April 2015

April 2015


Congress Considers Repeal of Federal Estate and Generation-Skipping Taxes

On April 16, 2015, the U.S. House passed H.R. 1105 by a 240-179 vote.  The bill, titled the “Death Tax Repeal Act of 2015,” repeals the federal estate tax (FET) and the generation-skipping transfer tax (GSTT) for estates of decedents dying and generation-skipping transfers made after the date of enactment.  The bill retains the gift tax and also retains the “stepped-up” basis rule which allows the heirs to avoid capital gain taxes on the sale of inherited assets that are attributable to the built-in gain during the decedent’s period of ownership.  Other significant provisions are included (and are detailed below), making the bill of significant importance to individual taxpayers, business owners and practitioners. 

Presently, a top marginal rate of 40 percent applies to taxable gifts and estates.  That 40 percent rate applies to non-exempt transfers that exceed $1 million.  For 2015, the unified credit is set at $5.43 million.  The GSTT can apply in addition to federal gift or estate tax, and the GSTT rate is set at a flat 40 percent above $5.43 million.  The President, however, has proposed a second tax on decedent’s estates.  That second tax would be in the form of the elimination of “stepped-up” basis for inherited assets in the hands of the decedent’s heirs.  Instead, under the President’s proposal, the heirs would be taxed on the capital gains attributable to the inherited assets on sale.  An exception would apply for a surviving spouse along with an exemption on the first $200,000 of capital gains for a married couple.  This same strategy was attempted during the Carter Administration, but problems with the ability to track basis led to serious administrative and compliance concerns such that the provision was repealed before becoming effective.

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Pending Syngenta Lawsuits Raise Numerous Questions

If you are an Iowa corn farmer, you most likely have been contacted by an attorney wishing to represent you in a lawsuit against Syngenta. Since last fall, plaintiffs have filed hundreds of lawsuits alleging that Syngenta harmed the U.S. corn market by prematurely commercializing genetically modified (GM) corn seed before it was approved for import by China. This article provides a high level summary of the complex legal actions pending against Syngenta. Readers seeking information regarding their individual legal rights should contact an attorney.

Syngenta AG is a Swiss-based agribusiness company that owns several American companies, including Syngenta Seeds, Inc. The “Syngenta litigation,” involves GM corn Syngenta developed with the MIR162 insecticidal trait. Syngenta developed the seed to control “true armyworm.” After U.S. regulators approved Agrisure Viptera in 2010, Syngenta began marketing it for the 2011 crop year. Most U.S. trading partners promptly approved the GM trait. China, however, did not grant import approval for many months. To continue reading, click here.


Omitting Information on Form 1040 Can Extend the Statute of Limitations For IRS Review

We've been discussing various tax issues at our tax seminars in recent years involving taxpayers that have financial accounts in foreign countries.  It's a big issue for many tax practitioners.  We will address significant issues involving these clients at our summer seminars this year, particularly at the Lake Tahoe seminar in late July which will also be simulcast over the internet.  Under the Foreign Account Tax Compliance Act (FATCA) which became law in 2010, certain U.S. taxpayers holding specified foreign financial assets with an aggregate value exceeding $50,000 are required to report information about those assets on IRS Form 8938, which must be attached to the taxpayer’s annual income tax return.  Higher asset thresholds apply to U.S. taxpayers who file a joint tax return or who reside abroad. 

Form 8938 reporting applies for specified foreign financial assets in which the taxpayer has an interest in taxable years starting after March 18, 2010.  For most individual taxpayers, this means that they started filing Form 8938 with their 2011 income tax return.  If the required information isn't furnished to the IRS, penalties can apply and the statute of limitations for IRS to assess tax can be extended.  In a recent Program Manager Technical Advice (PMTA), the IRS said that the omission of required information with Form 8938 operated to extend the statute of limitations with respect not only to the taxpayer's Form 1040, but also an associated Form 706 (estate tax return) and an associated Form 1041 (income tax return for an estate).

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CALT does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. CALT's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.

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