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June 30,
2008
Dear Professional Advisor,
Greetings from
Immanuel St. Joseph's Foundation. I am pleased to share with you the
latest news from Washington, tax law updates, PLRs, Case Studies and
timely articles. We provide this weekly eNewsletter and web site to
our professional advisor friends as a complimentary service.
Please feel free to call me at 507-385-2932 if I can run a proposal
or be of assistance to you.
Cordially
yours,
Bob Weiss
Immanuel St. Joseph's Foundation
1125
Mulberry St.
Mankato, MN 56001 |
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| Immanuel St.
Joseph's Foundation |
June 30,
2008 |
GiftLaw Weekly eNewsletter -
June 30, 2008
- WASHINGTON
HOTLINE
- PLR THIS
WEEK
- CASE OF THE
WEEK
- ARTICLE OF THE
MONTH
|
WASHINGTON HOTLINE
Tax Quote of the Week
"A good prince
will tax as lightly as possible those commodities which are used by
the poorest members of our society; e.g., grain, bread, clothing,
and all other staples without which human life could not exist."
-- Desiderius Erasmus
AMT Dance
Continues
Despite strong Senate opposition to any tax
increases accompanying the AMT Relief Bill, on June 25, 2008, the
House passed the Alternative Minimum Tax Relief Act of 2008. This
bill is "fully offset" and includes added taxes on oil and gas
companies, greater credit card reporting for website sales and
increased scrutiny of overseas tax havens.
Chair Charles
Rangel (D-NY) stated, "The main difference between Democrats and
Republicans is that Democrats don't believe that we should pay for
the cost of this bill by adding to the national debt. Instead, we
should take a look at the tax code and see what loopholes we can
close to repair the AMT."
The Ranking Member of the Ways and
Means Committee is Rep. Jim McCrery (R-LA). He responded, "We know
how this political exercise is going to end -- Congress will
eventually pass an AMT patch without tax increases -- as was done
last year."
Editor's Note: Sen. Max Baucus, Chair of
the Senate Finance Committee, repeatedly has stated there is no
chance for the AMT relief with offsets to pass the Senate. He has
been unable to pass a Senate tax bill with no AMT offsets and fairly
modest offsets for the energy and tax extenders. Sen. Baucus
indicated that he will try again the second week of July to develop
a compromise bill on AMT and tax extenders acceptable to both
parties.
Higher Gas Costs Equal IRS Mileage
Increase
In IR 2008-82 (23 Jun 2008), the IRS raised the
permissible mileage rates for business use, medical and moving
miles. The new rates will be 58.5 cents per mile for business use,
and 27 cents per mile for either medical or moving
mileage.
IRS Commissioner Doug Schulman indicated that the
increased rates were the result of higher gas costs. He noted,
"Rising gas prices are having a major impact on individual
Americans. Given the increase in prices, the IRS is adjusting the
standard mileage rates to better reflect the real cost of operating
an automobile."
Editor's Note: The deduction for
charitable miles remains at an extraordinarily low 14 cents per
mile. This rate was created when gas was 1/3 of existing prices and
needs to be updated. In the Republican proposed change on the AMT
bill, there was a proposal to increase the charitable mileage rate.
It appears that Congress is finally recognizing that this rate needs
to be greatly increased to reflect actual automobile costs for
volunteers who are assisting charities.
Increased IRA
Savings Needed
The House Ways and Means subcommittee on
retirement accounts held a hearing on June 26, 2008. Committee Chair
Richard Neal (D-MA) noted, "You have probably heard of the
three-legged stool meant to prop up retirees in their golden years
-- that is, Social Security, pensions and savings. Without one leg,
that stool will be hard to sit on. Today, we will be discussing
personal savings, and why the national savings rate continues to
decline."
Rep. Neal indicated that it is essential for more
Americans to start saving larger amounts for retirement. The
personal savings rate since 2005 has declined to only ˝ of 1% of
income. Between 1970 and 1990, the rate was approximately
8%.
In testimony given before the House committee, President
Dallas Salisbury of the Employee Benefit Research Institute
discussed the current funding of IRAs. He noted that "IRA assets
reached $4.75 trillion at year-end 2007." The "asset growth is
mostly due to rollover distributions" from employer plans such as
401K, 403(b) and other similar plans.
At the hearing, the
AARP endorsed a plan for employers with 10 or more employees to
create an "automatic IRA." There would be a modest tax credit for
employers creating new IRA programs. All employees under this plan
would be offered a payroll-deduction IRA saving
option.
Editor's Note: With IRA's now comprising
approximately $5 trillion of the $14 trillion that the Federal
Reserve estimates are in all types of qualified retirement plans,
many persons over age 65 do have substantial savings. However, the
majority of these IRA amounts have resulted from rollovers from
other types of corporate plans. For individuals who are interested
in philanthropy, the bequest of an IRA and especially the "Give It
Twice" testamentary unitrust funded with an IRA remain very
attractive options. If Rep. Neal is successful in encouraging more
use of IRAs, the potential for donors to remember charities through
IRAs will increase.
