November 9, 2017 RE: Back to the Thursday Report


Thanks to all veterans-past, present, and future!

And also veterinarians who served in the military..and veterans who were veterinarians and drove Vettes!

What to do Now in Case the House Ways and Means Committee Tax Law Passes by Brandon Ketron and Alan Gassman

Wiand and Florida Homestead Exemption by Alan Gassman and Stephanie Mas 

Updated Preview of Planning for Ownership and Inheritance of Pension and IRA Accounts and Benefits in Trust or Otherwise by Alan Gassman, Chris Denicolo, and Brandon Ketron 

Richard Connolly’s World 

Proposed Tax Reform: A New Trap Taxing Capital Contributions? By Edwin Morrow 

Humor! (Or Lack Thereof!)


Have you been waking up early this week?  It may not be Daylight Savings Time.  Thursday Report readers have reported feeling tired a little early in the evening this week, and we credit this to excitement over the upcoming Thursday Report.

We thank the dozens of people whose efforts make the Thursday Report possible every week, and the handful of people who read it.

We welcome questions, comments, suggestions and compliments, whether true or not.

This week we center in on some practical implications for planning if a new tax law passes, some important Florida law basics, and a surprise here and there for our loyal readers.

Quote of the Week 

There’s that word again. “Heavy.” Why are things so heavy in the future? Is there a problem with the Earth’s gravitational pull?

-Dr. Emmett Brown
Back to the Future is a 1985 American science-fiction adventure comedy film directed by Robert Zemeckis and written by Zemeckis and Bob Gale. It stars Michael J. Fox as teenager Marty McFly, who is sent back in time to 1955, where he meets his future parents in high school and accidentally becomes his mother’s romantic interest. Christopher Lloyd portrays the eccentric scientist Dr. Emmett “Doc” Brown, Marty’s friend who helps him repair the damage to history by helping Marty cause his parents to fall in love. Marty and Doc must also find a way to return Marty to 1985.

Zemeckis and Gale wrote the script after Gale mused upon whether he would have befriended his father if they had attended school together. Various film studios rejected the script until the financial success of Zemeckis’ Romancing the Stone. Zemeckis approached Steven Spielberg, who agreed to produce the project at Amblin Entertainment, with Universal Pictures as distributor. The first choice for the role of Marty McFly was Michael J. Fox. However, he was busy filming his television series Family Ties and the show’s producers would not allow him to star in the film. Consequently, Eric Stoltz was cast in the role. During filming, Stoltz and the filmmakers decided that the role was miscast, and Fox was again approached for the part. Now with more flexibility in his schedule and the blessing of his show’s producers, Fox managed to work out a timetable in which he could give enough time and commitment to both.



What to do Now in Case the House Ways and Means Committee Tax Law Passes  

By Brandon Ketron and Alan Gassman


Over the years, we have learned that it is often best to ignore, or not pay close attention to, proposed tax legislation to avoid confusion and loss of energy by “not worrying about your chickens until they are hatched.”

On the other hand, sometimes planning in advance of possible changes can yield significant benefits or eliminate significant problems that would otherwise exist.

In this regard, there are a few notable items in the proposed bill that may impact planning, and in particular, the timing of financial transactions.

While the vast majority of the changes in the proposed law are written to be effective for the 2018 tax year, some of the provisions apply when the proposed bill was released on Thursday, November 2nd, 2017.

Notable items that can impact planning are as follows:


  1. Keep great-grandpa and great-grandma alive and married until January 1, 2018 if they are over the $5,490,000 estate tax exemption. The exemption is scheduled to increase to $5,600,000, but if the new bill is passed the exemption would be doubled, meaning great grandpa and great grandma can pass up to $11,200,000 estate tax free with the use of portability.  If great-grandma has died, then consider having your girlfriend marry great-grandpa.

If great-grandpa will be over the $11,200,000 adjusted exemption that would apply beginning January 1, then do everything possible to facilitate gifting, estate tax planning, and/or keeping him alive until 2023 when the estate tax is scheduled to be completely repealed.

