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Expiring Provisions

Just a few weeks ago, many individual taxpayers, driven by what they viewed as the relatively imminent expiration of the enhanced federal transfer tax[i] exemptions, sought advice on how to leverage their remaining exemption and thereby optimize the transfer of value to their beneficiaries while limiting the amount of tax incurred.

Even following the results of the November elections, and regardless of the President-Elect’s recent statements about further curbing the federal transfer taxes, many individuals continue to be concerned about the reduction of the “basic exclusion amount”[ii] that is scheduled to occur at the end of this year.[iii]

Are these folks unreasonably anxious?  

Divided GOP?

Stated differently, is it far-fetched to contemplate a scenario in which the GOP leadership in the House is unable to keep all of its members in line,[iv] resulting in the failure to win a majority vote and extend – let alone expand – the expiring provisions of the 2017 legislation,[v] including the enhanced transfer tax exemptions?

Not necessarily.  

Reconciliation

Or is it possible that any extension of the 2017 legislation’s expiring transfer tax benefits will itself be temporary?

Yes.

Under the Senate’s budget reconciliation rules, a bill may be passed with a simple majority vote[vi] – the GOP holds 53 seats in the Senate – but if the bill increases the deficit because, for example, it includes tax cuts that are not offset by other, revenue-generating provisions, those tax cuts will have to expire.[vii]

Watch Your Step

For that reason, it will behoove taxpayers who undertake any estate planning for the tax efficient inter vivos or testamentary disposition of their assets to be cautious and to familiarize themselves with those strategies and structures that have passed muster with Congress, the IRS or the federal courts.

Perhaps just as importantly, taxpayers should be aware of those other strategies that the government has found wanting. As someone once said, those who are ignorant of history are doomed to repeat it.

The truth of this cautionary proverb was borne out by a recent decision of the U.S. Tax Court that considered the estate tax consequences of one ill-conceived plan.[viii]

The Beloved Nephew

Decedent inherited her late spouse’s business and ran it very successfully. She had no children but “took a particular interest” in her Nephew. In her later years she relied on Nephew to take care of her and manage her assets.

In fact, when Decedent prepared her last will and testament (the “Will”), she named Nephew the executor of her estate.

She also executed a power of attorney (POA), and a health care proxy.

Nephew Takes Charge

The POA appointed Nephew to act as Decedent’s agent and attorney-in-fact upon her disability or incapacity.[ix] Decedent did not restrict any of the powers provided for in the POA.[x]

Likewise, the health care proxy designated Nephew as Decedent’s agent to make healthcare decisions for her should she be unable to do so.[xi] There were no restrictions on the health care proxy.

Decedent was diagnosed with Alzheimer’s. Several months later, she required surgery, which was followed by a stay at a rehabilitation center,[xii] and then at a long-term care facility. Shortly thereafter, however, Nephew moved Decedent into a house that he purchased as her agent, and using her assets. He also hired caregivers to provide Decedent round-the-clock care under his supervision.[xiii]

Nephew then approached Lawyer about certain investments that he wanted to make using Decedent’s assets. On the advice of Lawyer, Nephew formed two LLCs: Investment LLC and Real Estate LLC. Decedent, who was identified as the sole member of both these LLCs, did not personally sign the operating agreements; instead, Nephew signed those agreements for Decedent as her agent. He also signed each agreement on his own behalf as the LLC manager.[xiv]

“Decedent’s” Estate Plan

Nephew subsequently met with Lawyer’s partner, Estate Planner, to discuss the disposition of Decedent’s future estate. Following a meeting with Nephew, Estate Planner organized Limited Partnership and Management LLC in accordance with State law, and prepared partnership and operating agreements[xv] for these newly formed entities.

Operating Agreement

Nephew executed the operating agreement for Management LLC in his individual, nonfiduciary capacity.

Under that agreement, Nephew was the company’s sole member and its sole manager; he signed the agreement in both capacities. The agreement also provided that Nephew would contribute $1,000 to Management LLC in exchange for all of its membership interest.   

Partnership Agreement

Nephew also executed the partnership agreement for Limited Partnership. Under the partnership agreement, Management LLC was the limited partnership’s general partner and Decedent was its sole limited partner.

The partnership agreement provided that, subject to certain restrictions, the general partner “shall have the sole and exclusive right to manage the business of [the partnership].” 

The agreement also provided that: profits for each fiscal year “shall be allocated to the Partners in proportion to their respective Percentage Interests”; the general partner had absolute discretion to distribute cash “to the Partners in proportion to their respective Percentage Interests”; the partnership would dissolve and wind up upon (among other things) “[t]he affirmative vote of all the Partners” (i.e., Management LLC and Decedent); and, in the event the partnership was wound up, partnership property would be liquidated and the proceeds first used to pay the partnership’s debts and liabilities to third parties, then used to pay the partnership’s debts and liabilities to the partners, and finally distributed to the partners in accordance with their respective capital accounts.

Capital Contributions

The partnership agreement further provided that Management LLC (i.e., Nephew, individually) would contribute $1,000.00 to Limited Partnership[xvi] in exchange for a “0.0059%” equity interest and that Decedent would contribute assets with an aggregate value of $16.97 million to the partnership in exchange for a 99.9941% interest.

Nephew signed the limited partnership agreement both in his individual role as manager of Management LLC and on Decedent’s behalf, as her agent under the POA. Further, as manager of Management LLC,[xvii] Nephew executed the certificate of formation for Limited Partnership. 

Immediately following the formation of Limited Partnership and Management LLC, the latter contributed $1,000 to Limited Partnership in exchange for its general partner interest. The next day, Nephew executed an assignment that identified Decedent as the transferor of certain assets, and Limited Partnership as the transferee of such assets. Nephew signed the other necessary transfer forms,[xviii] both for the transferor (as Decedent’s agent) and for the transferee (as manager of Management LLC).[xix]

Decedent received a 99.9941% limited partner interest in Limited Partnership in exchange for the above assets. Following the transfers, Decedent’s assets remaining outside the limited partnership totaled approximately $2.15 million, consisting of $1.53 million in liquid assets, $495,000 in real estate (illiquid), and $127,000 in other illiquid assets.

Decedent’s Demise

Decedent, who was hospitalized during most of the above-described planning activities, died just a few days after the last of the transfers were completed.[xx] 

Decedent’s Will provided for ten specific cash bequests (three of which were to charities) totaling $1,450,000, and one noncash bequest of shares of Corp stock. The rest of Decedent’s estate passed to Nephew.

