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A decedent’s taxable estate is determined by deducting from the value of the gross estate certain deductions. That includes deductions for amounts paid for funeral and administration expenses, claims against the estate and unpaid mortgages. Specifically, the Internal Revenue Code (Code) provides that “the value of the taxable estate shall be determined by deducting from the value of the gross estate…claims against the estate.” As explained in the applicable Treasury Regulation, “[o]nly claims enforceable against the decedent’s estate may be deducted” from the gross estate. Under ano
In this divorce case, the trial court entered a decree in early 2011 ordering the parties to share joint legal custody of their minor child and for the parties to claim the child as a dependent for income tax purposes in alternating years. The ex-wife appealed on several issues, including the tax issue. She claimed, on appeal, that she should have been awarded the tax exemption for the minor child each year and further claimed that awarding the tax exemption each year to her would be in the child’s best interests.
The IRS has finalized the instructions for Form 706 for estates of decedents dying in 2011. The final instructions largely follow a prior draft, but do give additional insight into the portability of the deceased spousal unused exclusion amount (DSUEA).
A recent Kansas Court of Appeals opinion highlighted some important concepts with respect to adverse possession in Kansas. Generally, an individual that possesses someone else’s land in an open and notorious fashion with the intent to take it away from them may become the true property owner after the expiration of a statutory time period and after quieting title in a court of law. Adverse possession is a common law concept, so the application of the rule varies from state-to-state. The reason for the rule is to cure potential or actual defects in real estate titles by limiting the time
In 2007, Davison County, South Dakota, began the process of reassessing “agricultural structures” upon discovering “discrepancies” in the county’s current assessments. The county assessor reassessed four of twelve townships that year.
It is possible to generate income tax advantages through various fringe benefits that can be provided to a spouse as an employee of the family business. One of those fringes for an employee/spouse that is a bona fide employee is employer-provided health insurance coverage that can also include other family members. The technique, if done properly, can also convert family health insurance premiums into deductible business expenses. Pursuant to I.R.C.
Under the Freedom of Information Act (FOIA), a governmental agency must disclose all records that are requested by “any person,” unless the information sought is exempt from a FOIA request. The issue has come to the forefront again in a battle between two government agencies over access to USDA data that would also be helpful to the requesting agency.
Iowa Code §468.621 states that a landowner “may drain the land in the general course of natural drainage by constructing or reconstructing open or covered drains, discharging the drains in any natural watercourse or depression so the water will be carried into some other natural watercourse…”. In addition, if the drainage is done solely upon the landowner’s property, the landowner is not liable for damages for the drainage unless it increases the quantity of water or changes the manner of discharge on the land of another. In this case, a landowner claimed that his property had be
A purchaser of real estate must act in “good-faith” and give “valuable consideration” when acquiring a parcel of land. That “good-faith” distinction can be lost if the purchaser does not undertake “due diligence” to make reasonable inquiries to find others that might have an interest in the land. A recent North Dakota Supreme Court Opinion has again brought to light what it takes to be a bona fide purchaser of real estate.
After numerous attempts spanning several months, the Congress has repealed the 1099 reporting requirement that was contained in the Patient Protection and Affordable Care Act of 2010 (Health Care Act) and the 1099 reporting requirement that was included in the Small Business Jobs Act of 2010 (Jobs Bill). Both provisions were widely unpopular with taxpayers and practitioners. The bill was signed into law on April 14, 2011.
As we have been pointing out at the tax schools and other seminars, Iowa has the highest stated corporate tax rate in the nation, and relatively high income tax and property tax rates. Now an ISU study shows that those rates have been diminishing Iowa's labor productivity. Here's the ISU press release announcing the study: http://archive.news.iastate.edu/news/2011/mar/IAlabor. The study is accessible here: https://www.eco
Iowa Code Ch. 650 governs boundary by acquiescence disputes. In the past few years, we have seen several cases involving boundary disputes in Iowa, usually stemming from a change in ownership that triggers a survey of the property. Here, owners of two adjoining parcels disagreed as to whether they or their predecessors had acquiesced to use of an existing fence line as the boundary between their adjoining parcels. A farmer owned the north parcel for many years before selling the property to the plaintiff in 1998.
