Probate & Trust Law Section Conference Manual ... - Minnesota CLE

ii. The Tax Court disallowed an approximately $20 million charitable contribution
because the taxpayer did not properly fill out Form 8283 and failed to obtain a
qualified appraisal at the time of filing.
g. Fire Department Training for Charitable Deduction
i. Patel v. Comm. 138 TC No. 23, 2012. The Tax Court denied a charitable
contribution deduction for a home donated to the local fire department for
training purposes.
ii. The Tax Court found that the couple granted a “license” to the local fire
department which should be valued as a partial interest in the property.
iii. Section 170(f)(3) disallows a charitable deduction for a partial interest.
C. Affordable Care Act (“ACA”) – Law Becoming Effective 2013
a. 3.8% Tax on Net Investment Income
i. Beginning in 2013, a 3.8% surtax on net investment income becomes effective
ii. The surtax applies to the lesser of:
Net Investment income; or
The excess over modified AGI (MAGI) set at $200,000 for a single
taxpayer and $250,000 for married filing jointly taxpayer.
iii. Net Investment income subject to surtax:
Taxable interest
Dividends
Annuity income
Rents
Passive Royalties
Passive Income
Net capital gain
iv. Net investment income not subject to surtax:
Wages
Exempt Interest
Distributions from IRAs or qualified plans
Self-employment income
Active Royalties
Social Security Income
Material participation in business income
b. .9% Medicare Tax for High Income Earners
i. A .9% Medicare tax is tacked on to the employee’s share (not employer’s) for
wages and self-employment income in excess of $200,000 single and $250,000
married filing jointly.
ii. For joint returns, the .9% applies to the combined earnings of both taxpayers.
So although the .9% may not be withheld from their wages if they individually
earn less than $250,000, they will ultimately remit the .9% Medicare Tax on
their Form 1040.
c. Qualified Medical Expenses Subject to New AGI Limitation
Beginning in 2013, qualified medical expenses will only be allowable as
itemized deductions if they exceed a 10% AGI threshold.
However, if either the taxpayer or spouse reaches age 65 by the end of
2013, 2014, 2015 or 2016, the 7.5% threshold applies beginning in that
year.