Because Decedent’s Estate did not have enough cash to pay all the cash bequests, Nephew distributed $600,000 of cash and 1,200 shares of Corp stock from Limited Partnership to the Estate. Then, as the executor of the Estate, Nephew wrote out the necessary checks.

The 706

Nephew retained CPA to prepare the Estate’s federal estate tax return, on IRS Form 706. On that return, the Estate included in the Decedent’s gross estate her limited partner interest in Limited Partnership, at a discounted (by approximately 36%) value of $10.88 million.[xxi]

The Estate did not include, independently of the limited partner interest, any value of Decedent’s assets that were earlier transferred to Limited Partnership.

The estate tax return reported a federal estate tax liability of about $4.62 million. Nephew signed the estate tax return as executor of the Estate.

Off to Court

Because the Estate did not have enough cash to pay the reported estate tax liability, Nephew sold some of Limited Partnership’s marketable securities and distributed the cash proceeds from Limited Partnership to the Estate (as the limited partner), which then paid the tax.

IRS Exam

The IRS audited Decedent’s estate tax return and determined, based on the facts and circumstances surrounding the organization of Limited Partnership, that Decedent’s gross estate should have included the full (undiscounted) date-of-death value of those assets that Decedent had previously contributed to Limited Partnership.

Consequently, the IRS issued a notice of deficiency in which it asserted that the Estate owed additional estate tax.

The Estate disagreed with the IRS’s assertion and timely petitioned the U.S. Tax Court.

The Issue

The issue before the Court was whether the value of Decedent’s gross estate should be increased by an amount equal to (1) the aggregate date-of-death value of the assets Decedent contributed to Limited Partnership, over (2) the reported value of Decedent’s limited partner interest in the partnership. In other words, should the Decedent be treated as still owning the contributed assets?[xxii] 

The Court’s Analysis

The Court explained that the value of a decedent’s gross estate generally includes the fair market value of all property that the decedent owned on the date of death.

Inclusion of Retained Interests

However, the Court added that a decedent’s gross estate will also include the fair market value of property that was transferred by the decedent during their lifetime, and which was not owned by the decedent at the time of death, but is nevertheless required to be included in the decedent’s estate for tax purposes because the transfer was “testamentary in nature.”[xxiii] 

For example, if a decedent made a lifetime transfer of property (other than through a bona fide sale for adequate and full consideration) and retained specific rights or interests in such property – like the right to all income from the property – that were not relinquished until the decedent’s death, the full value of the transferred property generally is included in the decedent’s gross estate.[xxiv] 

According to the Court, there are three requirements that must be satisfied for property to be included in a decedent’s gross estate under the above-described “retained interest” rule:

  1. first, the decedent must have made a lifetime transfer of the property;
  2. second, the decedent must have retained a statutorily enumerated interest or right in the transferred property, which they did not relinquish until death; and
  3. finally, the transfer must not have been a bona fide sale in exchange for which the decedent received adequate and full consideration.[xxv] 

Transfer

The Court noted there was a lifetime transfer of property when Nephew, on Decedent’s behalf, contributed most of Decedent’s assets to Limited Partnership while Decedent was still alive.

Retention

Next, the Court considered whether Decedent retained any rights or interests in the property “she transferred” that may properly cause such property to be included in her gross estate.[xxvi]

The Court explained that property transferred by a decedent may be included in their gross estate if the decedent retained possession or enjoyment of, or the right to income from, the property.[xxvii]  For these purposes, a transferor retains “possession or enjoyment” if they retain a “substantial present economic benefit” from the property, as opposed to “a speculative contingent benefit which may or may not be realized.” Possession or enjoyment is “retained” for these purposes, the Court continued, if there is an express or implied agreement among the parties to that effect at the time of the transfer, whether or not the agreement is legally enforceable.[xxviii] 

Although the partnership agreement gave Management LLC some rights to the income and underlying property of Limited Partnership, it acquired those rights in exchange for a $1,000 contribution that represented a de minimis interest that was “hardly more than a token in nature,” the Court stated.

Decedent’s Agent

What’s more, Management LLC was the general partner of Limited Partnership at all times, with absolute discretion to make proportionate distributions; Nephew was the LLC’s sole member and manager; and both before and throughout his tenure as manager, Nephew acted as Decedent’s agent under the POA.

Therefore, at all times Decedent effectively held the right to virtually all the income from the transferred assets, and the Limited Partnership’s agreement constituted an express agreement to that effect.[xxix] Although Decedent did not actually receive any income distributions from Limited Partnership during her life.[xxx]  the right to possession or enjoyment of, or the right to income from, the property “does not require that the transferor pull the ‘string’ or even intend to pull the string on the transferred property; it only requires that the string exist.”

Continued Reliance on Transferred Assets

The Court also concluded that Decedent retained enjoyment (i.e., substantial present economic benefit) of the transferred assets themselves.[xxxi]

The transfers to Limited Partnership left Decedent with only $2.15 million of assets outside the partnership,[xxxii] while her Will provided cash bequests of $1.45 million, and a substantial estate tax liability was foreseeable. On this basis, the Court found an implicit agreement between Nephew and Decedent that Nephew, as manager of the general partner of Limited Partnership, would make distributions from the partnership to satisfy Decedent’s final expenses, debts, and bequests if and when necessary.[xxxiii] Nephew did in fact make distributions to satisfy Decedent’s bequests and the Estate’s estate tax liability. The use of a significant portion of the partnership’s assets to discharge obligations of the Estate was evidence of a retained interest in the assets transferred to the partnership. “As we remarked in an analogous case,” the Court continued, “virtually nothing beyond formal title changed in decedent’s relationship to [her] assets.”[xxxiv]

Right to Determine Enjoyment

In addition to retaining enjoyment and rights,[xxxv] Decedent also retained “the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the [transferred] property or the income therefrom.”[xxxvi] 

Specifically, the Limited Partnership agreement provided that Decedent had the right, in conjunction with Nephew, to dissolve the partnership, at which time Nephew would be obligated to liquidate all partnership property, pay off partnership debts, and distribute the remaining cash to the partners in accordance with their capital accounts. Accordingly, Decedent retained the right – “in conjunction with” Nephew – at any time to acquire outright all income from the transferred assets and then designate its disposition. 

