<img src="//bat.bing.com/action/0?ti=5189112&amp;Ver=2" height="0" width="0" style="display:none; visibility: hidden;">

    TRUSTS & ESTATES, WILLS, AND TAX LAW UPDATE

    D. Bradley Pettit

    Recent Posts

    TAX: Free Like-Kind Exchanges of Property

    Posted by D. Bradley Pettit on Thu, Dec 27, 2018 @ 11:12 AM

    Brad Pettit—Senior Attorney, National Legal Research Group

                The Internal Revenue Code provides generally that "[n]o gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment if such real property is exchanged solely for real property of like kind which is to be held either for productive use in a trade or business or for investment," as long as the transaction does not involve an "exchange of real property held primarily for sale." 26 U.S.C. § 1031(a) (also includes Pub. L. Nos. 115-233 to 115-253, 115-255 to 115-269; Title 26 current through Pub. L No. 115-270). "As used in section 1031(a), the words 'like kind' have reference to the nature or character of the property and not to its grade or quality." 26 C.F.R. § 1.1031(a)-1(b). Thus, "[o]ne kind or class of property may not, under that section, be exchanged for property of a different kind or class." Id. For example, "[t]he fact that any real estate involved is improved or unimproved is not material, for that fact relates only to the grade or quality of the property and not to its kind or class." Id.

    Read More

    Topics: IRC, Brad Pettit, tax, like-kind exchanges, nature or character of property, personal residence

    ESTATE PLANNING: Lifetime Gifts of Closely Held Business Stock to Family Members

    Posted by D. Bradley Pettit on Thu, Dec 13, 2018 @ 12:12 PM

    Brad Pettit—Senior Attorney, National Legal Research Group

     

             "Rather than disposing of stock in a closely held business (by sale or corporate reorganization) at retirement the retiree may decide to transfer all or a portion of the stock by gifts to various family members." Streng & Davis, Tax Planning for Retirement ¶ 7.05[1] (Thomson Reuters Tax & Acct’g 2018).  Three important objectives can be achieved by making gifts of closely held business stock to family members:

     

    It eliminates the stock's dividend income from the gross income and the estate of the retiree/donor

     

    It removes the value of the stock from the retiree/donor's estate for federal estate tax purposes upon the retiree's death

     

    It solidifies the interests of the family members receiving the stock as officers of the closely held corporation, enabling them access to corporate executive compensation arrangements and other benefits.

     

    Id.

    Read More

    Topics: Brad Pettit, estate planning, closely held business stock, estate tax liability

    TAX: Sales and Use Tax—The End of the “Physical Presence” Test

    Posted by D. Bradley Pettit on Wed, Oct 17, 2018 @ 12:10 PM

    Brad Pettit, Senior Attorney, National Legal Research Group

                On January 12, 2018, in South Dakota v. Wayfair, Inc., 138 S. Ct. 735 (2018) (Mem.), the United States Supreme Court granted a petition for writ of certiorari with respect to the decision by the Supreme Court of South Dakota in State v. Wayfair Inc., 2017 SD 56, 901 N.W.2d 754, holding that a state statute that requires Internet sellers with no physical presence in the state to collect and remit sales tax violated the dormant Commerce Clause of the U.S. Constitution.

                In reaching this decision, the Supreme Court of South Dakota had relied on the prior rulings from the United States Supreme Court in National Bellas Hess, Inc. v. Department of Revenue, 386 U.S. 753 (1967), and Quill Corp. v. North Dakota, 504 U.S. 298 (1992), holding that the Commerce Clause of the federal Constitution prohibits a state from requiring an out-of-state seller to collect and remit sales or use tax with respect to mail-order and similar sales and shipments of merchandise to in-state purchasers unless the former has a "physical presence" in the taxing state.

    Read More

    Topics: Commerce Clause, sales and use tax, Internet sellers, physical presence in taxing state

    ESTATES: Removal of an Executor or Trustee

    Posted by D. Bradley Pettit on Fri, Feb 16, 2018 @ 16:02 PM

         The general rule is that a probate or surrogate's court may revoke letters of administration that were granted to an executor or personal representative if there is demonstrated friction, hostility or antagonism between the appointed fiduciary and beneficiaries of a decedent's estate, but only if the enmity between the fiduciary and the beneficiaries threatens to interfere with the administration of the estate.  In re Estate of Brown, 2016 N.Y. Slip Op. 02691, 138 A.D.3d 1191, 29 N.Y.S.3d 630 (3d Dep't 2016).  In other words, neither a conflict of interest nor hostility between an executor or trustee and the beneficiaries of an estate or trust provide the basis for removing a trustee or personal representative unless the administration of the trust or estate has been adversely affected.  In re Gerald L. Pollack Trust, 309 Mich. App. 125, 867 N.W.2d 884 (2015); In re Estate of Robb, 21 Neb. App. 429, 839 N.W.2d 368 (2013) (when executor of estate has a personal interest in administration of estate and in disposition of estate property and circumstances reveal that those conflicting interests are preventing executor from performing fiduciary duties in impartial manner, then executor should be removed).

