September 28, 2017 RE: Are Hugh Ready for Some Football? (and Tax Planning)?


News Flash-The “Big 6” Tax Reform Framework Has Been Released by the Trump Administration by Chris Denicolo

Bankruptcy Trivia Quiz

Don’t Forget About Annual Gifting by Ken Crotty

Sneak Preview of the Updated Chapter 1 of Planning For

Ownership and Inheritance of Pension and IRA Accountsnot by Ed Morrow

A Refresher on Casualty Losses-Thanks for the Tax Savings, Irma! by Brandon Ketron

IRS Gives Tax Relief to Victims of Hurricane Irma; Like Harvey, Extension Filers Have Until Jan. 31 to File; Additional Relief Planned-Update

Asset Protection Planning: Be Careful! by Martin Shenkman

Creating a 1-Page Quarterly Action Plan for Your Business by David Finkel

Thoughtful Corner-Make it Easier on Everyone Involved-Share Compares and Documents in Editable Format by Chris Denicolo

Richard Connolly’s World

Humor! (Or Lack Thereof!)  

We welcome contributions for future Thursday Report topics. If you are interested in making a contribution as a guest writer, please email Alan at

This report and other Thursday Reports can be found on our website at


Quote of the Week

“Nobody in football should be called a genius. A genius is a guy like Norman Einstein.”

 – Joe Theismann

American football evolved in the United States, originating from the sports of association football and rugby football. The first game of American football was played on November 6, 1869, between two college teams, Rutgers and Princeton, under rules based on the association football rules of the time. During the latter half of the 1870s, colleges playing association football switched to the Rugby Union code, which allowed carrying the ball. A set of rule changes drawn up from 1880 onward by Walter Camp, the “Father of American Football”, established the snap, eleven-player teams, and the concept of downs; later rule changes legalized the forward pass, created the neutral zone, and specified the size and shape of the football.

American football as a whole is the most popular sport in the United States. The most popular forms of the game are professional and college football, with the other major levels being high school and youth football. As of 2012, nearly 1.1 million high school athletes and 70,000 college athletes play the sport in the United States annually, almost all of them men, with a few exceptions. The National Football League, the most popular American football league, has the highest average attendance of any professional sports league in the world; its championship game, the Super Bowl, ranks among the most-watched club sporting events in the world, and the league has an annual revenue of around US$10 billion.



News Flash-The “Big 6” Tax Reform Framework Has Been Released by the Trump Administration

By Chris Denicolo

On Wednesday, the Trump Administration and Republican congressional leadership released their “Unified Framework for Fixing Our Broken Tax Code,” which can be found at the following link: .

This tax reform framework is a statement of the objectives and intent of the Administration, the House Committee on Ways and Means and the Senate Committee on Finance, which is billed as  a “unified framework to achieve pro-American, fiscally-responsible tax reform.”

While this framework does not make effective any changes to existing law and does not provide in depth detail on the contemplated future tax changes, it gives us guidance to understand which direction the wind might be blowing with respect to tax law reform.

The significant features of the framework are as follows:

  1. The framework would increase the standard deduction to $24,000 for married taxpayers filing jointly, and $12,000 for single filers.
  2. The income tax brackets would be condensed into three brackets of 12%, 25% and 35%.  However, it is not clear as to the income levels that would apply with respect to these brackets.
  3. The framework proposes the elimination of most itemized deductions, but retains tax incentives for home mortgage interest and charitable contributions.
  4. The framework calls for the repeal of the existing individual alternative minimum tax.
  5. The framework only provides the following sentence with respect to estate and gift taxes:  “The framework repeals the death tax and the generation skipping tax.”  No other information or detail is given.
  6. The framework proposes lowering the maximum tax rate applied to business income of small and family-owned businesses conducted as sole proprietorships, partnerships and S corporations to 25%.
  7. The framework contemplates reducing the corporate tax rate to 20%, and eliminating the corporate alternative minimum tax.
  8. The framework would allow businesses to immediately write off or expense the cost of new improvements and depreciable assets other than structures made after September 27, 2017, for at least five years.
  9. The deduction for net interest expense that is incurred by C corporations would be partially limited, but it is not clear as to the details of this.

