Source: http://rubinontax.floridatax.com/2015/08/
Timestamp: 2019-04-21 16:26:37+00:00

Document:
The parents of a deceased child were the sole heirs of the child’s estate. The child’s remains were cremated, and the parents could not agree on the final disposition of his assets. The father petitioned the probate court to divide the ashes equally among the mother and father as the heirs of the child.
Florida’s probate code defines “property” as “both real and personal property or any interest in it and anything that may be the subject of ownership.” The probate court found that the ashes were not “property” subject to division in accordance with the division of other property of the decedent, and the appellate court agreed. The appellate court noted that while there is a legitimate claim of entitlement by the next of kin to possession of the remains of a decedent for burial or other lawful disposition, this does not give rise to a property right and does not convert those remains to “property” for disposition purposes.
On July 31, 2015, President Obama signed HR 3236, the "Surface Transportation and Veterans Health Care Choice Improvement Act of 2015." While you wouldn’t know it from the title, Congress included some important procedural tax changes that are of special interest to tax return preparers and estate administrators.
Due Date for FBAR/FinCEN Form 114. Starting next year, this has been moved up from June 30 to April 15. For the first time, taxpayers can obtain a six month extension to October 15. This will put the filing schedule in line with the federal income tax return filing deadlines for most individuals. At this point, it is unknown if a separate filing will be needed to obtain the extension or whether a federal income tax return extension request will be sufficient – hopefully only one extension request will be needed.
Filers residing abroad are automatically extended until June 15, and can get an extension until October 15 (which is shorter than the current extension period available to December 15). First time filers who file late may be eligible to receive late filing penalty relief if they file by October 15.
Due Date for Partnership Income Tax Returns/Form 1065 and S Corporation Income Tax Returns/Form 1120S. This has been moved up by a month, to March 15 for calendar year returns and the 15th day of the third month following the close of the fiscal year for fiscal year entities. A maximum six month extension is available.
Due Date for C Corporation Income Tax Returns/Form 1120. This has been moved back a month to April 15 for calendar year returns and the 15th day of the fourth month following the close of the fiscal year for fiscal year partnerships.
Maximum Extension Due Dates for Trusts/Form 1041. The maximum extension for calendar year taxpayers will be 5 1/2 months to September 30.
Maximum Extension Due Dates for Exempt Organization Forms 990. This is 6 months to November 15 if not otherwise required to file an income tax return, for calendar year filers.
Due Date for Form 3520-A, Annual Information Return of a Foreign Trust with a U.S. Owner. This will be the 15th day of the 3rd month after the close of the trust’s taxable year, with up to a six month extension.
Due Date for Form 3520, Annual Information Return of a Foreign Trust with a U.S. Owner. This will be April 15 for calendar year filers, with up to a six month extension.
Six Year Statute of Limitations for Basis Overstatement. The extended six year statute of limitations for 25% or more omissions from gross income on an income tax return now expressly provides than an overstatement of basis is an omission from gross income for this purpose. This overrules Home Concrete & Supply, LLC, 132 S.Ct. 1836 (2012) which held that an overstatement of basis was NOT an omission from gross income.
Consistent Basis Reporting. Code Section 1014 is modified to require that the basis of property reported on an income tax return must be consistent with the values determined for such property for estate tax purposes. Thus, taxpayers cannot claim a higher basis than the estate tax value. Based on the provision only applying to property whose inclusion in the decedent’s estate increased the liability for estate tax, it would appear that this provision would not apply if due to deductions taken on the estate tax return there was no estate tax due (but this exception should not apply to the new reporting discussed below). Accuracy-related penalties applicable to underpayments under Code Section 6662 will apply to violations of this provision.
New Code Section 6035 now requires an estate required to file an estate tax return to furnish to the IRS and to each person acquiring an interest in gross estate property a statement identifying the value of each interest in such property. This statement must be delivered within 30 days of the earlier of the date the return is filed or the date the estate tax return was due (with extensions). If the value is subsequently adjusted (e.g., by audit or amendment), a supplemental statement must be provided within 30 days. Presumably, the IRS will provide a form for use in this reporting. The penalty for each failure is $250, to a maximum of $3 million. If the failure to report was intentional, the penalty is increased to $500, with exceptions for reasonable cause.
