Illinois Brings Back Its Estate Tax

No First-Time Homebuyer Credit For Purchase From Parents. A Wisconsin man who purchased a home from his parents could not claim the $8,000 tax credit for first-time home buyers, which was in effect in 2008 and 2009, the Tax Court ruled. Cary Nievinski purchased the Milwaukee house for $115,725, and claimed the credit on his 2008 tax return. Neither the Internal Revenue Service Form 5405 that his accountant prepared to take the credit, nor IRS Publication 4819 dealing with the first-time buyer credit, mentioned that the tax code specifically disallowed the credit for purchases from certain family members, including parents. But the Tax Court ruled that this was irrelevant. The law was clear even if the IRS materials were not, and the IRS correctly followed the law in disallowing the credit, said Tax Court Judge Stephen J. Swift. Cary Allen Nievinski v. Commissioner, T.C. Summ. Op. 2011-10.

Illinois Brings Back Its Estate Tax. Legislation to close an estimated $15 billion state budget gap has put Illinois’ estate tax back on the books after a one-year hiatus. The Illinois levy applies at rates up to 16 percent to estates over $2 million. The federal estate tax, which also returned in 2011, has a maximum rate of 35 percent, but only applies to estates greater than $5 million in 2011 and 2012; beginning in 2013 the federal tax would reach 55 percent on estates greater than $1 million. The variations between the state and federal thresholds will complicate estate planning for Illinois residents as well as non-residents who own property in Illinois. The Illinois estate tax is expected to raise $182 million in fiscal 2012 and $243 million annually thereafter. 2011 STT 16-11.

Connecticut Looks To Tax Increases To Close Budget Gap. Bucking a national trend to close state budget holes with little or no increase in taxes, Connecticut’s newly elected Gov. Dan Malloy called on the state’s General Assembly to boost a broad range of tax levies. Malloy, a Democrat, proposed raising income taxes for middle-and upper-income taxpayers, ending a $500 state tax credit for local property taxes paid on homes and motor vehicles, raising the higher general sales tax, and hiking other taxes on luxury goods, rental cars, hotel rooms and cigarettes. The higher taxes are supposed to raise an additional $1.5 billion in fiscal 2012, which is a bit less than half of the estimated $3.2 billion budget shortfall. Malloy called for concessions from state employees’ unions to make up most of the difference. The General Assembly is expected to enact a budget sometime this spring. Malloy’s Democrats control both the state House of Representatives and the state Senate by comfortable majorities. 2011 STT 33-8.

About Larry M. Elkin 534 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

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