  1. Defer as much income as you can to next year. The corporate tax rates would be dramatically reduced under the proposed bill.

Individuals married filing joint would not reach the highest tax bracket of 39.6% until Adjusted Gross Income exceeded $1,000,000 versus $470,701 under current law. In addition, the Alternative Minimum Tax (AMT) would be repealed.

  1. Sell your primary residence before year end if you plan to do so and have not lived there for five years. Presently, the $250,000 per person exemption for the sale of a primary residence only requires that the house be lived in by the seller for the last two (2) out of five (5) years.  This will go to five (5) out of eight (8) years on January 1 if the bill passes.

You can sell your home to family members or an irrevocable trust in exchange for a promissory note this year and elect out of the installment method in order to lock in presently existing capital gains before the new rule applies.

  1. The proposed bill would also eliminate the deduction of up to $4,000 for the payment of qualified tuition and related expenses for yourself, your spouse, or your dependent. If you are considering taking higher education courses or have a dependent in college pay for next semester’s tuition before the end of the year.
  2. If possible, pay for your rights to purchase next year’s tickets to your favorite college football team prior to the end of the year as the special rule that provides a charitable deduction for up to 80% of the amount paid for such rights would be repealed under the new bill.
  3. Complete back door Roth IRA conversions. The proposed bill would eliminate the ability to convert traditional IRAs to Roth IRAs after December 31, 2017.
  4. Moving expense reimbursements received after January 1, 2018 would constitute taxable income so if you plan to move for a job, then get this done before year end so that any reimbursement received from an employer can be excluded from taxable income.

Free bonus brought to you by KFC  – Move to Florida or another state that does not have a state income tax as the proposed bill would eliminate the deduction for state and local taxes, unless the taxes were paid or accrued in carrying on a trade or business or producing income.

  1. Take advantage of all entertainment expenses that are available for 2017 because they would not be deductible thereafter.

Meals will continue to be deductible, and the 50% limitation will still apply.

  1. Tax free exchanges under Code Section 1031 would be limited to transfers of real property, but otherwise unchanged, so complete 1031 exchanges of non real estate items prior to year end.


  1. Give out employee achievement awards of up to $400 per employee prior to December 31st, which are deductible by the employer and tax free to employees, as the Bill would repeal the exclusion for such awards and the awards would constitute taxable compensation.


  1. Set up your S-corporation or partnership entity to own an active business that may be able to take advantage of the special 25% business flow thru income rate or convert your C-corporation to an S-corporation while avoiding the unrecognized built-in gain rules that can apply when a converting company has accounts receivable, appreciated inventory, and other “hot assets” by declaring a bonus before year end and making sure that it can be paid by March 15, 2018 in an amount sufficient to “zero out unrecognized built-in gain.”


Wiand and Florida Homestead Exemption 

By Alan Gassman and Stephanie Mas


Florida Homestead Creditor Exemption Challenge, where funds have unknowingly come from preferential or fraudulent transfers.


In the June 22, 2017 Tampa Division Middle District of Florida Bankruptcy Court Decision of Wiand v. Lee, innocent victims of a Ponzi scheme who used monies received from the bankrupt Ponzi entity to pay down their mortgage, lost their homestead exemption to the extent of the Ponzi monies used for mortgage pay-down, even though they had no knowledge whatsoever that the arrangement was a Ponzi scheme, and that recoupment in the Bankruptcy Court would occur.

The Court imposed an equitable lien on the home, and also determined that the Trustee in bankruptcy could impose a “constructive trust” so that the home would be sold to satisfy the equitable lien.

The Court also held that monies that were co-mingled with the tainted funds could be disregarded so that the first monies coming out of a partly tainted account will be considered as tainted funds to the extent used to purchase a homestead, even though a significant portion of the money spent could have been considered to have come from legitimate funds.  The Court used the “lowest immediate balance rule” which is further discussed below.

