January 2013

Gift & Estate Tax
The American Taxpayer Relief Act (ATRA) of 2012 prevents steep increases in estate, gift and generation-skipping transfer (GST) taxes that were slated to occur for individuals dying and gifts made after 2012. The Act does this by permanently keeping the exemption level at $5,000,000 as indexed for inflation after 2010 (2013 exemption estimated to $5.25 Million at press time). However, the Act also permanently increases the top estate and gift tax rate from 35% to 40%.

Gift & Estate Exemption Reunification
Prior to the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), the estate and gift taxes were unified, creating a single graduated rate schedule for both. That single lifetime exemption could be used for gifts and/or bequests. The EGTRRA decoupled these systems. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (TRUIRJCA) reunified the estate and gift taxes. The ATRA permanently extends unification and is effective for gifts made after December 31, 2012.

Portability of Unused Estate Tax Exemption Made Permanent

The TRUIRJCA allowed the executor of a deceased spouse’s estate to transfer any unused exemption to the surviving spouse for estates of decedents dying after December 31, 2010 and before January 1, 2013. The ATRA makes permanent this provision and is effective for estates of decedents dying after December 31, 2012.

CAUTION – A Form 706 (Estate Tax Return) must be timely filed to obtain the portability.

The basic exclusion amount is $5.12 million for deaths in 2012 and $5 million (subject to an inflation adjustment) for individuals dying in 2013. (Code Sec. 2010(c)(3))

The “deceased spousal unused exclusion amount” is the lesser of:

(1) the basic exclusion amount, or

(2) the excess of the applicable exclusion amount of the last deceased spouse dying after Dec. 31, 2010, of the surviving spouse, over the amount on which the tentative tax on the estate of the deceased spouse is determined. (Code Sec. 2010(c)(4))

A surviving spouse (for convenience we’ll assume it is the wife in this discussion) may use the deceased spousal unused exclusion amount in addition to her own basic exclusion for taxable transfers made during life or her estate may use it on the estate tax return at her death.

If a surviving spouse is predeceased by more than one spouse, the amount of unused exclusion that is available for use by the surviving spouse is limited to the lesser of the applicable exclusion amount (for example, $5.12 million if the spouse died in 2012) or the unused exclusion of the last deceased spouse. (Code Sec. 2010(c)(4))

For the surviving spouse or her estate to use the deceased spouse’s unused exclusion amount, the predeceased spouse’s estate must make an election – referred to as the portability election – on a timely filed estate tax return (Form 706) that includes a computation of the unused exclusion amount. To make the portability election, Form 706 must be filed even if the value of the gross estate is not enough to otherwise require filing an estate tax return. See temporary regulations § 20.2010-22T for detailed rules and guidance on the portability election.

This excerpt is pulled from the Big Book of Taxes 2012 courtesy of Lee T. Reams, Sr.



Continuing professional education (CPE) hours, those pesky requirements needed to maintain your CPA license, are also necessary to ensure that you remain current on tax codes and other legislative developments in the field of accounting. But they can also be an excellent opportunity to increase your value to your employer, broaden your professional knowledge, and choose a CPA specialty. In other words, it may be time to look at fulfilling CPA requirements as an ongoing process that continues throughout your career. (Tip: Each state’s CPA requirements differ, if you want a full list of CPA requirements by state click here)

Today’s CPE providers understand that CPAs often want to do more than brush up on the new tax laws; they want to explore new opportunities and expand their skill set to include everything from ethics and management to communications and marketing. CPE courses are now quite diverse and creative, covering everything from today’s hot button topics and trends to the current economic climate and personal development.

With advances in technology, many CPE programs are offering a variety of formats for the delivery of their course material, thereby making achieving your CPE requirements easier than ever. Online education, satellite programs, podcasts, and webcasts are just a few of the ways CPAs are satisfying their CPE requirements.

CPE courses are evolving to meet the demands of today’s CPA, so it may be time to consider the many ways in which CPE can benefit your career:

CPE allows you to build upon your professional knowledge and expertise.

Your expertise as a CPA professional, as you are no doubt well aware, doesn’t end when you receive your CPA license. Therefore, when assessing your CPE options, it is important to consider expanding your skill set with both “hard” skills and “soft” skills.

CPE courses that build upon your hard skills may cover accounting technology, such as the newest accounting software or enterprise management software, as well as key business skills, such as Six Sigma, project management, and portfolio management. Although obtaining these skills certainly is not essential to accounting, they certainly allow you to become more effective at your current position and allow you to begin achieving specific business and career objectives.