Stay tuned for more details regarding tax reform issues as they become available.



                          Don’t Forget About Annual Gifting                              

by Ken Crotty

As the end of the year approaches, clients who have not used their annual exclusion for gifts should consider doing so.

Each year an individual can give $14,000 per donee without having such gift use any of the individual’s unified credit.  For 2017, the unified credit allows an individual to make $5,490,000 worth of “taxable” gifts during his or her lifetime before paying actual gift tax on any additional gifts that he or she makes.  It is important to remember that the use of the unified credit to shelter “taxable gifts” from being subject to actual gift taxes reduces the donor’s unified credit for estate tax on a dollar for dollar basis.  Therefore, clients should look at ways to make gifts that are either leveraged or do not use their unified credit to maintain as much of his or her unified credit as possible to shelter the client’s assets from being subject to estate tax.

If, during a calendar year, an individual only makes gifts that qualify for the annual exclusion, then the individual does not need to file a gift tax return for that year.  In the event that an individual makes gifts that are in excess of the annual exclusion, then such individual needs to file a gift tax return for that year.  If an individual is required to file a gift tax return and makes annual exclusion gifts to donees, then the individual needs to report the annual exclusion gifts on the gift tax return, but also gets a credit for the annual exclusion gifts on the gift tax return so that he or she is not using any of his or her available applicable credit or paying actual taxes on these annual exclusion gifts.

Only gifts of a “present interest” qualify for the gift tax exclusion.  A gift is a present interest if the donee has an immediate right to use, possess, or enjoy the property.  Outright gifts of cash or similar assets qualify for the annual exclusion.  Outright gifts of limited partner interests or non-voting interests in an LLC typically qualify for the annual exclusion, but the determination of whether such a gift will qualify depends on the language of the partnership agreement or operating agreement of the entity.

If a gift is made to a trust, this could pose a problem satisfying the requirement that the donee have a present interest with respect to the gift.  The solution to this problem is by drafting the trust so that the beneficiary has a Crummey right of withdrawal.  A Crummey right of withdrawal provides the beneficiary with an absolute right to withdraw the gift or a certain portion of the gift during a stated time, which qualifies the gift as a present interest.  Frequently, this right of withdrawal is for a sixty (60) day period.

Because an exclusion gift must be a gift of a present interest, gifts of future interest do not qualify for the gift tax annual exclusion.  Some examples of future interest include reversions, remainders, and any other interest that commences in use, possession or enjoyment at some future time.  If a client makes a gift of a future interest, the gift must be reported at its fair market value and will use an amount of the client’s unified credit equal to the fair market value of the gift.

Even clients that think the estate tax return may disappear in the future should consider making annual gifts.  Many clients have existing irrevocable trusts that they can make annual exclusion gifts to.  Even if the trust does not provide for Crummey right of withdrawals in the trust agreement, many trusts are drafted so that the donor can designate that certain contributions would qualify for the annual exclusion by providing that certain beneficiaries would have the necessary right of withdrawal with respect to a specified contribution.  Sample language that could be included with respect to this in a trust that otherwise does not have Crummey rights of withdrawals is as follows:

The Grantor acknowledges that contributions to this Trust will not qualify for the annual gift tax exclusion provided for in Internal Revenue Code Section 2503(b), as from time to time amended, (currently $14,000 per donor per donee per calendar year, $28,000 if the gift is split with the donor’s spouse).  The Grantor or any other Donor, may, however, with advance approval of the Trustee or Trustees, and in order to qualify a specific contribution made to this Trust for such annual exclusion, designate by signed writing delivered to the Trustee either prior to or contemporaneously with such contribution that one or more beneficiaries of this Trust have a withdrawal right with respect to such contribution, and in such event and to the extent and under the terms so designated, the designated beneficiary or beneficiaries shall have a withdrawal right with respect to such contribution only.

