Estates and Trusts
- Executors for people who died in 2010 have been given a filing reprieve by the IRS. They have until January 17, 2012 to file Form 8939 to report basis allocations for inherited assets. Originally, the IRS said that estates that opt out of the estate tax for 2010 had until Nov. 15 to file Form 8939 with heirs and the IRS to allocate $1.3 million of added basis to heirs plus $3 million more for a spouse. But only a draft of Form 8939 has been released so far, without any instructions.
- Executors also get more time to file Form 706. If they requested an extension no later than September 19th, they'll have until March 19, 2012 to file the estate tax return for 2010 and pay any tax. The IRS won't assess penalties, but it will charge interest on tax paid after September 19th. If the decedent died between December 17 and December 31, 2010, the executor has 15 months (with extensions) after the date of death to file Form 706.
Business Taxes
- If you are a sole proprietor, hiring your spouse can cut your tax bill. The tax savings come from a medical plan. By offering family coverage for all employees, you can receive health insurance under your spouse's policy. And if you have no other employees, you don't incur any extra out-of-pocket cost. The entire cost of the medical plan can be deducted as a business expense, an Appeals Court says, as long as the spouse is a bona fide employee. In this case, a farmer hired his wife and paid her $100 a month plus health insurance. The Court sent the case back to Tax Court to determine if she truly was his employee. However, the odds on a favorable ruling are good, since she spent an average of 40 hours a week helping with the crops, caring for livestock, and keeping the books. The business expense deduction reduces the farmer's income tax and SECA tax bills.
- Employer-provided cell phones are tax free fringes, the IRS says. As long as companies give the phones to workers primarily for business reasons, employees won't be taxed on wither the business or personal use of phones. Thus, workers will not need to keep a log of their business and personal calls. This is also true where employers reimburse for the business use of personal cell phones. The payments aren't taxed to employees if the use of the phones is reasonably related to the firm's business needs and the amounts paid are not unusual or excessive.
- Amortization of intangible assets starts when a firm begins business, the Tax Court says in the case of S firms that received wireless network licenses from the federal government. It rejected their contention that the 15 year amortization of the cost starts on the date that the licenses were granted.
- Sellers of marijuana for medical purposes have an income tax problem: they can't deduct any of their costs, even though they live in a state where it is legal to grow and sell marijuana for medical purposes, IRS privately rules. Tax law bars deductions for sellers of illegal controlled substances such as marijuana, and no exception is provided for medically necessary marijuana. Since the IRS won't give relief, sellers will have to convince Congress to change the law. Similarly, those who use marijuana for health reasons can't claim the cost as a medical expense.
If you have any questions about these or any tax developments, please contact Fred Schutz at 856-722-5300 ext. 201 or Dave Gill at ext. 210.
