The estate of pop music legend Michael Jackson owes $702 million in federal taxes and penalties, the Internal Revenue Service charged in U.S. Tax Court, accusing the estate of undervaluing some of the star's assets by hundreds of millions of dollars. The dollar amounts in dispute had not been previously disclosed in the court challenge that the Jackson estate filed in July to a bill from the IRS, the U.S. tax-collecting agency. At issue is the wide difference between what the estate said Jackson's legacy was worth versus what the IRS determined was its taxable value. An IRS spokesman and…
A recently released survey suggests that, at least where Social Security is concerned, voters may feel differently: When asked to choose in a trade-off between lower benefits and higher payroll taxes for themselves, even self-identified Republicans were more likely to choose the tax. In all, 74 percent of Republicans and 88 percent of Democrats agreed with the statement that “it is critical to preserve Social Security even if it means increasing Social Security taxes paid by working Americans.” The survey was commissioned by the National Academy for Social Insurance, a nonpartisan group of specialists in entitlement policy who generally agree…
When the children of art dealer Ileana Sonnabend inherited her valuable collection of artwork in 2007, among the pieces was a ground-breaking “combine” by Robert Rauschenberg titled “Canyon” (pictured right). The children paid $471 million in federal and state estate taxes on their mother’s estimated $1 billion collection, but they did not think they had to pay any tax on “Canyon.” The 1959 work, it turns out, can never be sold because it includes a stuffed bald eagle. Bald eagles are under federal protection and selling or trading one, even if it is part of a famous work of art,…
Many seniors are aware that some planning is necessary if Medicaid is to cover their skilled nursing care as they age and that making gifts of money or property to their loved ones before they need care can be part of that process. There are a few common misconceptions, however, about gifting and the Medicaid Process. Often, penalties resulting from these transfers could have been avoided if clients had been aware of the consequences of their actions. “I thought I was allowed give away $13,000.00 to each person every year.” This statement and action is a result of the misapplication…
Many people wonder if it is a good idea to give their home to their children. While it is possible to do this, giving away a house can have major tax consequences, among other results. When you give anyone property valued at more than $13,000 in any one year, you have to file a gift tax form. Also, under current law you can gift a total of $5 million over your lifetime without incurring a gift tax. If your residence is worth less than $5 million, you likely won't have to pay any gift taxes, but you will still have…
If you are caring for your mother or father, you may be able to claim your parent as a dependent on your income taxes. This would allow you to get an exemption ($3700 in 2011) for him or her. There are five tests to determine whether you can claim a parent as a dependent: The person you are claiming as a dependent must be related to you. This shouldn't be a problem if you are claiming a parent (in-laws are also allowed). Keep in mind, however, that foster parents do not count as a relative. To claim a foster parent,…
Are you still reeling? August was a tumultuous money month (to say the least), but at least we can breathe a sigh of relief that it’s over. Hopefully the upcoming months will bode better. The S+P downgrade and the following correction, as well as several other market drops, hit and hurt a lot of people. Of course, if your Roth IRA was hit then you’ve also got a bit more work to do to protect yourself. As a recent SmartMoney article details, you can still un-do a Roth IRA rollover from 2010, at least until October 17, that is. Many…
Do you own a vacation home in Mexico? Have a bank account in Hong Kong? Has your spouse retained Canadian citizenship? Are you a long-term U.S. resident who was born in the U.K.? Is your brother-in-law, who is a citizen and resident of Ireland, the successor trustee of your revocable trust? Each of these scenarios raises complex tax issues that, without proper planning, could easily have disastrous and costly consequences. The fact is that we live in a globalized world: technology and commerce allow us to move about as we please, even across several continents. But remember that technology…
The Internal Revenue Service has a low-profile but sweeping effort under way to use state land-transfer records for evidence of omissions in reporting gifts of real estate to family members. New tax rules make big gifts to family members popular this year. If you made a gift of real estate (or are considering making one) be warned – the IRS is scrutinizing land-transfer records looking for folks who may have made a reporting error. As The Wall Street Journal reports, the IRS has begun requesting state land-transfer records and checking them against reports of the past few years to find…
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