When a farm is acquired, it is important from a tax standpoint to allocate value to depreciable items and set those items up on the appropriate depreciation schedule beginning with the tax year in which possession is obtained. Of course, land is not depreciable, but when a farm is acquired, there may be items on the land that are depreciable such as fences, drainage tile, buildings, corrals, timber, wells, water lines and residual fertilizer supply. There may be other items (such as a gravel road) that should also have cost allocated to them. How to properly allocate value to these items
Development agricultural property around the Des Moines metro area provided the background for this case in which the Iowa Court of Appeals affirmed a Dallas County trial court’s ruling recognizing an easement for access to farmland across developed lots. The plaintiffs owned and farmed the ag property adjacent to the existing housing development. They sued seeking judicial recognition of their right to access a farm field through the driveways of the lots. The defendant lot owners countersued, asking the court for damages caused by the farmer crossing their lots.
A brand new, full decision of the U.S. Tax Court recognizes that losses incurred by gamblers can lead to a net operating loss. In so finding, the Court rejected a portion of its 1951 opinion concerning a gambler’s ability to deduct associated business expenses where the court held that such expenses were to be treated the same as gambling losses – deductible only to the extent of gambling winnings. The decision was to be anticipated – the IRS had already revealed its litigating position on the issue in late 2008.
The full Tax Court, in August of 2009, knocked the IRS off its heels when the court said that a single-member LLC must be respected for gift tax purposes. Such entities are ignored for federal income tax purposes - they are treated as a disregarded entity under the so-called "check-the-box" regulations. But, the court said, the entity is separate from the single-member for gift tax purposes with the result that the taxpayer in the case was not responsible for gift tax on transfer of membership interests in the LLC – she didn’t have an interest in the LLC’s underlying assets. The court w
We begin 2011 with our annual look at the most significant agricultural law developments of the previous year. Legal issues continue to be at the forefront of developments that are shaping the present and future of American agriculture, and it is very likely that the involvement of the legal system in agriculture will continue to grow. The following is my list of what I view as the top ten agricultural law developments of 2010 based on their impact (or potential impact) on U.S. agricultural producers and the sector as a whole.
In the early 1900’s, the Iowa Legislature created a system of drainage districts to facilitate construction and repair of drainage tile, levies, waterways and terraces in certain parts of the state. Normally, the county board of supervisors acts as the drainage district board in the event of disputes or drainage issues. In this case, workers for a rail line discovered a sink hole under the railroad tracks in a drainage district. The sink hole was the result of old clay drainage tiles collapsing and sucking the soil from the railroad embankment.
The Congress has failed in its attempts to extend the federal estate tax for deaths in 2010. That means that the estate tax (and the generation-skipping transfer tax (GSTT)) does not exist for deaths in 2010. Federal gift tax stays in place, but at a flat 35 percent rate and a maximum exclusion of $1 million.
The expiration of the estate tax has significant implications for practitioners and their clients, and may provide some planning opportunities.
In Iowa, challenges to property tax assessments are first made at the county level. If the county board of review rejects the taxpayer’s arguments, the taxpayer may appeal to the county district court (trial court). If the taxpayer does not find relief at this level, they may appeal to the state’s appellate courts. In this case involving a property tax assessment challenge, the definition of “manufacturing equipment” was at issue. “Manufacturing equipment” is exempt from tax.
A minority of states recognize common-law marriages. But, even in these states, it’s not enough to just simply live together for a certain amount of time. Instead, the couple must hold themselves out to the public as married persons. There are various ways that can be done, including using the same last names and filing joint tax returns. Each state that recognizes common-law marriage sets forth certain tests that must be followed to establish the relationship. In Kansas, the couple must have the capacity to marry, agree to be married and represent to the public that they are married.