CPE courses that concentrate on soft skills will allow you to concentrate on communicating better with clients and interacting and collaborating better with colleagues. Soft skills cannot always be measured, but they are, without a doubt, essential for achieving success and long-term growth. Soft skills may include leadership, team building, communications, international business relations, and public speaking.

CPE allows you to enhance your career options.

CPE is likely the most effective way to enhance your value to your current employer, as well as future employers. For ambitious accountants, CPE is the perfect opportunity to gain specific skills that allow them to increase their earning potential and move to higher-level positions within their company. If you’re a CPA seeking a supervisory role, CPE courses in human resource planning or organizational skills may arm you with those specialized skills needed to climb the professional ladder.

In short, extensive and well-rounded CPE training allows you to expand your skills, surpass your employer’s expectations, and satisfy your specific professional goals.

CPE allows you to expand your scope of practice.

A CPA specialty may be just what you need to take your career in a new direction, and CPE provides you with the opportunity for doing so. CPE allows you to expand on your general accounting skills, but it may also provide you with the opportunity to explore an area of expertise. For example, you may want to begin exploring CPE in financial planning, forensic accounting, or international accounting practices.

CPE allows you to gain a competitive edge in the industry.

One of the most effective ways to stand out from the competition within the accounting industry is to show employers you have an expansive and well-rounded skill set that sets you apart from other CPAs. Your CPE should show employers your ability to offer a number of value-added services to their business. It should also reflect your commitment to your profession and your willingness to not only remain current on specific, tax-related issues, but to also stay current on those skills that enhance your career in different ways, such as communications, marketing, and customer handling.

A business’ goals are never static, so your professional goals should never be static, either. When choosing CPE, consider practice niches in which you may want to gain more knowledge, and consider your overall professional development goals and the skills you want to bring to your current employer or future employers. Your CPE portfolio should represent a commitment to personal and professional growth, and it should be uniquely yours.

Guest Blogger: Tony Smith

The infamous “Fiscal Cliff” was reached the end of 2012, and, as our nation fell off the Fiscal Cliff, Congress passed the American Taxpayer Relief Act of 2012 (“ATRA 2012”) on January 1, 2013. The President signed ATRA 2012 into law the very next day. As has been widely reported, the “sequester” required spending cuts were only delayed for a couple of months, ATRA 2012 increases revenue to some extent, but also included many tax benefit “extenders” and special tax benefits for some taxpayers and their companies. However, in the estate and gift tax area and as to estate and succession planning in general, ATRA 2012 makes “permanent” (until more tax legislation is passed) the benefits of the Tax Relief Act of 2010, which was set to be repealed, in effect, January 1, 2013.

Owen Fiore, JD has been involved in estate and succession planning for nearly 50 years, including presenting webcast courses for CPE Link the past several years. See prior CPE Link Blogs authored by Owen October 2 and May 8, 2012. On January 24th he will present for CPE Link an updated version of his estate planning and family wealth succession webcast, titled Family Estate and Succession Planning: 2012 and Beyond. With a detailed outline, nearly 100 power point slides, and a special ATRA 2012-based outline on succession planning issues, participants will have an inside look at the important issues for tax practitioners and their clients to consider in 2013.

The only adverse element on estate and gift taxes in ATRA 2012 is the increase in the top transfer tax rate from 35% to 40%. Of singular importance is that the $5 million (adjusted for inflation since 2011) per person lifetime exemption is made permanent. Therefore, the many clients who failed to make substantial gifts in 2012 when it was believed the 2013 exemption would go down to $1 million, now have another opportunity to transfer wealth within the family – without tax! In addition, the TRA 2010 Portability Election also was made permanent by ATRA 2012. What does this mean? The answer is that any unused exemption level in the estate of the first spouse to die in a married couple situation, by proper election, can be used by the surviving spouse in addition to his or her own exemption. Therefore, it is critical to insure that estate planning documents take this election into account.

Finally, for the clients who made large gifts in 2012, there are important gift tax return reporting requirements to be met, including via the use of qualified valuation appraisals for “hard-to-value” assets, such as closely held corporate stock, FLP and LLC interests, and even co-tenancies in real estate.

Our “triple reason” for 2013 estate and succession planning remains: low asset values, low interest rates, and the possibility of new adverse tax legislation later in 2013.

Guest blogger: Owen Fiore