Clients can make annual exclusion gifts to a trust that could be held for the client’s spouse and descendants.  The client could designate that the client’s descendants have the Crummey rights of withdrawal with respect to such gifts, and as a result could make contributions up to the annual exclusion limit to the trust for the beneficiaries without using any of his or her unified credit.  After the Crummey right of withdrawal period is over, the assets could be primarily held for the benefit of the client’s spouse, which would indirectly benefit the client because such funds would be available to pay for expenses associated with the education, healthcare, and support of the client’s spouse and descendants.

Running the numbers on annual gifting shows how effective this technique can be in transferring wealth out of a client’s estate.  If we assume that a client has five (5) children and grandchildren, then that client could gift $70,000 per year to a trust as described above without using any of the client’s unified credit.  If the client gifts $70,000 per year to a trust and we assume 6% annual growth, then after ten (10) years, the value of the trust would be equal to $922,656.

If the client gifts discounted interests in a limited partnership or non-voting interests in an LLC, then the client could take a discount on the value of the gift for the lack of control and lack of marketability.  If we assume a 30% discount on the value of the interest being transferred, the client can transfer $20,000 worth of non-discounted assets while taking the position that the discounted interest is only worth $14,000  (100% – 30% = 70%; $20,000 ÷ 70% = $14,000).  If the client gifts the discounted interests for ten (10) years, which would result in the client gifting $100,000 worth of non-discounted assets per year, then assuming 6% annual growth, the value of the trust would be $1,318,079.

The value added to the amount transferred to the trust by using discounted interests instead of cash or marketable securities is an additional $395,423.

If we further assume that the client dies in the tenth (10th) year and is subject to estate tax, the amount that he or she gifted to the trust will not be subject to estate tax in the client’s estate.  Because the amounts gifted qualified for the annual exclusion, the gifts would not have used any of the client’s unified credit, and as a result would not have increased his or her estate tax exposure.

If the $922,656 that the client had gifted would have otherwise been subject to estate tax in the client’s estate, assuming a 40% estate tax, the client would have saved $369,062 by making five (5) annual exclusion gifts each year for ten (10) years.

By gifting discounted interests, if the $1,318,079 that the client had gifted would have otherwise been subject to estate tax in the client’s estate, assuming a 40% estate tax, the client would have saved $527,232 by using the discounted gifting program.

In this example, by gifting discounted interests in an LLC or a partnership, the client saved an additional $158,170 of estate tax.

Practitioners should make sure that clients are aware of the availability of making such annual gifts.  Frequently, the gifts could be made to trusts that already exist in a client’s estate plan for minimal cost.  As shown above, the benefit could be significant for clients that may eventually be subject to estate tax in the future.  It is important to note that if an individual does not use his or her annual exclusion during an applicable year, then the exclusion is lost because the unused exclusion does not roll over to the next year.  Therefore, practitioners should reach out to their clients before the end of the year to see if clients would like to make gifts utilizing the annual exclusions that are available to them.



Sneak Preview of the Updated Chapter 1 of Planning For

Ownership and Inheritance of Pension and IRA Accounts-

Soon to be published by a grocery store near your house. 

by Alan Gassman, Chris Denicolo & Brandon Ketron


We thank Ed Morrow for not being able to get around to proof-reading this article-please blame any errors on Ed.

This chapter covers basic information about IRA and Roth IRA contribution and withdrawal rules.  Most practitioners will skip this chapter and go on to subsequent and more technical explanation, but many will use this chapter for refreshing or supplementing knowledge of basic rules that apply.

There are many stages of IRA and pension distribution planning, and many different types of interactive knowledge needed. This chapter focuses on the basics: how individuals can establish and fund an IRA, selecting the most beneficial type of IRA for their situation, and how to make the best use of IRAs. Discussion will include regular IRAs, Coverdell Education Savings Accounts, Roth IRAs, rollovers, creditor protection, transferring IRAs, and age limitations.