         The mere fact that the personal representative of a decedent's estate is also a beneficiary thereof does not necessarily create a conflict of interest that would justify the removal of the personal representative as the fiduciary for the estate.  Gardiner v. Taufer, 2014 UT 56, 342 P.3d 269.  In order to justify removal of a personal representative who is also a beneficiary of an estate, the evidence must show that the personal representative committed some negligent act or mismanagement of the estate before a court can find a sufficient conflict of interest that is serious enough to justify removal of the estate fiduciary.  Id. ¶ 31, 342 P.3d at 279.

    Read More

    Topics: motives and conflict of interest if trustee is a b, hostility between trustee and beneficiary, removal of executor or personal representative, executor of estate

    TRUSTS: Hostility Between Beneficiary and Trustee as Ground for Removal of Trustee

    Posted by D. Bradley Pettit on Tue, Mar 15, 2016 @ 13:03 PM

    The Lawletter Vol 41, No 3

    Brad Pettit, Senior Attorney, National Legal Research Group

         The Restatement of Trusts provides generally that "[a] trustee may be removed . . . for cause by a proper court." Restatement (Third) of Trusts § 37(b) (2003 & Westlaw database updated Oct. 2015) (emphasis added). The Comment to section 37 of the Restatement says that "[f]riction between the trustee and some of the beneficiaries [of a trust] is not a sufficient ground for removing the trustee unless it interferes with the proper administration of the trust." Id. § 37 cmt. e(1). Thus, although the "[b]eneficiaries may be resentful when property they expected to inherit is placed in trust, or of reasonable exercise of a trustee's discretion with regard to matters of administration or the alleged underperformance of the trustee's investment program[, s]uch resentment ordinarily does not warrant removal of the trustee." Id. "[B]ut a serious breakdown in communications between beneficiaries and a trustee may justify removal, particularly if the trustee is responsible for the breakdown or it appears to be incurable." Id.

         A leading treatise on trust law notes that "[d]isagreeable personal relations between the beneficiary [of a trust] and the trustee are frequently relied upon as grounds for removal [and] the mere fact that the beneficiary wants the trustee removed is not enough" to sustain a petition for removal of a trustee. George Gleason Bogert et al., The Law of Trusts and Trustees § 527 (Westlaw database updated Sept. 2015) (footnotes omitted). Thus, "[d]ifferences of opinion or unfriendliness" between a trust beneficiary and the trustee are "insufficient" grounds to support the removal of a trustee from office. Id. (footnotes omitted).

    Read More

    Topics: trusts, Brad Pettit, removal of trustee, hostility between trustee and beneficiary

    TAX: State and Local Sales Tax on Internet Sales of Goods

    Posted by D. Bradley Pettit on Wed, Apr 15, 2015 @ 17:04 PM

    The Lawletter Vol 40 No 2

    Brad Pettit, Senior Attorney, National Legal Research Group

          A very recent decision by a Florida appellate court illustrates constitutional issues that arise when a state or locality seeks to impose a tax upon sales of goods to out-of-state customers via the Internet. In American Business USA Corp. v. Department of Revenue, 151 So. 3d 67 (Fla. 4th DCA 2014), the court addressed the question of whether Internet sales of flowers, gift baskets, other items of tangible personal property, and prepaid telephone calling arrangements by a corporation that was registered to do business in Florida to out-of-state consumers were subject to the Florida sales tax. The taxpayer in the American Business case objected to taxation of its Internet sales to out-of-state customers on the ground that such taxation violated the Commerce and/or Due Process Clauses of the U.S. Constitution. The American Business court upheld the State of Florida's taxation of Internet sales of prepaid telephone call cards but rejected the State's taxation of Internet sales of flowers and other tangible goods.

    Read More

    Topics: Commerce Clause, Due Process Clause, tax law, Internet sales, state and local sales tax

    New Call-to-action
    Free Hour of Legal Research  for New Clients
    Seven ways outsourcing your legal research can empower your practice