Previous decisions have found that transfers of tainted funds by a spouse or significant other into homestead would be subject to equitable liens and constructive trust treatment where the spouse or significant other of the “innocent” homeowner had knowledge of the fraudulent nature of the funds.  This decision concluded that no knowledge of the homeowner or any person married or cohabitating therewith was necessary for the equitable lien and a constructive trust to be imposed.



Prior to marrying his wife, a debtor husband (Debtor) invested $1,873,262 into a Ponzi scheme, which returned $2,942,264, and resulted in over a $1,000,000 return on his investment. The Debtor divided the $1,000,000 into three separate bank accounts, and later bought a house, using both tainted and untainted money from the one account.  After marrying his wife, Debtor and Debtor’s wife (the “Defendants”) both continued to deposit untainted money into the account, and made improvements on the house.

In a separate action, Debtor voluntarily petitioned the court and “listed his home as exempt under Florida’s constitutional homestead exemption and a tenancy-by-the-entireties with his wife.”  The plaintiff, (the “Receiver”), contended that the Defendants’ homestead was not exempt from either the homestead or tenancy-by-the-entireties exemptions.  The Defendants were not accused of any wrong-doing relating to the Ponzi scheme, but were simply the recipients of funds therefrom. The court stayed those proceedings until the resolution of this partial summary judgement “for the imposition of an equitable lien and a constructive trust on Defendants’ homestead.”


By entirely eliminating the requirement of intent, the Wiand Court is essentially stripping innocent homeowners of a basic layer of protection.  The decision opens the door for homeowners to lose their homestead protection by engaging in various activities, including investing or receiving monetary gifts.

Although the policy suggests that unjust enrichment should be prevented, it seems harsh to take from the innocent who did not participate in any fraud themselves and unknowingly used tainted funds to purchase their homestead.

The Wiand Court began their analysis by determining that the issue to be decided was whether the loss of “[Florida’s homestead] exemption requires that the fraud or the egregious conduct be committed by the homeowner who is claiming the exemption.  In this case, the Debtor passively received the fraudulent transfers without knowledge that they were ill-gotten gains, and used them to buy the house.  It was not alleged that he or his wife engaged in any fraud or egregious conduct.”

The court analyzed previous decisions, which had also involved homestead purchases made with “tainted” money which had been obtained fraudulently.  In the 1993 decision of  Palm Beach Savings & Loan, F.S.A. the Florida Supreme Court upheld the trial court’s decision to “grant the [defrauded mortgage] lender an equitable lien on the homestead.”  Subsequent court decisions held that (1) “Florida homesteads [are] protected from creditors’ claims even if money was put into a home with the owner’s specific intent to hinder, delay, or defraud creditors. . . [but equitable liens may be established] where funds obtained through fraud or egregious conduct were used to invest in, purchase, or improve the homestead” and (2) “a lack of knowledge on the part of the person asserting the homestead exemption does not change [the analysis of tainted funds used to purchase a homestead], as it is the fraudulent nature of the funds which is of utmost importance.”

The Florida Supreme Court justified the imposition of equitable liens where the homestead did not have knowledge on the basis of the policy goal of preventing unjust enrichment.

The  Wiand Court determined that an equitable lien should be imposed on “the Defendants’ homestead to prevent their unjust enrichment from the funds traced to the Ponzi scheme. . . The focus is not on the Defendants’ culpability, but on the necessity of preventing or mitigating their unjust enrichment by permitting fraudulent transfers to be sheltered in their homestead.”  Additionally, the court determined that the imposition of a constructive trust was “the appropriate remedy for unjust enrichment.”

The Wiand Court engaged in a lengthy discussion on the extent of the equitable lien and constructive trust, and determined that legitimate monies that went into the account that was used to buy the home would be disregarded, so that all monies from an account used to buy the home would be considered as tainted, as long as (1) the amount of  tainted funds put into the account equaled or exceeded the purchase price, and (2) only to the extent that the account had a continuing balance at least equal to the amount of funds used to purchase the home.  The court determined that “the lowest intermediate balance rule” should be applied to determine the amount of the equitable lien, which would be held in the constructive trust.  The court stated:

“[T]he lowest intermediate balance rule” is an acceptable method for treating trust proceeds that have been commingled with other funds: where trust funds are commingled in an account they are considered as undiminished so long as the total account balance is at least equal to the amount of the trust fund deposits.  If the aggregate amount of trust deposits exceeds the lowest intermediate balance in the account, they are considered lost.  Thus, “the lowest intermediate balance in a commingled account represents trust funds that have never been dissipated and which are reasonably identifiable.