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:

  • $5,500 (but $6,500 if over the age of 50).
  • 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.
  • 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 you AGI[2]:

  1. One-half of payroll taxes deducted by a self-employed individual
  2. Student loan interest
  3. Tuition and fees deduction
  4. Qualified tuition expenses
  5. Passive income or loss
  6. Rental losses
  7. IRA contributions and taxable Social Security payments
  8. Exclusion for income from U.S. savings bonds
  9. 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 $62,000 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 $62,000.01 and $72,000, he or she will receive a partial deduction. If the individual has a modified AGI of greater than $72,000, 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 $99,000 or less, will receive a full deduction up to the amount of his or her respective contribution limit.[6] With a modified AGI between $99,000.01, and up to $119,000, he or she will receive a partial deduction, and an individual with a modified AGI greater than $119,000, 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.
  2. The balance must be disbursed for qualified education expenses prior to the beneficiary reaching the age of 30 to avoid penalties and
  3. Unlike 529 Plans, the Coverdell Savings Account can be used for primary and secondary education expenses and is not limited to college education expenses.
  4. 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.)
  5. Organizations such as corporations and trusts can also contribute, and there is no requirement for the organization’s income to be below a certain
  6. No contribution can be made after beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary.


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 $133,000 to contribute to a Roth IRA for the 2017 tax year. If the taxpayer is married then the taxpayer must make less than $196,000 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

  • $5,500 (but $6,500 if over the age of 50)
  • Taxable compensation for the year
  • Reduced by contributions to traditional IRAs – See 1.c above
  • 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. $186,000 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. $118,000 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 – $186,000 = $4,000

Step 2 – $4,000/$10,000 = 40%

Step 3 – 40% * $5,500 = $2,200

Step 4 – $5,500 – $2,200 = $3,300


Contribution is limited to $3,300, and $2,200 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.

Converting a Traditional IRA into Roth IRA

When an individual chooses to convert some or all from a Traditional IRA to a Roth IRA, income tax has to be paid on the amounts converted. The taxable amount that is converted is added to taxable income taxes and your regular income rate is applied to your total income.

Converting to a Roth IRA can be a savvy way for an investor to cut tax losses – the scenario generally occurs when the investor or contributor knows his income will be increasing in the next year, thus increasing his tax bracket, but if he switches to a Roth IRA then the tax bracket will remain at the lesser amount, thus allowing the contributor to save some money. Having a Roth IRA can also be a benefit when the government announces a tax increase for the coming year.

Upon conversion from a Traditional IRA to a Roth IRA, the IRA account balance is subject to income taxes, except to the extent of basis, and does not always make good sense.[14]

In the past, to convert from a Traditional IRA to a Roth IRA your income had to be below $100,000, but the IRS rules have changed and eliminated this cap. However, even though the cap has been eliminated, Roth IRAs still have income-eligibility restrictions that apply to contributions to a Roth IRA.

Having a Roth IRA guarantees you will not owe additional income taxes on the funds during retirement. If an investor chooses to convert from a Traditional IRA to a Roth IRA, he or she has until April 15 of the following year to make the conversion effective for the tax year. For example, if an individual was considering converting his Traditional IRA to a Roth IRA as of December 31, 2017, the individual would have until April 15, 2018 to make that decision.

Both traditional and Roth IRAs allow the owner to begin taking penalty-free, “qualified” distributions at age 59 ½. But, Roth IRAs require that the first contribution be at least five years before qualified distributions begin.

If you have started taking substantially equal periodic payments from a traditional IRA, you can still convert the amounts in the traditional IRA to a Roth IRA and continue the periodic payments.  Tax will be owed upon the conversion, but future payments will be income tax free.