We reported on this case two years ago. Now, there is another development to report. By way of background on this drainage dispute, Iowa law specifies that the natural drainage of surface water cannot be diverted by one landowner to the damage of another landowner. But, courts only grant injunctive relief in situations where it is necessary to prevent irreparable harm or afford relief where there is no other adequate remedy. A drainage issue and injunctive relief were involved in this case.
The floods of 2010 created many problems for Iowa farmers this summer, including flood-damaged land and crops. The Iowa Department of Agricultural and Land Stewardship (IDALS) issued a Press Release and Q & A Fact Sheet on Sept. 30, 2010, regarding the harvest of flood-damaged grain in Iowa.
Iowa has specific rules governing the drainage of surface water. But, is the state subject to those same rules? That question was addressed in this case. In the Spring of 1999, a rural community in north central Iowa experienced heavy rainfall (nearly 7 inches in two days) resulting in flooding which damaged several properties. Several years later, the Iowa Department of Transportation (IDOT) constructed a four-lane, divided-highway bypassing the town. The bypass crossed a stream and the bridge installed over the stream was designed to withstand a fifty-year flood.
In recent years, an important issue that has produced opinions by the U.S. Tax Court and several Federal Circuit Courts of Appeal involves the question of whether a full dollar-for-dollar discount should apply when valuing interests in a C corporation to reflect built-in capital gain tax. The IRS had maintained successfully (until 1998) that no discount should apply, but the courts have disagreed with that view.
In September of 2009, on cross motions for summary judgment, an anti-technology activist group persuaded a federal judge that they had showed that USDA’s unconditional deregulation of Roundup-Ready sugar beets violated the National Environmental Policy Act (NEPA) by failing to examine the likelihood and effects of gene transmission on conventional farmers and consumers of sugar beet seed or of gene transmission to the related crops of red table beets and Swiss chard.
This case involves a farmer’s lawsuit against a local cooperative for damage done to his corn crop when the co-op sprayed the wrong herbicide on twenty-five acres of corn. The entire crop on that twenty-five acres was destroyed.
Many Iowa farmers use standard written form leases. Sometimes farmers add additional terms to those standard forms that conflict with some of the standard terms. When clauses conflict in a farm lease, how do the courts determine the parties’ intent in the event of a dispute? What if the lease is perpetual? This case demonstrates the importance of executing a clear and concise written farm lease agreement, and discusses the problem of perpetual farm leases.
When property is leased, the tenant is entitled to “peaceable possession” of the leased premises. Sometimes that is termed “quiet enjoyment.” But, just exactly what does “quiet enjoyment” involve.
Three parties were involved in this case: a real estate brokerage company, the buyer of the property (a real estate investment LLC), and the property seller (a hotel management company). The real estate broker generated a written contract to be used in the purchase of the real estate consistent with the buyer’s ultimate offer. The parties agreed to the terms of the agreement.
Here, the plaintiff purchased a tract of land and obtained a mortgage on the real estate from the defendant, a bank. The real estate secured the mortgage and the bank had an additional security interest in the plaintiff’s horses. A few years later, the plaintiff defaulted on her mortgage with the bank, and the bank filed a petition for foreclosure. However, before the sheriff’s sale, the plaintiff moved herself and her horses to her sister’s property. After the sheriff’s sale, there remained a $7,990 deficiency on the bank loan.
A year before her death, a woman entered into a real estate installment contract with her sister-in-law to sell her home, retaining a life estate in the property. The woman executed a will that provided for the payments of her “just debts” from her estate upon her death. The remainder of her property was to go to her sister-in-law. At the time of her death, she owed several thousand dollars to health care entities for medical assistance. Upon discovering this outstanding balance, the Iowa Department of Human Services (DHS) filed a claim against the estate pursuant to Iowa Code § 249.5(2).
