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Friday September 22, 2017

Washington News

Washington Hotline

Tax Relief for Hurricane Irma Victims

In a series of letters this week, the IRS announced three types of tax relief for victims of Hurricane Irma who are from Florida, Puerto Rico or the U.S. Virgin Islands. These are filing extensions, hardship loans from qualified retirement plans and leave donation programs. The IRS actions are similar to steps taken recently to help victims of Hurricane Harvey.

IRS Commissioner John Koskinen stated, "This has been a devastating storm for the southeastern part of the country, and the IRS will move quickly to provide tax relief for victims, just as we did following Hurricane Harvey. The IRS will continue to closely monitor the storm's aftermath, and we anticipate providing additional relief for other affected areas in the near future."

In IR-2017-150 the filing deadlines for taxpayers with extensions to October 16 are changed to January 31, 2018. Various tax deadlines for quarterly estimated tax payments and certain business tax returns are also extended.

Taxpayers may search for "Disaster Relief" on www.irs.gov or call 1-866-362-5227 for assistance.

In IR-2017-151 and Announcement 2017-13 the Service announced streamlined procedures for loans from 401(k), nonprofit 403(b) or government 457(b) plans. Plan administrators can permit loans up to the legal limits for victims in federally-designated disaster areas.

Even if the plan has not been amended to permit these hardship loans, the IRS will permit distributions for food and shelter needs. However, hardship distributions are still taxable and may also subject recipients under age 59½ to a 10% early withdrawal tax.

Finally, Notice 2017-52 enables employers to accept gifts of leave to provide Hurricane Irma and Hurricane Harvey charitable relief. Employees may have unused vacation, sick or personal leave days. An employee may give these days back to the employer. There is no deduction or taxable income for the employee.

By January 1, 2019, the employer must give the cash value of the donated days to a Sec. 170(c) organization. The gifts must be designated for relief of Hurricane Irma or Hurricane Harvey victims. Payments by the corporations are deductible either under Sec. 170(c) as charitable gifts or under Sec. 162 as ordinary and necessary business expenses.

IRS May Recalculate DSUE

In Sower, Estate of Minnie Lynn et. al. v. Commissioner; No. 32361-15; 149 T.C. No. 11 (11 Sep 2017), the Tax Court held that the IRS could recalculate a deceased spouse unused exclusion (DSUE) even though the estate was closed.

Decedent Minnie Lynn Sower had been married to Frank Sower. He passed away on February 23, 2012. His estate file IRS Form 706, reported a DSUE of $1,256,033 and elected portability. On November 1, 2013, an IRS closing letter accepted that return as filed.

Minnie died on August 7, 2013 and her estate claimed the $1,256,033 DSUE on her IRS Form 706. The IRS adjusted her estate by taxable gifts for 2003-2005 of $997,920, adjusted the DSUE by Frank's 2003-2005 gifts of $997,921, recalculated the DSUE as $282,690 and assessed a deficiency of $788,165.

The estate made three arguments. The closing agreement was final, the Sec. 2010(c)(5)(B) provision on DSUE amounts precluded review of the 2003-2005 taxable gifts and reopening Frank's estate was an unconstitutional lack of due process.

The Tax Court noted Sec. 2010 (c)(5)(B) permits recalculation of DSUE in the estate of the first spouse to pass away. Therefore, the IRS recalculated the DSUE. It also did not assess any deficiency for Frank's estate.

Because the applicable law on determining the taxable estate in 2012 permitted review of prior gifts, the IRS may review the 2003-2005 gifts even though they were prior to passage of marital portability in 2010. Recalculation of DSUE is not an assessment of an additional tax against Frank's estate and is simply for the purpose of determining the tax on the estate of Minnie. Therefore, there was no violation of due process of law and the deficiency was affirmed.

Private Foundation Equivalency Determinations

In Rev. Proc. 2017-53; 2017-40 IRB 1 (13 Sep 2017), the Service provided guidelines for written advice used by private foundations to make equivalency determinations.