You CANNOT convert amounts distributed in accordance with Required Minimum Distributions Rules into a Roth IRA.

Eligible Rollovers

Most pre-retirement payments received from a retirement plan or IRA can be “rolled over” by depositing the payment into another retirement plan or IRA within 60 days, such transfers can also be completed by a financial institution or the retirement plan administrator.[15]

However, Internal Revenue Code Section 408(d)(3)(B) provides that there can be only one tax free rollover by an individual within a twelve month period.[16]

The benefit of a roll over plan is that you generally will not have to pay taxes on the plan until you withdraw from the new plan – i.e. by rolling over, you can save for your future and the contributed money will continue to grow tax-deferred.

An eligible rollover distribution does not include:

  1. Any distribution that is one of a series of substantially equal periodic payments made (at least annually) for (a) the life (or life expectancy) of the employee, or the joint lives (or joint life expectancies) of the employee and the employee’s designated beneficiary, or (b) a specified period of ten years or more;[17]
  2. Any distribution to the extent it is a required minimum distribution.
  3. Any hardship distribution.

An eligible rollover distribution from a qualified plan is subject to 20% withholding, unless there is a direct trustee-to-trustee transfer. Plan administrators must inform recipients of potential rollovers in writing, known as a “Section 402(f) notice,” of the applicable rollover rules no less than 30 days and no more than 90 days before making an eligible rollover distribution.

Tune in next issue for the exciting conclusion to this breathtaking chapter!

*IRAs are not to be confused with the Irish Republican Army*


A Refresher on Casualty Losses-Thanks for the Tax Savings, Irma!

by Brandon Ketron


In light of the recent destruction caused by Hurricanes Harvey, Irma, and Maria, individuals who itemize deductions may be able to deduct a portion of the loss caused by these hurricanes.

Generally, a casualty loss is defined as a loss resulting from damage, destruction, or loss of the taxpayer’s property from any sudden, unexpected, or unusual event. This includes damage from hurricanes, floods, tornados, earthquakes, etc.

The amount of the individual’s loss is the lesser of (1) the adjusted basis of the property, or (2) the decrease in the fair market value of the property as a result of the loss.  Additionally, the loss is only deductible to the extent that an individual did not receive reimbursement from his or her insurance coverage.

After totaling all casualty losses for the year and subtracting insurance reimbursements, the total loss is then subject to two limitations.

First, $100 must be subtracted from the total loss for each casualty event that affected the individual during the year.

Second, the total loss must be reduced by 10% of the individual’s Adjusted Gross Income (AGI) for the year.

Example – An individual with AGI of $500,000 recently purchased a $250,000 home in the Florida Keys just before Hurricane Irma.  The property is now valued at $100,000 due to the damage to the property.

Assuming that the individual’s loss was not covered under insurance, his or her loss would be $150,000, which is the lesser of (1) the individual’s basis in the property ($250,000) or  (2) the decrease in the fair market value of the property ($250,000 – $100,000).

The $150,000 loss would first be reduced by $100 for each casualty event that affected the indiviudal in the year.  The total loss is now limited to $149,900.

If the individual is also deducting  losses from another casualty event (such as a loss from damage to his or her property in Houston, Texas) the combined losses from both events would be reduced by $200.

The $149,900 loss would then be reduced by 10% of the individual’s AGI, or $50,000.

As a result, the individual would be able to deduct $99,900 of the $150,000 on his or her tax return as an itemized deduction.  Since the loss is considered an itemized deduction it may be further limited by the Pease limitation on itemized deductions, which kick in if AGI exceeds $259,250 for single filers and $309,900 for married filing joint filers.

Casualty losses on business and income-producing property are not subject to the $100 limitation and the 10% of AGI limitation described above.  The amount of the loss on business  and income-producing property is generally the lesser of (1) the adjusted basis of the property, or (2) the decrease in the fair market value of the property as a result of the loss, however if business or income-producing property is totally destroyed then the decrease in fair market value is not considered and the loss is limited to the adjusted basis of the property minus any salvage value.  Additionally, the loss is only deductible to the extent that the business did not receive reimbursement from insurance coverage.  Further, if the reimbursement received from insurance coverage exceeds the adjusted basis of the property, gain is required to be recognized.

