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San Jose, CA estate tax lawyerThere are several ways the IRS will be involved in the estate of someone who has died (known as a “decedent”). The IRS is notorious for enforcing payment of the taxes it claims it is due, including in situations involving a deceased person’s estate. 

Tax issues will be important to a deceased person’s personal representative, executor, successor trustee, and heirs, because the estate must pay all taxes due before the estate’s assets can be distributed to the beneficiaries. The IRS can even audit the tax returns of a dead person.

The estate will have to pay any income taxes due for the year of the person’s death (as well as for any year that the decedent did not file). Just like a taxpayer filing his or her income taxes each year, the estate administrator will file a Form 1040 for the estate. Depending on how organized the estate is, the estate administrator may need to file a Request for Transcript of Tax Return in order to get needed documents related to the deceased person’s income and taxes.


gift tax, transfer taxes, San Jose tax attorney, estate tax, gift tax returnIn the United States, we are all too aware of the taxes that affect our everyday lives, such as sales tax and income tax. However, there are additional taxes that apply in special situations, including when someone leaves assets to his or her heirs after their death and when a person gives someone a large gift of money or property. These taxes are known as transfer taxes, and people should be aware of the tax laws that apply in these situations.

Estate Tax

When a person dies, taxes may apply to the transfer of his or her property to his or her heirs. A complete accounting of one’s assets will be made, including cash, real estate, investments, and business interests, using the fair market value of these items. The total value of this property is known as the Gross Estate. Deductions from this amount may apply for debts, expenses related to estate administration, property left to charities, and property left to a surviving spouse.


Taxpayer complaints led the IRS to abandon the practice in 2006 but now it is set to return: using private collectors to pursue overdue federal tax payments. Subcontracting with private collection firms was approved by President Obama when he signed the recent federal highway bill—also known as Fixing America's Surface Transportation (FAST) Act, HR 22—on December 4, 2015. According to multiple media sources, including the Hill, the president signed the legislation with only hours remaining before federal funding for highways was set to expire. FAST should provide funding for the nation's highways and other infrastructure for the next five years without increasing gasoline taxes. The law also has substantial implications for taxpayers who owe a significant amount of money to the IRS. In addition to authorizing the use of private collection agencies for some tax collections, FAST also includes a new penalty for taxpayers who have "serious" tax debt that is delinquent.

As a result of the new law, taxpayers who owe more than $50,000 in unpaid federal taxes will now have their applications for passports or passport renewals denied. Supporters of this approach believe this new penalty may be an incentive for payment and predict it will garner nearly $400 million dollars in tax revenue over the next 10 years.

Tagged in: Estate Tax

Digital currency may be a misnomer because, according the United States Government, it is property rather than currency. Regardless of what it is called, digital currency does have value and the owner of the currency must report digital currency transactions on his/her income tax returns or face penalties.

During an American Bar Association webcast that was held on March 25, 2015, government sources said they will aggressively pursue taxpayers who use virtual currency for illegal activities including money laundering, tax evasion and a host of other crimes. The webcast affirmed what the IRS stated in a press release published in March of last year: "IRS Virtual Currency Guidance : Virtual Currency Is Treated as Property for U.S. Federal Tax Purposes; General Rules for Property Transactions Apply."

Bitcoin, the most popular digital currency, has approximately $3.9 billion in circulation worldwide. Each holder of Bitcoin currency obligated to pay US income tax must report the fair market value to the IRS. According to the IRS press release, other requirements include

Tagged in: Estate Tax

A trust that is specifically designed to take advantage of a federal tax loophole created in 1990, is helping many billionaire families avoid paying taxes, and in a perfectly legal manner. The trust is called the Grantor Retained Annuity Trust, or GRAT, and it is helping many wealthy billionaires to avoid paying taxes legally. In fact, according to a recent piece that was published in Bloomberg Politics, some of the richest Americans have been able to avoid taxes to the tune of $100 billion merely using GRAT.

How it works is like this. Under the current tax laws, individuals and couples who are worth more than $ 5.25 million, and individuals and couples who are worth more than $10.5 million, will have the federal estate tax applied to them. However, when it comes to inheritance, the value of the estates above these exemptions are liable to be taxed a gift tax at the rate of 40%. If families want to pass on their assets to their children during their lifetimes, they are only allowed to give a maximum of $ 28,000 a year to one person without having the gift tax levied on them.

Many families are working around this by creating a Grantor Retained Annuity Trust. Legally, the trust allows the person to make a gift to himself, and use the trust to hold the asset for a period of time with a minimum holding period of two years. At the end of the period of time, the trust will return the original value of the assets that have been parked in it, in addition to a certain amount of interest. However, if the asset gains value during the time that it is in the trust, any excess gains that are greater than the interest that can be applied will be passed on to a beneficiary. Those excess gains are tax-free.

Tagged in: Estate Tax Trust
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