What Act Allows For The FBAR

There are certain requirements for the reporting of Foreign Bank and Financial Accounts, also referred to as FBAR.  Recently, I was asked, where did the Department of Treasury obtain authority to require such reporting and obtain information on certain accounts those holding signature authority or an interest in such account. The Bank Secrecy Act (BSA) is the act that gives authority to the Department of Treasury to require reporting and the compilation of information.  The video below has been prepared by John McGuire, a tax attorney in Denver, Colorado at The McGuire Law Firm.

If you have questions regarding your requirements to report foreign accounts or assets, contact The McGuire Law Firm to schedule a free consultation with a tax attorney in Denver, Colorado.

Gifting Property to a Trust With Reserved Powers

Many individuals will transfer property into a trust and think they have made a gift.  These individuals may be right, or they may be wrong under certain circumstances.  It is not uncommon for the donor, or person placing property into the trust to want to have and hold certain powers over the trust property.  These transfers into the trust with reserved powers may not be a complete gift for gift tax purposes.  The article below will provide addition information regarding transfers into trust that can be revoked or amended.  Please remember the article and information below are for informational purposes and you should discuss the tax implications of transfers into a trust with your tax attorney.

Under the regulations, when an individual transfers property into a trust but holds the power to revoke or amend the trust in certain ways, the gift or transfer is considered incomplete for gift tax purposes.  The transfer is incomplete regardless of whether the power is held only by the donor or can be exercised only with the consent of another individual when such individual does not have a substantial interest adverse to the donor exercising their power.  The Treasury Regulations under Section 25.2511-2(e) state, “A donor is considered to as himself having a power if it is exercisable by him in conjunction with any person not having a substantial adverse interest in the disposition of the transferred property or the income therefrom.  A trustee, as such, is not a person having an adverse interest in the disposition of the trust property or its income.”

The idea behind an individual having a substantial adverse interest to the donor is, if the other individual has no reason not to agree with the decisions made by the donor, the power is essentially left to the donor to make decisions unilaterally and alone.  However, if the donor’s power to revoke can only be exercised with the agreement and acquiescence an individual with an adverse interest to the disposition of the property held in trust or the income created by the trust property, the gift is complete.  Practical thought would lead to the decision that an individual with an adverse interest, would generally not agree with the donor regarding the donor exercising certain revocation powers, and thus the donor is considered to have relinquished enough of the necessary control of the property transferred into the trust, such that the transfer of property is a complete gift. 

It may go without saying after reading and considering the above, but a transfer of property whereby the donor has the sole authority (when looking at the terms of the trust) to revoke would be an incomplete gift for gift tax purposes, even though it would appear the donor needs the acquiescence of a third party with an adverse interest.  Thus, consider substance over form when reviewing certain provisions of a trust document.

If you have tax questions regarding gifting property, you can speak with a tax attorney in Denver by contacting The McGuire Law Firm.   

 

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Filing a Tax Extension With The IRS

How do I extend the filing of my tax return?  What form do I file with the Internal Revenue Service to file for an extension on my tax return?  As a tax attorney, these are common questions I hear from individuals, especially as the April 15th tax deadline gets closer and closer.  The article below discusses the filing of an extension with the Internal Revenue Service

Ok, so perhaps you procrastinated, or perhaps you are waiting on a K-1 from a partnership, S Corporation or trust, but the bottom line is, you are not ready to file your 1040 individual income tax return with the IRS, and you need to file an extension.  An extension is filed with the IRS by filing Form 4868, which must be filed on or before April 15th.  The filing of Form 4868 will give you another six months, until October 15th to file your 1040 individual income tax return.  That being said, what information do you need to complete Form 4868?  To complete Form 4868 you will need your name, address, social security number and if married, your spouse’s name and social security number.  In addition, the form will ask for information related to what you estimate on your tax return.  For example, the form will ask what your estimated tax liability or amount of tax due will be, and if you are enclosing payment with the form.  If you think you will owe tax for the year, you should include payment with the form so as to prevent the accrual of failure to pay penalty, which brings up another important point.

Many people think that filing for an extension to file the tax return is an extension to pay the tax due.  This is incorrect.  The filing of an extension is only extension to file the actual 1040 individual income tax return, and is not an extension to pay the taxes that are due.  Yes, that taxes are due on April 15th regardless of whether you file an extension or not.  Thus, if you file for an extension, and then later file your return on or before October 15th and you owed tax per the tax return, the IRS can assess you the failure to pay penalty on the amount of tax due from April 15th moving forward.  Therefore, making a payment with your tax return extension will either prevent the failure to pay penalty from accruing, or lessen the penalty as the failure to pay penalty is based upon the amount of income tax that was due on April 15th and not paid.

Thus, if you cannot file your individual tax return by the April 15th deadline, it is best to file Form 4868 with the IRS, and make a payment with the filing of the Form based upon an estimated amount of tax due.

You can contact a Denver tax attorney at The McGuire Law Firm if you have additional tax related questions. 

Schedule a free consultation with a tax attorney in Denver Colorado or Golden Colorado by contacting The McGuire Law Firm.

Asset Purchase Video by Denver Business Attorney

When a business is purchased or sold, the acquisition could be through an asset purchase agreement.  Under an asset purchase agreement, the actual assets of the business are purchased.  This could include the inventory, accounts receivable, furniture, equipment, fixtures and intangible assets such as copyright or trademark rights, or patent rights & licenses.  An asset purchase also has tax implications to both the seller and purchaser, which you may want to discuss with your business attorney and/or tax attorney.

The video below has been prepared by a business attorney and tax attorney from The McGuire Law Firm.  If you are considering selling your business or buying  a business, consult with a business attorney or tax attorney regarding your specific issues.

The McGuire Law Firm provides a free consultation for all potential clients.