We have also been asked if your mother-in-law can be considered a casualty loss.  Unfortunately, mother-in-laws are not deductible, but there may still be advantages to losing her.


IRS Gives Tax Relief to Victims of Hurricane Irma; Like Harvey, Extension Filers Have Until Jan. 31 to File; Additional Relief Planned-Update

IR-2017-150, Sept. 12, 2017

WASHINGTON –– Hurricane Irma victims in parts of Florida and elsewhere have until Jan. 31, 2018, to file certain individual and business tax returns and make certain tax payments, the Internal Revenue Service announced today.

Today’s relief parallels that granted last month to victims of Hurricane Harvey. This includes an additional filing extension for taxpayers with valid extensions that run out on Oct. 16, and businesses with extensions that run out on Sept. 15.

“This has been a devastating storm for the Southeastern part of the country, and the IRS will move quickly to provide tax relief for victims, just as we did following Hurricane Harvey,” said IRS Commissioner John Koskinen. “The IRS will continue to closely monitor the storm’s aftermath, and we anticipate providing additional relief for other affected areas in the near future.”

The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance. Parts of Florida, Puerto Rico and the Virgin Islands are currently eligible, but taxpayers in localities added later to the disaster area, including those in other states, will automatically receive the same filing and payment relief. The current list of eligible localities is always available on the disaster relief page on

The tax relief postpones various tax filing and payment deadlines that occurred starting on Sept. 4, 2017 in Florida and Sept. 5, 2017 in Puerto Rico and the Virgin Islands. As a result, affected individuals and businesses will have until Jan. 31, 2018, to file returns and pay any taxes that were originally due during this period.

This includes the Sept. 15, 2017 and Jan. 16, 2018 deadlines for making quarterly estimated tax payments. For individual tax filers, it also includes 2016 income tax returns that received a tax-filing extension until Oct. 16, 2017. The IRS noted, however, that because tax payments related to these 2016 returns were originally due on April 18, 2017, those payments are not eligible for this relief.

A variety of business tax deadlines are also affected including the Oct. 31 deadline for quarterly payroll and excise tax returns. Businesses with extensions also have the additional time including, among others, calendar-year partnerships whose 2016 extensions run out on Sept. 15, 2017 and calendar-year tax-exempt organizations   whose 2016 extensions run out on Nov. 15, 2017. The disaster relief page has details on other returns, payments and tax-related actions qualifying for the additional time.

In addition, the IRS is waiving late-deposit penalties for federal payroll and excise tax deposits normally due during the first 15 days of the disaster period. Check out the disaster relief page for the time periods that apply to each jurisdiction.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Thus, taxpayers need not contact the IRS to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2017 return normally filed next year), or the return for the prior year (2016). See Publication 547 for details.

The tax relief is part of a coordinated federal response to the damage caused by severe storms and flooding and is based on local damage assessments by FEMA. For information on disaster recovery, visit

For information on government-wide efforts related to Hurricane Irma, visit


*UPDATE* The IRS has now expanded the list of eligible localities to include all 67 counties in the State of Florida.


                     Asset Protection Planning: Be Careful!                       

by Martin Shenkman

Remember the famous admonition from Hill Street Blues? “Let’s be careful out there. … You understand what I’m saying to you?” The world remains a dangerous place and anyone that has accumulated any wealth should take precautions to protect that wealth. That process is called “asset protection planning.” 2017 has seen a bunch of cases that have undermined some traditional steps that people take to protect their assets. Caution is in order. And don’t dismiss these unfavorable cases as just bad people getting caught. Even bad fact cases can forewarn of issues everyone should be wary of. No one can predict how a future court will interpret cases that may have been decided based on egregious facts.