The court reasoned that since tracing only requires “that [the] tainted funds be identified and followed from the point of origin(i.e. the fraudulent act).”

An example of the above rule would be that a debtor who puts $900,000 of “untainted funds” and $100,000 of tainted funds into an account, and spends $901,000 on legitimate expenses and $99,000 paying down a homestead mortgage will be found to have contributed $99,000 of tainted funds into the homestead, and will thus be subject to the equitable lien, and constructive trust treatment would apply.

The support for this lowest and intermediate balance rule came from the United States First Circuit Court of Appeals case of Connecticut General Life Insurance Company v. Universal Insurance Company, 838 F.2d 612, 619 (1st Cir. 1988).


In conclusion, individuals who buy homes or pay down homestead mortgages should be doubly careful if they have received large distributions or gifts from sources that might be considered to be inappropriate, whether as fraudulent transfers, stolen funds, or profits or other distributions received from otherwise insolvent or fraudulent sources.  Any such funds may be deposited and held separate and apart from clearly legitimate monies, and should not be co-mingled.  It may be preferable to pay normal living expenses from potentially questionable funds, and to use earnings and other legitimate funds to purchase homestead and other exempt assets.

High risk investors who are not able or willing to determine whether their “hedge fund profit” may consist of “ill-gotten gains” will be well advised to carefully plan what they do with these monies, and how they handle other income and funds from an investment, debt reduction, and living expense standpoint.

Updated Preview of Planning for Ownership and Inheritance of Pension and IRA Accounts and Benefits in Trust or Otherwise. (Changes have been underlined)

by Alan Gassman, Chris Denicolo & Brandon Ketron

The IRS recently released the 2018 IRA and Retirement Plan Limits for 2018.  Excerpts from Chapter One of our soon to be published book entitled Planning for Ownership and Inheritance of Pension and IRA Accounts and Benefits in Trust or Otherwise which has recently been updated to reflect the 2018 contribution limits can be found below.  Chapter One of the book covers basic information about IRA and Roth IRA contribution and withdrawal rules. Enjoy!


IRA Basics 

An Individual Retirement Account or “IRA” is a type of account that allows employees and self-employed individuals, who are not active participants in an employer-maintained retirement plan, to set aside and deduct up to $5,500 (or $6,500 in certain circumstances) for contributions.  The IRA itself is essentially a trust account, or custodial arrangement that holds permitted investments with a custodian that is typically a bank, savings and loan association, credit union, trust company, or other appropriately registered organization.

The 2017 IRA contribution rules are as follows:

Basic Contribution limit is the lesser of:


  1. $5,500 (but $6,500 if over the age of 50).
  2. Taxable compensation for the year, if the individual’s compensation is less than the $5,500 ($6,500 if over the age of 50) dollar limit.
  3. Reduced by the amount of Roth contributions.


However, it is important to note that there are a number of special rules applicable to the IRA Contribution limit.  For example, it is not applicable to Rollover Contributions or Qualified reservist repayments.[1]  Furthermore, if the taxpayer is covered by a qualified plan at work there are additional limitations.  Specifically, participation in another retirement plan through a business or employer does not foreclose the ability to contribute to either a traditional or Roth IRA, but participation in a work retirement plan by an individual or the spouse thereof may limit the ability to deduct traditional IRA contributions.

As a result of this, most affluent Americans who participate in qualified pension plans, will still fund an IRA, but on a non-deductible basis.  Further, even if an individual’s spouse limits his or her ability to deduct all of his or her traditional IRA contributions, contributions can still be made on a non-deductible basis. 