These new provisions apply to estate tax returns filed after July 31, 2015. They should not apply to returns filed only to claim portability of the DSUE amount if a return was not otherwise required.
What happens if the estate does not know within the 30 day deadline who will receive what assets? It would appear that the estate would need to provide a list of all possible assets to each particular potential recipient to avoid a violation of this provision. Perhaps a rule that would extend this to within 30 days of receipt of the subject asset would have been better or can be included by the IRS in its instructions or regulations. Executors may also want to give notice to themselves if they are beneficiaries, to assure compliance, unless final rules provide otherwise.
Issue: Fund managers of private equity funds typically obtain a percentage of total profits via general partner interests - a "carried interest." Because the GP is not entitled to its carried interest unless the fund’s investments generate sufficient profit to return all invested capital plus a specified preferred return, at the time the fund is created (and throughout the fund’s early stages) the carried interest has little or no value. The carried interest’s significant appreciation potential makes it an ideal asset to transfer during life using various estate planning techniques. However, Code §2701 typically applies to increase the value of the transferred asset for gift tax purposes if the managers own any other equity interests in the fund, such as limited partners. The article addresses various planning mechanisms to avoid Code §2701 limitations.
VERTICAL SLICE EXCEPTION: Utilizing Treas.Regs. § 25.2701-1(c), the vertical slice exception to §2701 requires the fund manager to transfer not only the carried interest, but also a proportionate amount of all other equity interests in the fund (e.g., the fund manager’s capital interest in the fund either through the GP or in the fund directly as an LP). This is commonly done via a transfer of all interests to an LLC and then a gift of member interests in that LLC.
CODE §2701 COMPLIANT ENTITIES: The manager transfers all of his interests to an LLC, which is structured to have common and preferred interests. Transfers of common interests are able to use the "same class" exception, and the retained preferred interests are structured to qualify as "qualified payment rights" under 2701. A deemed gift of 10% of the total equity interest values will still occur, and care must be exercised as to the coupon rate on the qualified payment right.
TRUST FOR APPLICABLE FAMILY MEMBERS: The manager transfers the carried interests to a trust under which applicable family members and other friendly persons are only discretionary beneficiaries without triggering §2701. Transfers to family members later occur through exercise(s) of limited powers of appointment to and among them. Step transaction exposure may exist.
PARALLEL TRUSTS. Two irrevocable trusts are created for the benefit of family members. One would be a completed gift grantor trust which receives the carried interest. One would be an incomplete gift nongrantor trust which received a proportionate amount of other capital interests. §2701 is avoided by the fund manager being treated as not owning the capital interest in the second trust.
DERIVATIVE CONTRACT: A derivative contract tied to the performance of the carried interest is transferred to an irrevocable grantor trust in exchange for a payment. Since an actual interest of the carried interest does not occur, then §2701 should not apply.
Florida Statutes Section 726.110 generally provides for a four year statute of limitations in regard to fraudulent conveyances (or if longer, 1 year after the transfer was or could have reasonably been discovered by the claimant). Fraudulent conveyance law generally allows a creditor to pursue a third party that received assets from a debtor if the transfer was a fraudulent conveyance.
The language of this statute is similar in language and concept to the general fraudulent conveyance statutes. Based on such similarity, the transferee argued that the statute of limitations under those statutes should apply to protect the transferee – since that period had run it was too late to collect against the transferee.
No such luck, said the first District Court of Appeal. The statute for collections under proceedings supplementary on a judgment are not tied to the fraudulent conveyance statutes of limitations. Instead, the judgment holder instead can proceed against the transferee (if the transfer was made to delay, hinder or defraud creditors) for the 20 year entire term of the judgment. Transferees thinking they are protected under a 4 year fraudulent conveyance statute in all events may have to adjust their assumptions.
While not applicable in the subject case, however, if a bankruptcy is involved then this extended period may not be applicable. In re: C.D. Jones & Company, Inc., 2015 WL 2260707 at footnote 18 (United States Bankruptcy Court, N.D. Florida 2015).

References: §2701
 §2701
 § 25
 §2701
 §2701
 §2701
 §2701
 §2701