With that, the Court determined there was no pooling of assets in the partnership similar to what one would find in a joint venture vehicle; rather, the partnership functioned essentially as a vehicle to reduce the value of Decedent’s contributed assets and to thereby reduce the estate tax.

Having found that Decedent retained the enjoyment of the transferred assets, as well as the right to the income from those assets, and the right to designate who should possess or enjoy that income, the Court was prepared to require the inclusion of such assets in Decedent’s gross estate.

Bona Fide Sale?

Before it could do so, however, the Court considered an exception to the above rule for transfers constituting a “bona fide sale for an adequate and full consideration in money or money’s worth.”

According to the Court,[xxxvii] whether a transfer is a bona fide sale is a question of motive, and whether a transfer is for adequate and full consideration is a question of value.[xxxviii] 

Whether a transfer to a partnership in exchange for a partnership interest was made for adequate and full consideration depends on whether:

  1. the interests credited to each of the partners was proportionate to the fair market value of the assets each partner contributed to the partnership,
  2. the assets contributed by each partner to the partnership were properly credited to the respective capital accounts of the partners, and
  3. on termination or dissolution of the partnership the partners were entitled to distributions from the partnership in amounts equal to their respective capital accounts.

All three of these requirements were met here: Management LLC and Decedent received Limited Partnership interests proportionate to their contributions to the partnership; the contributions of both partners were properly credited to their respective capital accounts; and the  partnership agreement provided that upon termination or dissolution of the partnership, and after payment of partnership debts, the partners would receive distributions in accordance with their respective capital accounts.[xxxix]

The Court therefore concluded that Decedent received adequate and full consideration for her contribution to Limited Partnership.

Still, the question remained whether there was a bona fide sale.

Non-Tax Purpose

As to whether Decedent’s transfer of assets to Limited Partnership was bona fide, the Court began by stating that “the proper inquiry is whether the transfer in question was objectively likely to serve a substantial nontax purpose.” This requires an objective determination as to what, if any, nontax business purposes the transfer was reasonably likely to serve at its inception.”[xl]

The Court explained that “the objective evidence must indicate that the nontax reason was a significant factor that motivated” the partnership’s creation. A significant purpose, the Court stated, must be an actual motivation, “not a theoretical justification.”[xli] 

The Estate (i.e., Nephew) alleged there were four significant and legitimate nontax purposes for Decedent’s[xlii] contributions to Limited Partnership:

  1. The partnership protected Decedent from further instances of financial elder abuse;[xliii]
  2. It allowed for “succession management of assets,” i.e., Nephew would be able to choose his successor to manage Limited Partnership (whereas he could not choose his successor under the POA);
  3. Limited Partnership resolved the problem of third parties, such as banks, refusing to honor the POA;
  4. The limited partnership allowed for consolidated and streamlined management of assets.

In support of the foregoing reasons, the Estate relied largely on Nephew’s testimony. Unfortunately for the Estate, the Court did not find credible Nephew ‘s testimony that he was motivated to contribute Decedent’s assets to Limited Partnership in order to achieve the above goals, especially given ‘s Decedent’s age and health at the time of the contributions.

The Court was not convinced that Nephew was actually motivated to undertake the Limited Partnership transactions for any reason other than reducing estate tax (by virtue of obtaining a discount on Decedent’s partnership interest for lack of control and lack of marketability).

In reaching its conclusion, the Court found it troublesome there was no evidence of any discussion of transferring Decedent’s assets into a partnership until Decedent’s health appeared to be in “precipitous decline”; yet thereafter “the transfers proceeded rapidly.”

The Court also observed that: 

  1. Leading up to the formation of Limited Partnership, there were no significant changes in the amount or composition of Decedent’s wealth that might reasonably have triggered a nontax concern for asset management that did not exist before.
  2. The record contained no contemporaneous documentary evidence of Nephew’s motivations for effecting the Limited Partnership transactions other than the email from Estate Planner to the appraiser about “obtaining a deeper discount” of Decedent’s partnership interest for tax purposes.
  3. The assets transferred to Limited Partnership were of a disparate character, promised no obvious synergies with each other, and came almost exclusively from Decedent – there was no prospect of realizing the intangible benefits “stemming from a pooling [of assets] for joint enterprise.” 
  4. The assets transferred to Limited Partnership were not “working” interests in any business requiring active management. 
  5. Decedent was not herself involved in any of the partnership planning or management; instead, Nephew represented both her interests (as Decedent’s agent) and his own.
  6. The asset transfers depleted Decedent’s liquidity to the point that the Estate could not pay Decedent’s bequests or its reported estate tax liability.

In view of the above-listed factors, the Court found it more likely that the nontax purposes given by Nephew were offered after the fact as “theoretical justification[s]” rather than “actual motivation[s].”[xliv] 

Court’s Conclusion

Thus, the Court concluded that the transfers to Limited Partnership were not bona fide.

Because the transfer of Decedent’s assets to Limited Partnership was not a bona fide sale, and because Decedent retained applicable rights and interests with respect to those assets up until her death, her gross estate should have included the date-of-death fair market value of the transferred assets.

However, because the transfer was made in exchange for consideration in money or money’s worth, but was not a bona fide sale, there was included in the gross estate only the excess of the fair market value at the time of death of the property otherwise to be included, over the value of the consideration received therefor by the Decedent.

Looking Ahead

An elderly, incapacitated taxpayer who happened to be wealthy; a beneficiary who was also taxpayer’s agent; a partnership that was organized by the beneficiary-agent without taxpayer’s involvement; an insignificant capital contribution by the agent individually in exchange for which he became the general partner; a transfer by the agent to the partnership, on behalf of the taxpayer, of almost 90% of taxpayer’s assets, consisting mostly of marketable securities, in exchange for a limited partnership interest; taxpayer’s demise shortly after completion of the foregoing transactions; a substantially discounted estate tax value for taxpayer’s limited partnership interests; an estate with insufficient liquidity to satisfy its obligations.

Any individual taxpayer and their estate planner or adviser should cringe at the thought of finding themselves in the above-described position. The beginning of a new administration that promises to be friendlier to business owners, and the anticipated partial defanging of the IRS’s enforcement capabilities, do not present an opportunity for pursuing “strategies” that the federal courts have clearly rejected,[xlv] nor do they grant a license for what may be described as reckless planning.[xlvi]

The consequences of ignoring this cautionary note may be more severe if the new Congress is unable to extend the expiring federal transfer tax benefits, and the “cushion” they may otherwise provide, beyond the end of this year.

