There are quite a few court cases that address whether a lawsuit settlement award is taxable. Section 104 excludes some damage payments for income tax purposes. But what about withholding taxes? Assuming that the payment or award is taxable, can the award escape withholding tax? One might think that this turns on whether the award…
Category: Tax
Tax
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Estate Plans in Uncertain Times
As 2006 approaches, I can’t help but pause to think about our estate and gift tax regime. The Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 changed the rules of the game. Following the enactment of EGTRRA, estate planners and tax attorneys went to work defining and clarifying how estate plans should be…
ERSOP Plans as a Financing Alternative for Start-ups
Starting a new business can be an exciting and challenging endeavor, but financing the venture can often prove to be a significant obstacle. Traditional lenders typically require a business to be operational for at least a year before they will consider providing small business loans. Meanwhile, venture capitalists often reject the majority of start-up proposals…
Key Tax Considerations for Administering Estates
Administering estates from a tax perspective can be a complex and challenging task, particularly for non-tax attorneys who may not have extensive experience in this area. Estate administration is all about managing finances, including making key elections and timing distributions, income, and expenses. Failure to make the right choices could result in significant tax liabilities…
Charitable Remainder Unitrust and NIMCRUT: Tax-Savvy Giving
Developing a tax strategy that allows for income and current income tax benefits is a key goal for many individuals and families. One potential solution to this challenge is to establish a charitable trust. These trusts can offer donors the ability to make a charitable gift while retaining an income stream from the donated assets,…
Taxes & Gay and Lesbian Marital Rights
This article is updated in 2023, given the significant changes to our tax laws that impact gay and lesbian couples. The U.S. Supreme Court issued several rulings that brought about significant changes to the tax treatment of same-sex marriages. The primary court case centered around the federal estate tax and the lack of a marital…
Trust as the IRA Beneficiary: The RMD Conduit Trust
If you have an individual retirement account or IRA, you should have a plan for how the account’s assets will be distributed after you die. There are a number of tax planning strategies that can be used for this. Many IRA owners opt to name a beneficiary to receive the account’s funds after they die.…
IRS Can Force Business to Shut Down
There is something about the human condition where we expect reason to prevail. We expect that if given the opportunity to explain, reasonable parties who take contrary positions will agree. This is not always the case, and it is often not the case when it comes to the IRS. For example, many businesses that owe…
Estate Tax Valuation Disputes (Explained)
Estate taxes are applied based on the value of assets that the decedent owned. Thus, unlike income tax which looks to sources of income, the estate tax focuses on the value of assets owned. This raises questions as to what the fair market value is for assets on the date the decedent died. Opinions can…
Tax Consequences of Settlement Awards for Plaintiffs and Attorneys
When an individual receives a settlement award, the tax consequences of that award can vary depending on how it is structured. There are several tax planning opportunities available for individuals who receive settlement awards, but in most cases, the tax consequences are fairly standard. The case of Lindsey v. Commissioner, 422 F.3d 684 (8th Cir.…