Federal and State Income Tax Deadlines Extended

2021 state and federal tax deadlines

The IRS has extended the filing and payment deadline to May 17, 2021 for 2020 Federal income tax returns.  The extension applies to individuals, businesses, trusts and estates.  By extending the deadline to May 17, the IRS is automatically postponing to the same date the time for individuals to make year 2020 contributions to IRAs (Traditional and Roth), health savings accounts, Archer Medical Savings Accounts and Coverdell education savings accounts.  In addition, for tax year 2017 Federal income tax returns, the normal April 15 deadline to claim a refund has been extended to the new date of May 17, 2021. 

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Lawsuit Arising Out of Gift of LLC Interest

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On February 3, 2021, the Iowa Court of Appeals issued an opinion in the case of Erwin v. Erwin, No. 19-1978 (Iowa Ct. App. Feb. 3, 2021). that involved a dispute between a father and son regarding the operation of their member/managed LLC.  In 2012, the father and his spouse transferred title of farm ground owned by them into a LLC for estate planning purposes.  The property was subject to a mortgage, however, the deed did not state that the transfer was subject to a mortgage.  The father subsequently made a gift to his son of one-half of the membership

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Final Regulations on Deductibility of Expenses of Estates and Non-Grantor Trusts

business taxes, business tax deductions, deduction limits, business expense threshold limits, De Minimis Safe Harbor Expense Threshold

On September 21, 2020, the Internal Revenue Service issued final regulations in regard to the deductibility of expenses of estates and non-grantor trusts.  The Tax Cuts and Jobs Act (TCJA), which was passed previously, bars individuals from claiming miscellaneous itemized deductions for the years 2018 through 2025.  After the passage of the TCJA, there are questions on how such barred itemized deductions would impact estates and non-grantor trusts. The final regulations state that deductions for costs which were paid or incurred in connection with the administration of an estate or trust and which would not have been incurred if the

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New Iowa Supreme Court Case – Estate Planning & Statute of Limitations

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On June 12, 2020, the Iowa Supreme Court issued a ruling in the case of In The Matter of the Estate of Sandra R. Franken, John E. Rottinghaus and Dessie Rottinghaus vs. Lincoln Savings Bank, Fiduciary of the Estate of Sandra R. Franken.  Said Ruling was amended on August 17, 2020. In 1973 the Rottinghauses sold real property of Dessie to Sandra and James Kipp, as joint tenants with full rights of survivorship.  The deed granted the Rottinghauses a first right of refusal which stated as follows: Grantees hereby agree that they will not sell or otherwise convey the premises

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1031 Like Kind Exchange Relief

1031 Like Kind Exchange

Section 1031 of the Internal Revenue Service Code allows a taxpayer to defer recognition of capital gains and related federal income tax liability on the exchange of investment real estate.  The capital gains and related federal income tax liability are deferred to the time that the replacement real estate is sold.  In order to meet the IRS requirements, the seller must use a qualified intermediary to handle the sale of the property and the purchase of the replacement property. A taxpayer has 45 days from the date of sale to identify the replacement property and 180 days from the date

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Iowa Supreme Court on Gift Restrictions – Tax Insight

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On November 8, 2019, the Iowa Supreme Court issued an opinion in the Matter of the Application of Coe College for Interpretation of Purported Gift Restriction.  The case involves a gift of seven paintings of Grant Wood in 1976 by the Eppley foundation to Coe College in Cedar Rapids.  The gift letter stated that the paintings would be given to the college “and that this would be their permanent home, hanging on the walls of Stewart Memorial Library”. The college treated the paintings on its books as an unrestricted gift that could be sold or otherwise alienated.  In 2016 an

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Final Regulations on Increased Gift and Estate Tax Exclusion Amounts

The Treasury Department and the Internal Revenue Service issued final regulations on November 22, 2019, confirming that individuals taking advantage of the increased gift and estate tax exclusion amounts in effect from 2018 through 2025 will not be adversely impacted after 2025 when the exclusion amount is scheduled to drop to pre-2018 levels. The final regulations largely adopt the proposed regulations from last year.  The final regulations also contain four examples which illustrate the impact of inflation adjustments.  Individuals who are planning to make large gifts between 2018 and 2025 can make such gifts without concern that they will lose

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Qualified Charitable Distributions Tax Break

iowa tax law charitable donations

Qualified charitable distributions are a valuable tool in reducing taxes.  The deadline for the 2019 year is December 31, 2019.  Qualified charitable distributions are valuable if a person is taking required minimum distributions and also making charitable gifts.  Under the new tax act, most taxpayers are no longer able to itemize deductions, which includes charitable contributions, on the federal return due to the increase in the standard deduction.  As such, many taxpayers are no longer able to deduct their charitable contributions on their federal income tax returns.  A qualified charitable distribution allows an individual who is over the age of

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Safe Harbor for Rental Real Estate – What You Need to Know

real estate safe harbor tax law

Last month the IRS issued the final regulations regarding Section 199A.  The IRS also issued IRS Notice 2019-07 which set forth a safe harbor under which a rental real estate enterprise would be treated as a trade or business under Section 199A.  The purpose of the Notice is to give taxpayers guidelines as to the application of the 199A deduction for rental real estate properties. To qualify for the safe harbor requirements, the taxpayer must meet the following requirements: Keep separate books and records setting out the income and expenses for the rental real estate enterprise; For tax years beginning

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Professional Tax Preparation Recommended for Businesses

professional tax preparation

The Tax Cuts and Jobs Act has added a number of complex issues to the tax preparation for businesses. Taxpayers who previously prepared their own tax returns with Schedule C’s or Schedule F’s will face many complex issues under the new tax act.  One issue is the new 20 percent pass–through deduction for non-C corporation businesses. The Act also has significant changes regarding depreciation and the deduction of expenses. Another item that adds complexity to tax preparation for 2018 is that the State of Iowa has not adopted the changes in federal tax law for the year 2018. I highly

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