Contribution limits for a person who is covered by a retirement plan at work (and the spouse thereof) are based upon the individual’s filing status and the individual’s modified “adjusted gross income” (“AGI”).

Modified AGI is calculated by adding back the following deductions from your AGI[2]:

  1. One-half of payroll taxes deducted by a self-employed individual


  1. Student loan interest


  1. Tuition and fees deduction


  1. Qualified tuition expenses


  1. Passive income or loss


  1. Rental losses


  1. IRA contributions and taxable Social Security payments


  1. Exclusion for income from U.S. savings bonds


  1. Exclusion for adoption expenses (under §137)


Limits Based on Your Filing Status if Covered by a Retirement Plan at Work[3]


When an individual filing is single or the head of household and has modified AGI of $63,000 or less, he or she will retain a full deduction up to the amount of his or her respective contribution limit.[4]  If the individual has a modified AGI between $63,000.01 and $73,000, he or she will receive a partial deduction.  If the individual has a modified AGI of greater than $73,000, he or she will not receive a deduction for funding an IRA.[5]

An individual who files jointly or is a qualifying widow(er) with modified AGI of $101,000 or less, will receive a full deduction up to the amount of his or her respective contribution limit.[6]  With a modified AGI between $101,000.01, and up to $121,000, he or she will receive a partial deduction, and an individual with a modified AGI greater than $121,000, he or she will receive a deduction.

Where the individual filing is married but filing separately with a modified AGI of less than $10,000, he or she will receive a partial deduction.[7]  If he or she is filing with a modified AGI greater than $10,000, he or she will not receive a deduction.  If a married couple is filing separately but did not live together at any time during the year, the IRA deduction is determined based on a “single” filing status.[8]

In order to deduct contributions for the 2017 tax year, contributions must be paid prior to the due date for tax returns.  A contribution made prior to the filing of the tax return due date is eligible to be treated as if it were made in the previous year.


Coverdell Education Savings Accounts 

A Coverdell Education Savings Account, formerly known as the Educational IRA, is set up to pay for the education expenses of a designated beneficiary.  If your modified adjusted gross income (MAGI) is less than $110,000, or less than $220,000 for a joint return, you may be able to establish a Coverdell ESA.  For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return.[9]

Coverdell IRAs can be a great way for grandparents to set money aside for grandchildren to cover future higher elementary, and secondary education.  There is no limit on the number of separate Coverdell ESAs (“Education Savings Account”) that can be established for a designated beneficiary, but the total contributions for each designated beneficiary cannot exceed $2,000 per year, regardless of the number of accounts established.  If an individual is above the income limitation or wishes to contribute additional amounts, then contributions can be made into a 529 plan.  Coverdell ESAs allow for tax-free growth and tax-free withdrawals to pay for permitted educational expenses similar to the 529 Plan rules.


Quick Facts on Coverdell ESAs:


  1. Contributions are limited to $2,000 per year per (Note –The limitation is on the total amount the child can receive per year, not on the amount contributed by each person.  Therefore, one individual can contribute to as many Coverdell Education Savings Accounts as he or she wants to in a given year so long as the total amount contributed to each account does not exceed $2,000.  If multiple parties contribute to a Coverdell Education Savings Account for one individual, the total contributions in the aggregate cannot exceed $2,000 in a given year for that individual.


  1. The balance must be disbursed for qualified education expenses prior to the beneficiary reaching the age of 30 to avoid penalties and


  1. Unlike 529 Plans, the Coverdell Savings Account can be used for primary and secondary education expenses and is not limited to college education expenses.


  1. Only eligible if AGI of contributor is less than $110,000 ($220,000 if filing joint) (Planning Note – It is possible for the child to contribute to his or her own Educational If the contributor’s AGI is greater than the limitation, a gift of $2,000 can be made to the child, and the child can contribute the money to the Educational IRA, assuming the Child’s AGI is below the income limitation amount.)


  1. Organizations such as corporations and trusts can also contribute, and there is no requirement for the organization’s income to be below a certain


  1. No contribution can be made after a beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary.


  1. The proposed tax bill released by the House Ways and Means Committee in November of 2017 would eliminate the Coverdell Savings Account and allow for 529 Plans to cover elementary education as well as college tuition.