Stay tuned.

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The opinions expressed herein are solely those of the author(s) and do not necessarily represent the views of the Firm.

[i] I.e., the estate, gift, and generation-skipping transfer taxes.

[ii] IRC Sec. 2010.

[iii] Last week, the Joint Committee of Taxation released a list of federal tax provisions that will be expiring over the next few years. JCX-1-25, January 9, 2025.

[iv] Consider the very narrow 219 to 215 breakdown between the GOP and the Dems in the House. Is it far-fetched to posit a situation in which some of the more conservative members of the GOP may decide not to toe the party line? The internal divisions were not wiped away by the first-round re-election of Speaker Johnson. Is it impossible to imagine a New York Republican (yes, there are some of those) voting against a bill that does not eliminate the SALT cap? Is it difficult to foresee a circumstance in which a strong Republican (say, Rep. Roy) votes against a bill on principle?

Coming at it from another perspective, how likely is it that a Democrat will cross the aisle to support a bill originating from the other side?

[v] Tax Cuts and Jobs Act, Pub. L. 115-97.

[vi] Thereby avoiding the Senate’s filibuster rule, which requires 60 votes to pass a bill.

[vii] The so-called “Byrd Rule.”

[viii] Estate of Fields v. Comm’r, T.C. Memo. 2024-90 (2024).

[ix] The POA stated that Decedent would be considered disabled or incapacitated for purposes of the POA if a physician certified in writing that, based on the physician’s medical examination, she was mentally incapable of managing her financial affairs.

[x] She also gave Nephew the power to make gifts, provided they did not exceed “the amount of annual exclusions allowed from the federal gift tax for the calendar year of the gift.”

[xi] And should a physician certify in writing that she was so unable.

[xii] Taxpayer was a victim of financial elder abuse while she was recovering at the rehabilitation center. A second instance occurred after she left the center.

[xiii] While the property was in escrow, it became unclear whether Nephew had the authority to act on Taxpayer’s behalf in the home purchase and other financial matters. Thus, Nephew obtained letters from two of Taxpayer’s physicians, each of which stated that, in the physician’s medical opinion, Taxpayer had the requisite mental capacity to understand the meaning and significance of the general POA when she signed it a few years earlier. One of the letters stated that, in the physician’s medical opinion, Taxpayer was “not capable of appreciating the meaning or significance of the [purchase of the property], or of handling her legal and financial affairs,” thereby satisfying the condition precedent for the general POA to take effect.

[xiv] At the time of Decedent’s death, Investment LLC held cash, notes receivable (consisting of loans that Investment LLC made to Nephew), and some collectibles.

[xv] Interestingly, Estate Planner sent copies of the draft agreements to an appraiser, asking him for “any comments [he might have] … regarding the terms that might be useful in obtaining a deeper discount.”

[xvi] The same amount that Nephew contributed to Management LLC in exchange for all of its membership interests.

[xvii] The general partner.

[xviii] The bill of sale purported to transfer the following:

1) $10 Million of the assets Decedent held at a brokerage account

2) All her shares of Corp stock, having an approximate value of $5.34 million

3) All her interest in a farm, having an approximate value of $1.1 million

4) All her interest in Investment LLC

5) All her interest in Real Estate LLC.

[xix] Assuming it was proper to treat Limited Partnership as a partnership for purposes of the federal income tax, the contribution of assets by Decedent in exchange for partnership interests was tax-deferred under IRC Sec. 721.

[xx] After Decedent died, Nephew initiated a probate action with the Probate Court. That court subsequently admitted Taxpayer’s Will to probate, appointed Nephew as executor of Decedent’s estate (the “Estate”), and authorized the issuance of letters testamentary.

[xxi] Recall that shortly before her death, Decedent transferred $16.97 million of assets to Limited Partnership in exchange for all the limited partnership interests.

[xxii] Stated differently, should Limited Partnership be disregarded?

[xxiii] IRC Sec. 2031, 2033–2046; Reg. Sec. 20.2031-1.

The federal estate tax is imposed on the transfer of a decedent’s taxable estate. IRC Sec. 2001(a). The taxable estate’s value is the value of the gross estate after applicable deductions. IRC Sec. 2051

[xxiv] IRC Sec. 2036(a). The purpose of IRC Sec. 2036(a) is to include in the gross estate inter vivos transfers that were basically testamentary in nature.

[xxv] Citing Estate of Bongard v. Commissioner, 124 T.C. 95 (2005).

[xxvi] If she did, we then must consider whether her transfers meet the exception for bona fide sales for adequate and full consideration.

[xxvii] IRC Sec. 2036(a)(1).

[xxviii] Citing Strangi v. Commissioner, 417 F.3d 468 (5th Cir. 2005), aff’g Estate of Strangi v. Comm’r, T.C. Memo 2003-145; see also Reg. Sec. 20.2036-1(c)(1)(i).

[xxix] Citing Estate of Strangi v. Commissioner, T.C. Memo. 2003-145 (holding that the decedent retained the right to income from property transferred to a family limited partnership in exchange for a 99% partnership interest, where the general partner was managed by the decedent’s attorney-in-fact).

[xxx] Having died shortly after the partnership was organized and funded.

[xxxi] As distinct from the income therefrom.

[xxxii] About 11% of her total assets prior to the transfer.

[xxxiii]Citing Estate of Bongard (“The existence of an implied agreement is a question of fact that can be inferred from the circumstances surrounding a transfer of property and the subsequent use of the transferred property.”).

[xxxiv] Citing Estate of Strangi.

[xxxv] Within the meaning of IRC Sec. 2036(a)(1).

[xxxvi] Within the meaning of IRC Sec. 2036(a)(2).

[xxxvii] And contrary to what many may conclude that receipt of adequate and full consideration indicates a bona fide sale.

[xxxviii] Citing Estate of Bongard.

[xxxix] See Reg. Sec. 1.704-1(b)(2)(iv).

[xl]  Citing Strangi v. Commissioner.

[xli] Citing Estate of Bongard.

[xlii] In fact, the contributions directed by Nephew as Decedent’s agent while Decedent was incapacitated.

[xliii] There had been two instances of financial elder abuse by others that had occurred years before the formation of Limited Partnership.

[xliv] Citing Estate of Bongard.

