis. But will it survive our current budget crisis almost 100 years later?

By Casey S. Hale on 12/20/2012 4:03 PM


A recent article published by The Chronicle of Philanthropy suggests that the nonprofit sector's efforts to convince the White House to preserve the charitable deduction may have paid off. The article indicates that the budget proposal the Obama administration gave to the Republicans earlier this week appears to preserve more generous write-offs for charitable deductions versus other deductions, such as mortgage interest, state taxes. etc. While White House officials have not yet confirmed the details, some Washington insiders are reporting that Obama's proposal preserves the charitable deduction's current rates. Of course, with all of the back and forth proposals, only time will tell where charitable deduction will end up. But still it is encouraging...
By Casey S. Hale on 12/19/2012 11:43 AM
The Service's publication earlier this year of Notice 2012-52 is a game changer for fiscal sponsorship. In that notice, the Service announces that going forward a donor may receive a charitable tax deduction for gifts to a domestic single-member limited liability company ("LLC") if the LLC is wholly owned by a 501(c)(3) organization. The Service will treat gifts to the single-member LLC just like a gift to the parent 501(c)(3) organization.

This is a great thing for 501(c)(3) organizations that engage in fiscal sponsorship and that house fiscally sponsored projects in wholly-owned single-member LLCs. Now donors that wish to support those fiscally-sponsored projects can make tax-deductible gifts directly to the project LLC. Whereas before, any tax-deductible gifts ultimately destined for a fiscally-sponsored LLC had to be channeled through the 501(c)(3) sponsor. This sometimes caused confusion for donors since the fiscally sponsored LLC could not raise funds for itself. Instead the staff of the fiscally-sponsored...