A private foundation may desire to make grants to foreign nonprofits. If the private foundation does not want to risk payment of an excise tax under Sec. 4945 for failure to exercise expenditure responsibility, it may make a good-faith determination that the foreign grantee qualifies as a public charity.

This determination requires written advice from a qualified professional. An affidavit from the grantee is not sufficient.

The written advice must describe the charitable actions of the foreign grantee in sufficient detail to demonstrate it could qualify as a public charity. The determination will be based on all of the applicable facts and circumstances.

Preferred written advice must include several items.
  • English Translation - All of the articles incorporation, bylaws, organizing documents or similar documents must be translated into English.
  • Country - The country in which the entity is formed and operated must be specified if not apparent from the organizing documents.
  • Tax-Exempt Purposes - The written advice must show sufficient factual background to explain and characterize the charitable functions and activities of the grantee.
  • Analysis - The expertise and qualifications of the author and the rationale for applying applicable nonprofit law to the facts and circumstances must be described. In essence, the author must explain his or her background and the analysis that leads to a conclusion the recipient qualifies as a public charity.

Applicable Federal Rate of 2.4% for September -- Rev. Rul. 2017-17; 2017-36 IRB 1 (18 Aug 2017)


The IRS has announced the Applicable Federal Rate (AFR) for September of 2017. The AFR under Section 7520 for the month of September will be 2.4%. The rates for August of 2.4% or July of 2.2% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2017, pooled income funds in existence less than three tax years must use a 1.2% deemed rate of return.

Published September 15, 2017
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Shelby Harder, 2018
Dr. Irving Auld and Dorothy
Roher Auld Scholarship

"Many students take for granted what a university has to offer. However, I am thankful every single day for the opportunity to attend this prestigious school. At Lawrence, you have the ability to engage in Socratic debates about the world we live in at dinner, play recreational or NCAA sports, and talk one on one with brilliant professors. At Lawrence, you don't just 'learn' a subject, you are immersed in it. You dive into the liberal arts and these professors show you the beauty in it all, and how everything is tied together. I am a Biochemistry major with a soft spot for rocket science, philosophy, and evolution. Lawrence is my dream school, and it would have never been possible without the Dr. Irving Auld and Dorothy Roher Auld Scholarship. I am forever grateful for their generosity."

Max Loebl, 2017
Grace Gates Scholarship and Schade Family Scholarship

"Lawrence has been a life changing opportunity. My experience here is made possible by the Grace Gates Scholarship and the Schade Family Scholarship. I will always be grateful for the generosity that made my life at Lawrence a reality. I am incredibly thankful for the amazing education and lifelong connections I have made here. Beyond a doubt, my time at Lawrence has been a multifarious experience; playing varsity soccer, working in the Volunteer and Community Service Center, and now serving as the President of the Lawrence University Community Council. The times spent at Lawrence will be carried with me and cherished for the rest of my life."

Magdalen D'Alessio, 2017
Lillian Seybold Wells Memorial Scholarship

"Hello, my name is Magdalen D'Alessio, I'm majoring in Psychology and minoring in Education Studies and History. I am extremely thankful to be a recipient of the Lillian Seybold Wells Memorial Scholarship as I have been able to further my education and pursue my extracurricular interests, including Dance Team, and participating in the many International programs offered on campus. I'm really glad to be able to attend Lawrence and hope to expand my knowledge of the world even further! In the near future, I plan to conduct an independent study regarding the relationship between the government and school systems and the importance of parental involvement!"

Joe Johnson, 2017
Amy Aplin Larsen Scholarship

"The Amy Aplin Larsen Scholarship has allowed me to pursue tons of opportunities at Lawrence as part of a liberal arts education. I have been able to take classes from close to a dozen different academic departments, perform in ensembles and theatre productions, and take part in shaping the Lawrence community. Regardless of what field I may go into, the connections I have made here at Lawrence with staff, faculty, and friends have been invaluable. Thank you!"