[xlv] Although the heyday of the family limited partnership (the “FLP”) as a “valuation discounting” vehicle may be behind us – as it should be – the FLP remains a viable alternative for addressing many family investment and family business challenges.

[xlvi] After all, by the time the IRS examines the plan implemented by the taxpayer, the government’s enforcement posture may be very different.

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Legitimate Interest

Few would argue that the federal government does not have a legitimate interest in preventing, detecting, and punishing tax fraud, money laundering, and other financial crimes. Likewise, I imagine few would disagree with the precept that the means by which the federal government chooses to perform these functions must not exceed its constitutionally enumerated powers.[i] Among Congress’s enumerated powers is the power to “regulate Commerce with foreign nations, and among the several States, . . .”[ii]

Limits – Enumerated Powers

As you may recall from your studies of Constitutional Law, the Commerce Clause is among the most debated and broadly construed provisions of the Constitution. Thus, it should come as no surprise that those federal courts[iii] that have considered challenges to the Corporate Transparency Act (the “Act”) over the last year or so have been inconsistent in their assessment of whether Congress exceeded its enumerated powers under the Constitution when it passed the Act.

Stop-Go-Stop-Go-Wait

Indeed, events over the last month alone have taken enough twists and turns to qualify the anxious owners of many closely held businesses – not to mention their advisers – for a spot in a Pepto-Bismol commercial.[iv]

Given the degree of uncertainty surrounding the legal status of the Act – and of the obligations imposed on businesses and their owners thereunder – it may be helpful to provide a scorecard, of sorts, that traces the development of opposition to enforcement of the Act and provides a status update. Here it goes.[v]