Roth IRA

A Roth IRA is a special retirement account that allows the holder to withdraw monies tax-free under most circumstances.  The benefit of a Roth IRA is that the holder can tap into the contributions in the account at any time tax-free and penalty-free.  The Roth IRA is also beneficial to young workers that do not have a substantial income, but will likely have a greater income in the future, because taxes will not be imposed upon the withdrawal of the Roth IRA monies.[10]  In addition, a Roth IRA can be beneficial if an individual believes that his or her tax rate may be higher during retirement than the current rate at which he or she is being taxed.

However, not everyone meets the IRS standards to contribute to a Roth IRA because there is a cap on the allowable income level.  To qualify, as an individual you must make under $135,000 to contribute to a Roth IRA for the 2017 tax year.  If the taxpayer is married then the taxpayer must make less than $199,000 to contribute.[11]  In addition, to qualify to contribute to a Roth IRA, you must have “earned income” for the year of the contribution.  Earned income is money paid for work you performed, including wages, salaries, tips, bonuses, commissions, self-employment income, and also taxable alimony and military differential pay.[12]

The basic Roth IRA contribution limit is the lesser of:


  1. $5,500 (but $6,500 if over the age of 50)


  1. Taxable compensation for the year


  1. Reduced by contributions to traditional IRAs – See 1.c above


  1. If contributing to both Roth and Traditional IRA, contributions in the aggregate cannot exceed the $5,500 limitation ($6,500 if over age 50)


In order to determine contribution limits, an individual must determine his or her filing status and modified AGI.  The formula provided by the IRS is as follows:


  1. Start with AGI.
  2. Subtract the following from the modified AGI:
    1. $189,000 if filing a joint return or qualifying widow(er).
    2. $-0- if married filing a separate return, and you lived with your spouse at any time during the year, or
    3. $120,000 for all other individuals.
  3. Divide the result in (2) by $15,000 (or $10,000 if filing a joint return, qualifying widow(er), or married filing a separate return and you lived with your spouse at any time during the year).
  4. Multiply the maximum contribution limit (before reduction by this adjustment and before reduction for any contributions to traditional IRAs) by the result in (3).
  5. Subtract the result in (4) from the maximum contribution limit before this reduction.
  6. The result is your reduced contribution limit.[13]


For example, if an individual filing a joint return had modified AGI of $200,000, he or she would not be eligible to contribute to a Roth IRA.

If an individual filing jointly had modified AGI of $190,000, then he or she would be eligible to contribute to a Roth IRA, but his or her contribution would be limited to $3,300 based on the above formula to the following amount:


Step 1 – $190,000 – $189,000 = $1,000

Step 2 – $1,000/$10,000 = 10%

Step 3 – 10% * $5,500 = $550

Step 4 – $5,500 – $550 = $4,950


Contribution is limited to $4,950, and $550 could be contributed by an individual under age 70 1/2 to a non-deductible IRA.  The nondeductible contribution must be reported to the IRS on Form 8606.

If an individual filing a joint return had modified AGI of $180,000, then he or she would be able to contribute the maximum amount of $5,500.



Richard Connolly’s World

Insurance advisor Richard Connolly of Ward & Connolly in Columbus, Ohio often shares pertinent articles found in well-known publications such as The Wall Street Journal, Barron’s, and The New York Times. Each issue, we feature some of Richard’s recommendations with links to the articles.

The attached article from the November 6th edition of the Wall Street Journal (page R14) says:

Last year, Nick Braun [ of Columbus, Oh] created a will for his human family. Soon after, he also made formal provisions for his dog, Gus.

For Mr. Braun, the founder of, a marketplace for pet health insurance, it was a multistep process to make sure his parents—Gus’s designated caregivers—have the financial support and practical guidance they need to assume care of the yellow Labrador retriever.

See the article’s discussion of picking a caregiver, possibly creating a trust, and other issues to consider for pets.