Lending equipment to a neighbor may seem harmless, but can it lead to a lawsuit? In this vicarious liability case, the issue was whether the owners of a trailer can be held vicariously liable under Iowa’s Owner Consent statute (Iowa Code §321.493). Ultimately, the courts agreed that the plaintiff’s claims should be dismissed against the trailer owners, because a trailer is not a motor vehicle in Iowa.
On March 18, 2010, the Hiring Incentives to Restore Employment Act (Act) became law. It is estimated that the HIRE Act will cost approximately $18 billion, and its cost is only partially offset by a tweak in the somewhat obscure foreign account tax compliance rules (i.e., offshore tax enforcement), acceleration in corporate estimated tax payments and various tax penalties. The intent of the law is to incentivize employment.
The passive loss rules can have a substantial impact on farmers and ranchers as well as investors in farm and ranch land. Until 1987, it was not uncommon for non-farm investors to purchase agricultural land and incur losses which the investor would then use to offset against the investor’s wage or other income. However, the passive loss rules, enacted in 1986, reduce the possibility of offsetting passive losses against active income. The effect of the rules is that deductions from passive trade or business activities, to the extent the deductions exceed income from all passive activitie
The Small Business and Work Opportunity Act of 2007 (Act) included a provision that allows some husband-wife business ventures to elect out of the partnership rules for federal tax purposes as a qualified joint venture (QJV). While the election will ease the tax reporting requirements for husband-wife joint ventures that can take advantage of the election, the Act also makes an important change to I.R.C.
On May 25, 2007, the President signed into law the Small Business and Work Opportunity Act (Act). The Act makes several amendments to the WOTC (I.R.C. §51), but perhaps the most important change to the WOTC from agriculture’s standpoint is that the WOTC now has expanded application for employers that hire new employees in a “rural renewal county.”
Agricultural legal and tax developments continued to impact the agricultural sector in 2009. Here’s the list of what we believe to be the “Top Ten” developments in 2009 based on their impact to agricultural producers and rural landowners across the nation.
Under present law, 2010 is the final year in which capital gains and qualified dividends will not be subject to tax in the hands of certain individual taxpayers – those in the two lowest tax brackets. This zero percent rate became available beginning in 2008 and raises significant planning questions and opportunities for lower-income taxpayers, and other taxpayers that can utilize tax management strategies to minimize income to take advantage of the zero percent rate.
The Congress has overwhelmingly approved legislation that expands the first-time homebuyer tax credit and extends the net operating loss carryback period. The Act is titled the Worker, Homeownership, and Business Assistance Act of 2009, was approved by the Senate 98-0 and the House 403-12 and has as its primary purpose an extension of unemployment insurance benefits for unemployed persons in areas plagued by high unemployment. The Act also contains numerous other tax provisions and revenue offsets. The legislation, H.R.
The homosexual marriage issue is important to practitioners because of the potential impact any change in the definition of “spouse” would have on various estate planning, inheritance, property ownership and tax concepts and rights to various government benefits.
In late 2008 and early 2009, two major pieces of legislation were enacted into law with the stated goal of spurring the economy. The 2008 legislation (H.R 1424) was titled the Emergency Economic Stabilization Act of 2008. Division B of the 2008 law contains the energy-related provisions. The 2009 law (H.R. 1) is known as the American Recovery and Reinvestment Act of 2009 and is the largest spending bill in U.S. history. Energy-related provisions are included among the various provisions of the bill.
For some farm families, the cost of health care is a major expense. In some instances, at least one of the spouses may deem it necessary to find off-farm employment for the purpose of obtaining health insurance for the family. For these families health insurance is very important, and a consideration of the various planning options associated with health insurance is critical.
The Iowa Supreme Court has determined that America Online (AOL) does not offer telecommunication services in Iowa because members could only access the services through AOL's out-of-state call centers. Thus, AOL's services were not subject to sales tax because the tax can only be imposed on services that originate and terminate within Iowa. Iowa law taxes the gross receipts from the sale, furnishing or service of communication services when they are sold at retail in Iowa to consumers or users.
The Center for Agricultural Law and Taxation 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. The Center'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.