A Snapshot

  • The House passed its version of the Corporate Transparency Act in late 2019;[vi]
  • After several months of negotiations and changes, the Senate passed the Anti-Money Laundering Act;
  • The bill was added to the National Defense Authorization Act for FY 2021;
  • After more negotiation and editing, the bill was passed by Congress in December 2020 and then sent to the President, whose veto of the bill was overridden;[vii]
  • The bill was enacted January 1, 2021;
  • Relevant to this post was the addition of a new section to the Bank Secrecy Act, which required “reporting companies” to submit specified beneficial ownership information (“BOI”) to the Financial Crimes Enforcement Network (“FinCEN”);[viii]
  • The statutory requirement for reporting companies to submit BOI was to take effect “on the effective date of the regulations” implementing the reporting obligations;[ix]
  • Under the Act, reporting companies created or registered to do business after the effective date were required to submit the requisite information to FinCEN at the time of creation or registration, while reporting companies in existence before the effective date would have a specified period in which to report;[x]
  • FinCEN issued final BOI reporting rules on September 30, 2022, with an effective date of January 1, 2024;[xi]
  • As issued, the rules required (a) companies formed before January 1 to file a BOI report with FinCEN by December 31, 2024, and (b) companies created on or after the rule’s effective date (of January 1, 2024) and before January 1, 2025, to file within 30 calendar days of notice of their creation;
  • In November 2022, National Small Business United challenged the Act in the U.S. District Court for the Northern District of Alabama claiming the Act exceeded Congress’s enumerated powers and was unconstitutional (the “NSBU case”);
  • The reporting rules were amended in November 2023 to provide an extended filing deadline of 90 calendar days for reporting companies created on or after January 1, 2024 and before January 1, 2025; entities created on or after January 1, 2025 will continue to have 30 calendar days from notice of their creation to file their BOI reports with FinCEN;[xii]
  • December 29, 2023, a lawsuit was filed with the U.S. District Court for the Northern District of Ohio[xiii] alleging that the Act exceeded Congress’s constitutional authority;
  • The reporting rules became effective January 1, 2024;
  • March 1, the U.S. District Court in the NSBU case[xiv] concluded that the Act was “unconstitutional because it cannot be justified as an exercise of Congress’s enumerated powers” – it did not regulate commercial or economic activity but only the act of incorporation – and enjoined FinCEN from enforcing the Act against the plaintiffs;[xv]
  • March 11, the Justice Department filed a Notice of Appeal to the Eleventh Circuit Court of Appeals on behalf of the Treasury[xvi] – the Circuit Court granted expedited review and scheduled oral Arguments for September 27, 2024;
  • March 11, FinCEN issued a notice in which it stated that, while the NSBU litigation was ongoing, FinCEN would continue to implement the Act as required by Congress, while complying with the District Court’s order; thus, other than the individuals and entities subject to the District Court’s injunction, reporting companies would still be required to comply with the Act and file BOI reports as provided in FinCEN’s regulations;[xvii]
  • March 15, a plaintiff filed a complaint in the U.S. District Court for the District of Maine in which they argued that the Act was unconstitutional because it exceeded Congress’s power to regulate interstate commerce, and asked that the Court enjoin FinCEN from enforcing the Act against the plaintiff;[xviii]
  • March 26, the Small Business Association of Michigan filed suit with the U.S. District Court for the Western District of Michigan challenging the constitutionality of the Act,[xix] and asking that the Court enjoin FinCEN from enforcing the Act against the plaintiff while the case was pending – the Court denied the motion for an injunction;[xx]
  • April 17, the proceedings in the District Court for Northern District of Ohio were stayed pending the decision of the Eleventh Circuit;[xxi]
  • April 29, a bill was introduced in the House to repeal the Act;[xxii] a similar bill was introduced into the Senate on May 9;[xxiii]
  • May 20, twenty-two States joined in filing an amicus brief with the Eleventh Circuit in which they urged the Court to affirm the above March 1 decision by the District Court in Alabama, based largely on principles of federalism[xxiv]
  • May 28, the National Federation of Independent Business filed a suit in the District Court for the Eastern District of Texas challenging the Act (the Texas Top Cop Shop case) in which it sought a declaratory judgment that the Act was unconstitutional on the grounds that it exceeded Congress’s enumerated powers, including its power to regulate interstate commerce, and asking that the Court grant a permanent injunction prohibiting enforcement of the Act, including the reporting rule;
  • May 29, the Black Economic Council of Massachusetts sued the Treasury over the Act, asserting it was unconstitutional;[xxv]
  • June 3, the plaintiffs in the Texas Top Cop Shop case sought a preliminary injunction against the Act and reporting rule; 
  • July 18, the Eleventh Circuit scheduled oral argument in the NSBU case for September 27;  
  • August 14, the Eleventh Circuit requested that the parties submit supplemental briefs regarding whether the District Court erred “in not holding the plaintiffs to their burden of showing that there are no constitutional applications of the Corporate Transparency Act”;[xxvi]
  • September 20, the U.S. District Court for the District of Oregon ruled[xxvii] that the plaintiff businesses were not likely to succeed on the merits of their suit alleging the Act exceeded Congress’s power to regulate interstate commerce, concluded that the Act was a legitimate exercise of Congress’s broad authority to regulate interstate commerce, and declined to enjoin enforcement of the Act;
  • September 27, a three-judge panel of the Eleventh Circuit heard oral arguments in the NSBU case;
  • October 9, 2024, the District Court in the Texas Top Cop Shop case held a hearing on the matter of the injunction;
  • October 24, the U.S. District Court for the Eastern District of Virginia denied the plaintiff’s request for injunctive and declaratory relief to prevent enforcement of the Act, finding that the plaintiff was unlikely to be able to show that Congress overstepped “the outer bounds of its commerce power” when it enacted the Act;[xxviii]
  • November 5, the Midwest Association of Housing Cooperatives filed a complaint in the U.S. District Court for the Eastern District of Michigan in which it asserted that the Act exceeded Congress’s constitutional authority;[xxix]
  • December 3, the District Court in the Texas Top Cop Shop case[xxx] determined that the Act was likely unconstitutional as outside of Congress’s power, and granted the plaintiff’s motion for a preliminary injunction, as a result of which enforcement of the reporting rule was enjoined nationwide, and compliance with the January 1, 2025 BOI reporting deadline was stayed pending any further order of the Court;
  • December 4-5, supplemental authorities were filed in the Eleventh Circuit’s NSBU case;
  • December 5, the government appealed the District Court’s preliminary injunction in the Texas Top Cop Shop case to the Fifth Circuit Court of Appeals;[xxxi]
  • December 9, FinCEN stated on its website “In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force,” but added that “reporting companies may continue to voluntarily submit beneficial ownership information reports” while the government appeals the injunction;
  • December 11, the government filed a motion with the Fifth Circuit to stay the Court’s order enjoining enforcement of the Act and the reporting rule;
  • December 13, the government filed an emergency stay motion in the Fifth Circuit requesting relief no later than December 27 in order to reinstate the January 1, 2025 deadline, and the Circuit Court entered an expedited briefing schedule;
  • December 17, House Speaker Johnson unveiled a continuing resolution that would have extended by one year the deadline for existing companies to report their beneficial ownership information to FinCEN, as required under the Act;[xxxii]
  • December 19, the U.S. District Court for the District of Utah stayed a case to block the Act and denied the plaintiff’s request for a preliminary injunction against enforcement of the Act,[xxxiii] stating that the “parties agreed to a 90-day stay, pending the new presidential administration”;[xxxiv]
  • December 23, 2024, a split motions panel[xxxv] of the Fifth Circuit granted a stay of the district court’s preliminary injunction against enforcement of the Act, entered in the Texas Top Cop Shop case, pending the outcome of the Department of the Treasury’s ongoing appeal of the district court’s order, and reinstated the January 1, 2025 reporting deadline;
  • December 23, FinCEN issued an alert notifying the public of the Fifth Circuit ruling, and recognizing that reporting companies may have needed additional time to comply with beneficial ownership reporting requirements, FinCEN extended the reporting deadline as follows for reporting companies created: before Jan. 1, 2024, have until Jan. 13, 2025 to file BOI reports with FinCEN; on or after Sept. 4, 2024, that had a filing deadline between Dec. 3, 2024, and Dec. 23, 2024, have until Jan. 13, 2025, to file; on or after Dec. 3, 2024, and on or before Dec. 23, 2024, have an additional 21 days from their original filing deadline; on or after Jan. 1, 2025, have 30 days after receiving notice that their creation;
  • December 24, the plaintiff in the Texas Top Cop Shop case asked the Fifth Circuit for an expedited rehearing by the entire Court to determine whether the injunction against enforcement of the Act should be reinstated, and asked that the Court rule on its petition no later than January 6, 2025;
  • December 26, a different panel of the Fifth Circuit issued an order vacating the earlier panel’s December 23 order that had granted a stay of the preliminary injunction in the Texas Top Cop Shop case, thereby restoring the injunction issued by the District Court and relieving reporting companies from the requirement to file BOI with FinCEN;[xxxvi]
  • December 27, the Fifth Circuit issued an expedited schedule for briefing (the government’s opening brief is due February 7, 2025) and oral argument (March 25);[xxxvii]
  • December 27, FinCEN issued an alert stating: “In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.”[xxxviii] 
  • December 31, the DOJ asked the U.S. Supreme Court[xxxix] to issue a stay of the preliminary injunction issued by the District Court in the Texas Top Cop Shop case, pending the consideration and disposition of the government’s appeal to the Fifth Circuit and, if the Circuit affirms the District Court in whole or in part, pending the timely filing and disposition of a petition for a writ of certiorari and any further proceedings in the Supreme Court.

What’s Next?

Over the last few weeks, the Texas Top Cop Shop case has been front and center among the many lawsuits initiated by businesses and business organizations to challenge the Act as unconstitutional.

Although this is understandable – especially so after the DOJ brought the Supreme Court into the mix on New Year’s Eve – we must not lose sight of the fact that any day now the Eleventh Circuit may render an opinion in the NSBU case.[xl]

One has to wonder what effect that Circuit’s opinion would have upon the Supreme Court’s response to the DOJ’s request for a stay of the nationwide preliminary injunction issued by the District Court in the Texas Top Cop Shop case, or upon the Fifth Circuit’s ultimate disposition of that case.    

One also has to wonder whether the new Trump Administration and this Congress will try to repeal the Act. As indicated above, the District Curt in Utah seems to have adopted this not unreasonable approach.

Hear Me Out

Setting the foregoing litigation aside for a moment, let’s consider why Congress thought the Act was a good idea just a few years ago.

Congress found that more “anonymous” legal entities,[xli] including corporations and LLCs, are formed in the U.S. than in any other national jurisdiction. It also determined that such legal entities are often being used by domestic and foreign criminals to engage in various illicit activities, to launder the proceeds from such activities, and to otherwise access and transact business in the U.S. economy to their benefit with relative impunity.