To View the Full Article Click Here

Proposed Tax Reform: A New Trap Taxing Capital Contributions?

By Edwin Morrow


Thanks to Stephen Liss for pointing out this potential issue in the new tax reform bill.

The House-proposed tax reform bill released on November 2, 2017, has an interesting provision in Section 3304 to tax certain capital contributions that normally are tax-free transactions, described in the summary as “Under the provision, the gross income of a corporation would include contributions to its capital, to the extent the amount of money and fair market value of property contributed to the corporation exceeds the fair market value of any stock that is issued in exchange for such money or property. Similar rules would apply to contributions to the capital of any non-corporate entity, such as a partnership. The provision would be effective for contributions made, and transactions entered into, after the date of enactment.”

What if someone contributes, e.g. $500,000 to a corporation in exchange for stock (including a partnership/LLC/LP/S corp), but the fair market value of the stock is found to only be $300,000? After all, a strategic buyer may pay more than market for various reasons, and of course we know that the lack of marketability and lack of liquidity for closely held businesses drives down the fair market value of what “a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts” would negotiate. Could this cause income tax on $200,000 of the above transaction under this proposed provision? What if I contribute capital to my child’s business? Would that be taxable income to the child (or the corporation) now? The proposed IRC Section 76 is below:


‘‘(a) IN GENERAL.—Gross income includes any contribution to the capital of any entity.


‘‘(1) IN GENERAL.—In the case of any contribution of money or other property to a corporation in exchange for stock of such corporation—

‘‘(A) such contribution shall not be treated for purposes of subsection (a) as a contribution to the capital of such corporation (and shall not be includible in the gross income of such corporation), and

‘‘(B) no gain or loss shall be recognized to such corporation upon the issuance of such stock.

‘‘(2) TREATMENT LIMITED TO VALUE OF STOCK.—For purposes of this subsection, a contribution of money or other property to a corporation shall be treated as being in exchange for stock of such corporation only to the extent that the fair market value of such money and other property does not exceed the fair market value of such stock.

‘‘(3) APPLICATION TO ENTITIES OTHER THAN CORPORATIONS.—In the case of any entity other than a corporation, rules similar to the rules of paragraphs (1) and (2) shall apply in the case of any contribution of money or other property to such entity in exchange for any interest in such entity.

‘‘(c) TREASURY STOCK TREATED AS STOCK.—Any reference in this section to stock shall be treated as including a reference to treasury stock.’’.

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Humor! (Or lack thereof!)

[1] Rollover Contributions are pre-retirement payments an individual receives from either a retirement plan or an IRA that may be “rolled over” if the payment is deposited into either another retirement plan or IRA within 60 days. Rollovers of Retirement Plan and IRA Distributions, I.R.S.,,-Employee/Rollovers-of-Retirement-Plan-and-IRA-Distributions (last visited Jan. 29, 2016). It is possible for the individual’s financial institution to directly transfer the payment. Id.

[2]  The IRS provides a worksheet at the following address that can be used to calculate MAGI

[3] Individuals filing single or head of household with income greater than the IRA contribution limit but less than the Roth IRA contribution limit should consider contributing amounts to a Roth IRA.

[4] 2018 IRA Contribution and Deduction Limits – Effect of Modified AGI on Deductible Contributions If You ARE Covered by a Retirement Plan at Work, I.R.S.,,-Employee/2018-IRA-Contribution-and-Deduction-Limits-Effect-of-Modified-AGI-on-Deductible-Contributions-If-You-ARE-Covered-by-a-Retirement-Plan-at-Work (Nov. 11, 2017).

[6] Id.

[7] Id.

[8] Id.


[10] Retirement Topics – IRA Contribution Limits, I.R.S.,,-Employee/Retirement-Topics-IRA-Contribution-Limits (last visited Nov. 9, 2017).



[12] Id.

[13] Amount of Roth IRA Contributions That You Can Make for 2018, I.R.S.,,-Employee/Amount-of-Roth-IRA-Contributions-That-You-Can-Make-for-2018 (last visited Nov. 9, 2017).