In Tax Planning for Sticky Situations, Danny Santucci examines issues that are often difficult for both the advisor and client. You'll get an in-depth look at problem areas in tax, bankruptcy, property settlements, debt cancellation, and foreclosure. For each issue covered, you'll learn how to evaluate, implement, and apply strategic concepts to help navigate your clients through these complicated areas. Also covered are income inclusion rules, tax treatment under §1038, calculating gain and received property basis, eldercare, estate planning, and much more.
Upon successful completion of this course, participants will be able to:
- Recognize how the 2005 Bankruptcy Act changed procedures, qualifications, and tax law.
- Recognize the most common bankruptcy types, noting their characteristics, availability to different types of entities, and their influence on how an individual or business goes bankrupt.
- Cite the rules for automatic stay and levy noting their impact on 'freezing' creditor activity, tax assessment, and collection.
- Identify the differences between preferential and nonpreferential payments noting the priority of creditor claims.
- Recognize the kinds of debt and when debt is discharged under the various bankruptcy types.
- Recognize how to establish an individual bankruptcy estate and identify the estate's taxable income and tax filing requirements.
- Identify the characteristics of partnership and corporate bankruptcies, debts covered under homesteading, and permissible garnishment amounts noting special garnishment rules.
- Identify the types of marital property and their likely division in marital property settlements and specify five legal principles used in dividing assets and providing support on divorce or separation.
- Recognize the benefits of premarital agreements pointing out the requirements and permissible provisions for a valid and comprehensive agreement under the Uniform Premarital Act.
- Cite the position of U.S. v. Davis on interspousal transfers noting the changes made by §1041, and identify the requirements of §1041 and the scope of its application.
- Identify factors that determine whether a property transfer is incident to divorce and how to meet these factors or avoid §1041 altogether when desired.
- Recognize the application of §1041 to transfers in trust under §1041(e) and to third party transfers on behalf of a spouse or former spouse.
- Recognize deferred tax liability by identifying property basis for the transferor spouse and transferee spouse under §1041 after a property settlement.
- Specify the application of §1041 to property transfers where the transferee assumes liabilities encumbering the property, and determine the holding period for an asset transferred between spouses or former spouses incident to divorce.
- Recognize the dangers of purchasing a former spouse's interest in property particularly a marital residence and its tendency to create deferred tax liability.
- Recall the tax effects of purchasing an interest in personal or real property used in a business or held for investment, recognize potential recapture, and identify the use of an exchange to dispose of low-basis property received in a §1041 transfer.
- Specify common disposition alternatives available on divorce, recall the home sale exclusion requirements, and identify the tax treatment and use of installment obligations under §453 in divorce.
- Recognize sale, redemption, recapitalization, liquidation, and third-party transfers as methods of dividing a business in a marital settlement citing unique provisions under §302, §736, and §754.
- Recognize whether gain or loss on a sale of real or personal property is capital or ordinary, the tax treatment of such gain or loss, and the role and tax treatment of life insurance in property settlements.
- Identify popular methods of dividing retirement benefits in a divorce or separation action noting the requirements and tax consequences of a qualified domestic relations order (QDRO).
- Cite an overall tax and economic strategy for the division of pension benefits in a marital settlement by specifying the pros and cons of deferred, present, and alternate property division arguments; determining the treatment of IRAs at divorce considering the IRA deduction limit and rollovers; identifying strategies for retirement planning after divorce; recognizing the Social Security benefits, military pensions, civil service pensions, or railroad pensions that may be available to a former spouse; and selecting which debts incurred during a divorce are dischargeable in bankruptcy.
- Recognize the goals and purposes of asset protection noting objections about shielding assets from creditors, reasons for asset protection and situations that can unexpectedly put assets and financial security at stake, common sources of lawsuits, the concepts of exploding and imploding liability, and how insurance, asset placement, and statutory protections can help achieve asset protection.
- Identify the types of creditors associated with asset protection and fraudulent transfers noting the best timeframe to complete asset protection planning.