Applicable Federal Rate of 4.2%
for July -- Rev. Rul. 2008-33; 2008-27 IRB 1 (18 Jun
2008)
The IRS has announced the Applicable Federal Rate
(AFR) for July of 2008. The AFR under Section 7520 for the month of
July will be 4.2%. The rates for June of 3.8% or May of 3.2% 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 2008, pooled income funds in existence less than
three tax years must use a 4.8% deemed rate of return. Federal rates
are available by clicking
here.
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PLR THIS
WEEK
PLR - 200825014 Settlement Agreement Distribution
Qualifies for Deduction
Decedent's last will and testament directed his
entire estate to Trust. Trust provided income to be paid to Charity
1 for 30 years with the remainder divided equally between Charity 1
and Charity 2. Decedent intended Trust to qualify as a valid
charitable trust. Charity 1 and Charity 2 both disagreed on the
income to be distributed or accumulated for their benefit. They
consequently made an agreement approved by the State Attorney
General and the Court (Order) as to their distribution. The Order
dictated the immediate distribution of 87.5% of the net estate to
Charity 1 and 12.5% of the net estate to Charity 2. Executor sought
a ruling on whether the estate would be entitled to a Sec. 2055(a)
charitable deduction.
The Service ruled that Decedent's
estate was entitled to an estate tax charitable deduction for
distribution of the estate under terms of the Order. Under Sec.
2055(a)(2), all bequests, legacies, devises or transfers to
qualifying charitable organizations are deductible from a decedent's
gross estate. In Rev. Rul. 89-31, 1989-1 C.B. 277, decedent
bequeathed the estate residue to a trust paying remainder to
charity. Following a valid challenge to the will resulting in
settlement, the estate made an immediate distribution of the
remainder value to the charitable organization which qualified the
estate for a Sec. 2055(a) charitable deduction.
To view the
full PLR Click
Here.
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CASE OF THE
WEEK
Marketing Ideas during Soft Markets and Dropping
Interest Rates Part 8 - Convert the Taxable into the Tax
Free
Jeanne Henry, 88, is
a very concerned American. Having grown up during the Great
Depression, Jeanne developed certain attitudes toward money and
savings. As a result, she saved consistently and conservatively
during her entire life. Despite her financial planner's suggestions,
Jeanne put little, if any, of her savings into the stock market.
Consequently, Jeanne avoided the loss in retirement savings that
some Americans experienced during the past year.
However, the
decreasing interest rates have caused Jeanne's CD and MMA interest
rate returns to dwindle. Currently, Jeanne is earning a mere 3% on
her savings. While happy she preserved the principal of her
accounts, Jeanne's yearly retirement income has dropped off
significantly and this worries her greatly. She wants to increase
her income substantially, but does not want to expose herself to
greater risk or to more income taxation. How can Jeanne increase her
return on investment without exposure to fluctuations in the markets
and without increasing her taxable income each year?
To view
the solution to this Case of the Week Click
Here.
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ARTICLE OF THE
MONTH
Avoiding the Boats, Cars and Vacations
Disaster
What is the basic
purpose of inheritance? Most parents will respond that the purpose
of an inheritance is to help the child "become a better person."
Let's listen into a discussion between an advisor and John and Mary
Parent as they discuss an inheritance plan for their three
children.
Advisor: John and Mary, how do you feel
about the way your children are progressing in
life?
John: Well, all three children are doing fine.
They have all finished their education and are working. We know that
they will be making a good contribution to society in some
manner.
Mary: Yes, they are all working. We've tried
to teach them good principles and that they should be honest and
caring persons.
Advisor: Do both of you think that it
is good for them to have jobs and to eventually buy a house and
acquire some savings?
John: Yes, they should have jobs
and they should be responsible citizens.
Advisor: But
with an inheritance you have the opportunity to give them additional
security.
Mary: Yes, we think that is important. We
recognize that we have been fortunate over the years to have
acquired substantial resources, and we do want to help
them.
Advisor: Have you thought about the difference
between giving principal or giving income? I find that many people
in your situation have been careful and built up their estate. They
have substantial resources. And frequently they leave a substantial
inheritance outright to the children. Have you seen examples of
parents who have done that?
John: We certainly have.
An uncle of mine passed away and left the estate to two children.
One of them did fine. But the other spent his entire inheritance in
18 months.
When he was asked what happened to the inheritance
he replied, "Well, I spent most of it on boats, cars and
vacations -- and I wasted the rest!"
To view
the full Article of the Month Click
Here.
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Note: Case studies, articles, commentary and other
materials in the GiftLaw system are included solely as educational
information. Articles and editorial comments are offered as an
educational service to friends of this organization, and may not
always reflect our official position on any issue. Since case
studies or articles may not always reflect the current AFR or tax
law, it may be necessary to run any illustration with a current
version of Crescendo to obtain updated information. If professional
services are required, all persons shall consult with their
qualified professional advisors. Tax Quotes are courtesy of Jeffery
L. Yablon, Washington, D.C.
© Copyright 1999-2008
Crescendo Interactive, Inc.
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| Immanuel St.
Joseph's Foundation |
June 30,
2008 |
| |
Thank you for your interest in
gift planning. To access any of this updated GiftLaw information,
please select our web page by clicking here.
Cordially
yours,
Bob Weiss
Immanuel St. Joseph's Foundation
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