Congress observed that such activities are facilitated by the fact that the U.S. did not have a centralized or complete store of information about who owns and operates legal entities within the U.S.[xlii] Moreover, the information about such entities that was already available to law enforcement was generally limited to the information required to be reported when the entity was formed at the state level. Even then, however, most states do not require the identification of an entity’s individual beneficial owners at the time of formation, and the vast majority of states require disclosure of little to no contact information or information about an entity’s officers.[xliii]

Congress believed that bad actors, being aware of the dearth of information regarding beneficial ownership, have exploited state entity formation procedures to conceal their identities when forming corporations or LLCs in the U.S., and have then used the newly created entities to commit crimes affecting commerce, including tax fraud.

Likewise, according to Congress, the lack of available beneficial ownership information impeded the efforts of law enforcement to investigate corporations and LLCs suspected of committing such crimes.

Having concluded that the identities of the beneficial owners of legal entities are of interest to the federal government because of their economic status as the persons who own or control a company that operates, at least in part, within the U.S., the federal government enacted the Act, with bipartisan support, and delegated authority to the Treasury to establish an effective date for filing and updating beneficial ownership information reports and to promulgate regulations regarding these reports.[xliv]

Although the means selected to remedy what Congress believed to be a defect in the law may ultimately itself be found wanting, the federal government continues to have a legitimate interest in accomplishing the intended goal.

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[i] I would add that the federal government must balance its obligation to enforce, say, the federal tax laws against its obligation to protect the equally legitimate interests of its constituents in maintaining their privacy. Of course, I am referring to the members of society from whom the government derives its authority, and whom the government serves, at least in theory.

[ii] U.S. CONST. Art. I, Sec. 8, Cl. 3.

[iii] As you’ll see below, there have been several.

[iv] You know the one: The Pepto-Bismol 5-Symptom Song & Dance, with its famous line – nausea, heartburn, indigestion, upset stomach, diarrhea. Please don’t shoot the messenger.

[v] All dates are in 2024 except as otherwise indicated.

[vi] Earlier versions were introduced in 2017.

[vii] The Senate voted 81-13 to override President Trump’s veto. The House had previously approved the bill by a vote of 322-87.

[viii] 31 U.S.C. 5336.

[ix] 31 U.S.C. 5336(b)(5).

‘‘(5) EFFECTIVE DATE — The requirements of this subsection shall take effect on the effective date of the regulations prescribed by the Secretary of the Treasury under this subsection, which shall be promulgated not later than 1 year after the date of enactment of this section.”

[x] 31 U.S.C. 5336(b)(1)(B), (C).

[xi] Published Document: 2022-21020 (87 FR 59498).

[xii] Published Document: 2023-26399 (88 FR 83499).

[xiii] Robert J. Gargasz Co. LPA v. Janet Yellen, Case No. 1:23-cv-02468 (N.D. Ohio filed Dec. 29, 2023).

[xiv] The suit was filed in November 2022.

[xv] National Small Business United, d/b/a National Small Business Association, et al., v. Janet Yellen, in her official capacity as Secretary of the Treasury, et al., No. 5:22-cv-01448 (N.D. Ala.).

[xvi] National Small Business United et al. v. U.S. Department of the Treasury et al., case number 24-10736, in the U.S. Court of Appeals for the Eleventh Circuit.

[xvii] https://www.fincen.gov/news/news-releases/updated-notice-regarding-national-small-business-united-v-yellen-no-522-cv-01448

[xviii] Boyle v. Yellen , D. Me., No. 2:24-cv-00081 (D. Me. Mar. 15, 2024).

[xix] Small Business Association of Michigan, et al v. Yellen.

[xx] Small Business Ass’n of Mich. v. Yellen, No. 1:24-cv-00314-RJJ-SJB (W.D. Mich. Apr. 26, 2024).

[xxi] https://www.pacermonitor.com/public/case/51852710/Robert_J_Gargasz_Co,_LPA_et_al_v_Secretary_of_the_Treasury_et_al

[xxii] H.R.8147, the “Repealing Big Brother Overreach Act”. 

[xxiii] S.4297, Among other things, the sponsors cited the severe penalties for noncompliance.

[xxiv] https://assets.law360news.com/1839000/1839407/https-ecf-ca11-uscourts-gov-n-beam-servlet-transportroom-servlet-showdoc-011013344879.pdf,: Alabama, Arkansas, Florida, Georgia, Idaho, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, Ohio, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, and Wyoming.

Twenty-Five States have filed in the Texas Top Cop Shop case.

[xxv] Black Economic Council of Mass., Inc. v. Yellen, D. Mass., No. 1:24-cv-11411, 5/29/24.

[xxvi] https://www.courtlistener.com/docket/68332749/national-small-business-united-v-us-department-of-the-treasury/  

[xxvii] Firestone v. Yellen, D. Or., No. 3:24-cv-01034, 9/20/24.

[xxviii] Community Associations Institute v. Yellen, U.S. District Court for the Eastern District of Virginia, No. 1:24-cv-1597 (MSN/LRV).

[xxix] Midwest Ass’n of Hous. Coop. v. Yellen, E.D. Mich., No. 2:24-cv-12949, complaint filed 11/5/24.

[xxx] Texas Top Cop Shop, Inc. v. Garland, E.D. Tex., No. 4:24-cv-00478, 12/3/24.

[xxxi] Texas Top Cop Shop, Inc. v. Garland, U.S. Court of Appeals (5th Cir.), No. 24-40792 (12/26).

[xxxii] You may recall that President-elect Trump opposed this Continuing Resolution.

Sec. 122 of the Continuing Resolution: 

Section 5336(b)(1)(B) of title 31, United States Code, is amended by striking ‘‘before the effective date of the regulations prescribed under this subsection shall, in a timely manner, and not later than 2 years after the effective date of the regulations prescribed under this subsection,’’ and inserting ‘‘before January 1, 2024, shall, not later than January 1, 2026,’’.

[xxxiii] Phillip Taylor et al. v. Yellen et al., case number 2:24-cv-00527, in the U.S. District Court for the District of Utah.

[xxxiv] Interesting that the Court wanted to see what the incoming Administration would do with respect to the Act. A very practical approach.

[xxxv] One Judge would have kept the injunction in place for the plaintiff.

[xxxvi] According to this panel, it vacated the earlier order “In order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments, that part of the motions-panel.”

[xxxvii] The panel also allowed the plaintiff’s earlier petition for an en banc hearing to be withdrawn.