- Recognize fraudulent transfer laws noting badges of fraud, statutes of limitations, criminal penalties, and permissible asset transfers.
- Recognize the degree and necessity of asset protection noting net worth using a balance sheet, what assets should be listed, and the appropriate asset values in the preparation of a balance sheet.
- Identify asset protection elements of insurance, ways that insurance can offer asset protection, the roles of parties under a life insurance contract listing, and reasons for establishing an irrevocable life insurance trust.
- Identify ways that buy-sell agreements can offer asset protection and what constitutes an entity purchase and a cross purchase buy-sell agreement.
- Recognize the guidelines and use of individual ownership and corporate ownership in an asset protection plan noting applicable advantages, disadvantages, and tax treatment of the different entities.
- Identify testamentary trusts, living trusts, and their subcategories noting their characteristics and asset protection elements.
- Specify the types of co-tenancy and their asset protection elements, and identify the types of partnerships and their variation from limited liability companies.
- Recognize the unique asset protection qualities of retirement plans, custodianship, and estates as asset protection tools.
- Identify deductible §213 medical care expenses and allowable deduction amounts for federal tax purposes.
- Recognize the potential inclusion and eligibility requirements of spousal and dependent expenses, medical insurance premiums, meals and lodging, transportation expenses, cosmetic surgery, permanent home improvements, and lifetime care payments.
- Recognize what constitutes a medical savings account noting differences with health savings accounts, and identify the benefits and qualifications of HSAs including their relationship with high deductible health plans.
- Recognize the characteristics and mechanics of prescription drug plans, the accelerated death benefits exclusion, and the health insurance deduction for self-employed individuals.
- Recognize variables that impact the deductibility of §170 charitable contributions noting qualified organizations and limitations for these purposes, and identify the types of contributions that can be made, their tax treatment, and substantiation requirements.
- Cite what constitutes a §165 casualty and theft noting the rules for taking a deduction for all or part of each loss.
- Recognize the effect of debt cancellation on net worth and potential income inclusion from cancellation of indebtedness income noting exceptions to the general income inclusion rule, eligibility requirements, their impact, and tax effect.
- Specify the reduction of tax attributes on cancellation noting any special basis reduction rules, recognize the depreciable property election, and determine what constitutes individual, partnership, and S corporation bankruptcies identifying variables used in characterizing shares as nominal or token.
- Identify gain or loss resulting from foreclosure or repossession including its timing and character, the reporting and filing requirements of such items, and the tax danger of acquiring one's own debt at a discount.
- Recognize the variables that determine which §1038 rules for repossessions apply, the basis and gain or loss resulting from repossession of personal property, the use of the installment method and noninstallment method sales, and applicable reporting and tax treatment.
- Identify the rules, calculations, and effects of repossessions of personal and real property, and when a §166 bad debt deduction may be taken if the seller repossesses real property.
- Identify bad debt categories noting their tax treatment and effect on accounting and reporting.
- Identify the qualifications for §166 tax treatment of business bad debts.
- Specify ways to manage an incompetent person's estate, recognize joint tenancy including its benefits and pitfalls, and identify the levels of conservatorship that can influence assistance in management and protection of an estate and/or personal care.
- Recognize the characteristics of durable powers and funded revocable living trusts noting their uses and limitations in elderly and disabled planning.
- Identify the eldercare eligibility and benefits of Medicare and Medicaid, countable income, and asset groupings under Medicaid.
- Recognize the available health care options an individual can decide upon such as having a living will, identify the distinctions between Supplemental Security Income and Social Security disability benefits, determine SSI asset groups, and specify the requirements for SSI and Social Security disability benefits.
- Recognize key terms and elements of estate planning including the unlimited marital deduction and its effect on the gross estate of the value of property and the applicable exclusion amounts for various years of death.
- Identify the concepts and requirements of 'stepped-up basis' and 'modified carryover basis' for estate tax purposes.
- Specify estate-planning goals and tools, including primary dispositive plans, various types of trusts, private annuities, and family documents that taxpayers should consider.
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