Milwaukee-Downer Scholarships and Professorships

Some of the many recipients of Milwaukee-Downer scholarships gather for a photo with Carolyn King Stephens M-D'62 and Marlene Crupi-Widen M-D'55 in January 2014 at the annual scholarship luncheon.

Rosamund Victoria Bille Adler Scholarship
Dr. Charles E. Albright Scholarship
Helen Daniels Bader Scholarship
James G. and Ethel M. Barber Scholarship
Catharine Beecher Endowed Fund for Downer Women
Bessie A. Bell Scholarship
Berk Scholarship
Frederick C. Best Scholarship
Beta Study Club Scholarship
Lynde Bradley Scholarship
Lucia R. Briggs-Alumnae Scholarship
Edith Lange Brooks Scholarship
Anne Barman Caldwell Scholarship
Alice Miller Chester Scholarship
City of Milwaukee Student Funds Scholarship
Milwaukee-Downer Class of 1940 Fund
Milwaukee-Downer Class of 1942 Fund
College Endowment Association Scholarship
Janet Cope Crawford Scholarship
Jessie Mabbott Daniels Scholarship
F. T. Day Scholarship
Rufus Dodge Scholarship
Julia P. Ely and Hannah R. Vedder Memorial Scholarship
General Endowed Scholarship - M-D College
Dr. Alfred W. and Mrs. Ada F. Gray Scholarship
Berenice E. Hess Scholarship Endowment
Lucille Ray Hibbard Scholarship
Belle Austin Jacobs Scholarship
Helen McDermott Jurack and Ronald J. Mason Scholarship
Marjorie S. Logan Scholarship
Nellie Maxwell Scholarship
S. Annabelle & Paul McGuire Scholarship
Memorial Scholarship Fund - Milwaukee-Downer
Milwaukee-Downer Class of 1953 Scholarship
Milwaukee-Downer Class of 1955 Scholarship
Milwaukee-Downer Class of 1956 Scholarship
Milwaukee-Downer Class of 1957 Scholarship
Milwaukee-Downer Class of 1958 and 1959 50th Reunion Scholarship
Milwaukee-Downer Club Scholarship
Milwaukee-Downer/Lawrence College Consolidation 50th Anniversary Scholarship
Francis Evelyn Kelley Morgan Memorial Scholarship
O'Neill-Anderson Family Scholarship Endowment
Elizabeth A. Olson Scholarship
Gilbert Haven Peirce, Sr. and Emma Elizabeth Manor Peirce Milwaukee-Downer Scholarship
Aleida J. Pieters Scholarship
Matilda Siefert Puelicher Scholarship
Elizabeth Ann Richardson Scholarship
William M. Ross Memorial Scholarship
Elizabeth Rossberg Scholarship
Charles Frederic Sammond Scholarship
Mildred L. Schroeder Scholarship
Sivyer Educational Fund for Women
Marion Merrill Smith Scholarship
Dr. Elizabeth A. Steffen Scholarship
W. Mead and Elizabeth McKone Stillman Scholarship
Strzelczyk Family Scholarship
Clare Scherf Sweetman Scholarship
Raymond H. and Jane K. Taylor Scholarship
Jerline E. Walfoort Memorial Scholarship
Barbara E. Wehr Fund
Harmony Weissbach Scholarship
Martha and Frances Wheelock Scholarship
James G. and Ethel M. Barber Professorship of Theatre and Drama
T. A. Chapman Professorship in Music
Alice G. Chapman Professorship in Physics
Alice G. Chapman Librarianship
Milwaukee-Downer College and College Endowment Association Professorship

Kaitlin Yorde, 2017
Maurine Campbell Endowed Scholarship

"I am so thankful to be a recipient of the Maurine Campbell Scholarship. I am the first person in my family to attend a four-year college, and this would not be possible without the scholarships I receive. At Lawrence there are so many wonderful opportunities and learning experiences available. This summer I was able to participate in research in my field and have also been able to get involved with the Appleton community through ESL tutoring at the Fox Valley Literacy Council. I am sure that the Lawrence education I have received will continue to benefit me for the rest of my life!"

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