[xxxviii] Query whether another extension is likely.

[xxxix] Garland v. Texas Top Cop Shop Inc., U.S., No. 24A653, application 12/31/24.

[xl] Or will that Circuit wait on the Supreme Court’s decision regarding the Texas District Court’s nationwide preliminary injunction?  

[xli] Anonymous in the sense that the ownership of such entities is not a matter of public record.

[xlii] In contrast to the U.S., member countries of the European Union are required to have corporate registries that include beneficial ownership information.

[xliii] H. Rept. 116-227 – Corporate Transparency Act of 2019;

https://www.congress.gov/congressional-report/116th-congress/house-report/227/1;. As the Committee Report put it:

“A person forming a corporation or limited liability company within the United States typically provides less information at the time of incorporation than is needed to obtain a bank account or driver’s license and typically does not name a single beneficial owner.”

[xliv] Id. § 5336(b)(1).

In general, the CTA requires each reporting company to submit to FinCEN a report identifying each beneficial owner of the reporting company and each applicant with respect to that company by: (1) full legal name, (2) date of birth, (3) current residential or business street address, and (4) unique identifying number from an acceptable identification document.

The applicant is the individual who files the document that forms a domestic corporation or LLC under state law. They are required to file a list of a reporting company’s beneficial owners, along with certain identifying information, with FinCEN at the time the company is formed.

In general, a reporting company includes a corporation, LLC, or “other similar entity” that is created under state law by filing a document with the secretary of state (or a similar office) of the governing jurisdiction.

However, certain entities are not treated as reporting companies. Significantly, from the perspective of many closely held businesses, the term “reporting company” does not include any U.S. company that:

i. has more than 20 employees on a full-time basis in the U.S.,

ii. filed Federal income tax returns in the U.S. in the previous year demonstrating more than $5 million in gross receipts or sales in the aggregate (including the receipts and sales of other entities it owns or through which it operates), and

iii. has an operating presence at a physical office within the U.S.

The term “beneficial owner” means a natural person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise:

i. Exercises substantial control over a company; or

ii. Owns or controls 25 percent or more of the equity interests of a company.

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Holiday Gatherings

How was your Thanksgiving? I hope you celebrated the holiday in a pleasant setting with folks whose company you enjoyed, and with plenty of good food. I hope you participated in some interesting conversations or joined in some fun games. I hope your NFL team put on a decent show.[i] I hope you had – and will continue to have – many reasons for which to be thankful, that you acknowledged them, and will continue to do so.  

At some point during our family’s celebration of this uniquely American holiday,[ii] I almost always find myself apart from the rest of the group, observing how others are interacting with one another, sometimes recalling how they may have handled certain challenges during the year,[iii] and often wondering what sort of future awaited them.[iv]

Continue Reading The Holidays – A Time for Family, Reflection and. . . GST Tax Planning?
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Another “Departure”

During the weeks leading up to the Presidential election, the media carried stories about wealthy supporters from each Party who had announced their intention to leave the country if the other Party’s candidate became President.

Of course, none of these individuals stated they would be giving up their U.S. citizenship or green card,[i] probably because they were aware that such a move (pun intended) would trigger an onerous exit tax.[ii]

Continue Reading Abandoning N.Y. Domicile – Must the Business Owner Abandon Their N.Y. Business?
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Decisions, Decisions

The owners of a closely held U.S. business will have to make many difficult decisions during the life of the business. Among the earliest of these is the so-called choice of business entity, the economic (including tax) consequences of which will be felt by the business and its owners for years to come.

Continue Reading Choice of Entity for a U.S. Business- Passthrough Status Matters Beyond the U.S. Border
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Enforcement

Earlier this year the IRS announced that, as part of its larger compliance efforts begun last fall under the Inflation Reduction Act,[i] the agency’s stepped-up enforcement activity with respect to high wealth, high income individuals had generated more than $1 billion in collections of past-due taxes.

One would be hard-pressed to seriously dispute that every taxpayer must pay the correct amount of income tax; no more, no less. That means a taxpayer has the right to pay only the amount of tax that is legally due and the right to have the IRS apply all tax payments properly.[ii]

Continue Reading Challenge to Collection Due Process? Will Supreme Court Affirm IRS’s Offset of Valid Refund With Disputed Tax Liability?
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As we will see shortly, it is often “better to give than to receive,”[i] though this statement begs the obvious question[ii] of whether it is better to do so during one’s lifetime or upon one’s death.

Many well-to-do individuals are seriously deliberating this question[iii] as they contemplate the impending federal elections and consider how the outcome of these contests may influence their plans for the disposition of various assets, including the transfer of such assets, or the value they represent, among members of such individuals’ families.

Continue Reading Thinking About Making Taxable Gifts Before the 2026 Sunset?
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Thus Spoke the Governor

Last Friday, New York’s Governor Hochul[i] delivered the following remarks at the annual meeting of the Business Council of New York State:[ii]

“Someone asked me today, are we going to raise income taxes? I said, ‘I’m not raising income taxes.’ I said I’m not. I stopped a huge income tax increase last year. I don’t think it’s a good strategy for economic development to find more reasons for businesses to leave the State of New York. . . . And maybe they didn’t hear that for a long time with Occupy Wall Street and all this other socialism that was going on, but you need to be reassured that the people who are actually in elected office in the highest positions right here don’t support that.”[iii]

Continue Reading New York Tax Continues to Inconvenience Nonresidents Working Remotely
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Raking It In

You may recall that earlier this year the IRS launched an initiative to pursue 125,000 “high-income, high-wealth” taxpayers who have not filed taxes since 2017. These were cases where the IRS received third party information[i] indicating these individuals had received income in excess of $400,000 but had failed to file a tax return. 

Last week, the IRS announced that during the first six months of this initiative, nearly 21,000 of these taxpayers filed returns and paid approximately $172 million in taxes.

Continue Reading Unconstitutionally Excessive FBAR Penalties? It Depends
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August is Like Sunday

As far back as I can remember, the end of August has always elicited a sense of dread comparable to what many schoolchildren, and a fair number of adults, experience every Sunday afternoon.

In retrospect, I cannot say that this feeling of doom was ever fully warranted.[i] Still, its presence has been undeniable, and it is especially palpable this year, and for good reason.  

Continue Reading New York’s Tax Treatment of Compensatory Restricted Stock and Dividends in the Hands of a Nonresident Executive