Planning Potpourri

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Grantor
Retained Interests:

Proposed revisions to Reg. 20.2036-1 (found in
REG-119532-08 ) provide a method to determine the portion of trust corpus
includible in a deceased grantor’s estate if the grantor reserves a graduated
retained interest, which is a retained interest that increases annually during
the term of the trust. The proposed method measures the amount of principal
needed to generate sufficient income to produce the payments that would have
been due even after the decedent’s death. This is done as if the decedent had
survived and continued to receive the retained interest. The proposed
regulations make other changes as well, including clarification of the
includable amount if the decedent retained the right to receive an annuity or
other payment, rather than income, after the death of the current recipient of
that interest.

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New
York will tax non-residents on gains on sales of real estate entities starting
May 7, 2009.

Example: You live in New Jersey and own 40% of an LLC that
owns an apartment building in NY. If the LLC sells the building at a $1M
profit, you’ll have to report $400,000 in gain to NY.

Caution: Depending
on how your home state taxes your LLC gain, and what it does by way of a credit
for taxes paid to NY, you could pay taxes in both states! Sing the jingle: “Double
your pleasure Double your fun With Doubletax Doubletax…”

Complexity:
Ya need more rules to keep your CPA employed, so: ■ Interests in a partnership, LLC, S corporation, or a C corporation
is treated as NY real estate if 50% or more of its assets are real estate
located in NY and it has 100 or fewer owners. ■ So you get smart and transfer enough cash into
the LLC the week before you sell the property so that the real estate
constitutes only 49% of the assets and you avoid the tax. No so fast Slick. Only assets owned for 2 years before the
sale count.