■ Bottom Line:

The take home lesson is not to avoid planning, but to plan carefully, plan with multiple layers and techniques using professionals for guidance, administer your plan with care, and don’t count on any plan being fully bulletproof. Nothing is.

■ LLC:

The court noted that ordinarily a corporation is considered a separate legal entity, distinct from its stockholders, officers and directors, with separate and distinct liabilities and obligations. The same is true of a limited liability company (LLC) and its members and managers. That distinction can be disregarded by the courts if the entity is used to perpetrate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose. The distinction can also be disregarded under an alter-ego doctrine when the actions of the entity are deemed to be those of the equitable owner. The court in Curci allowed the claimant to pierce a limited liability company (LLC) owned by the debtors and use LLC assets to satisfy claims against the owner. Generally, a charging order is viewed as the sole remedy a claimant can get. That basically means that the claimant can lien your interest in an LLC (or partnership) and receive a distribution you would have been entitled to. The debtor in Curci behaved badly, and he clearly controlled the LLC that was pierced. There were major mistakes in ignoring the entity formalities, and seemingly little purpose for the entity other than to shield assets from the creditor. Curci Investments, LLC v. Baldwin, Court of Appeal, Fourth Dist., Div. 3, CA G052764 Aug. 10, 2017.

■ Trust:

In Leathers, the court held that a taxpayer fraudulently transferred assets to a trust to avoid tax debt. The IRS had consistently maintained that the transfer of mineral interests to a trust was fraudulent. Under Kansas law, a transfer by a debtor is fraudulent as to a creditor if the debtor makes the transfer with actual intent to hinder, delay or defraud the creditor. The direct testimony from the individual and the trustee indicated that the purpose of the trust was to protect the transferor’s mineral interests from the IRS. The IRS tax liens took priority over any interest the trust might claim. M.R. Leathers, CA-10, 2017-1 USTC ¶50,212, May 4, 2017.

■ LLC:

The debtor asserted that the only remedy against an LLC was a charging order, but the creditors argued that the entities were shams, and endeavored to pierce the LLC to reach underlying assets. The creditor similarly asserted the right to pierce a trust and the debtor claimed that such an action against a trust was inappropriate. If entities of any type, or even trusts, are used to defraud creditors, courts may well craft a means to disregard or pierce them. Further, optics can be important in creditor cases. When the debtor lives a lavish lifestyle while claiming no access to assets, the result will more likely be less favorable to the debtor. While Transfirst is another bad-fact case, it should nonetheless serve as a reminder that clients with complex structures must meet regularly, not less frequently than annually, to review the maintenance and operation of those structures with their entire advisor team and assure they are operated with all appropriate formality. Clients with legitimate business purposes for entity and trust structures should corroborate them. This case provides yet another reminder that creating entity structures (LLC, corporation, partnership, trust) to protect assets will not succeed if the debtor himself does not respect the integrity of those entities. A trust was held to be a mere nominee for the taxpayer and could be disregarded to satisfy a tax lien. Transfirst Group, Inc. v. Magliarditi, 2017 WL 2294288 (D. Nev., May 25, 2017).

■ Trust:

The IRS successfully pierced a trust created by a taxpayer to satisfy a tax lien on the basis that the trust was a mere nominee for the taxpayer and could be disregarded. Here are some facts the court cited in determining if a trust is a mere nominee for the settlor:

■ Did the trust pay adequate consideration for the property.

■ Did the taxpayer transfer property to the name of the nominee in anticipation of (Continued from page 1) a suit.

■ Did the transferor continue to use the property.

■ Did the transferor retain enjoyment of the benefits of the transferred property.

■ Was there a close relationship between transferor and the nominee?

■ Was the transfer recorded in the case of real estate. Balice, U.S. v. Balice, Case 2:14-cv-03937-KM-JBC, (D.N.J. 8/9/2017).

■ Guardian:

Serving as a fiduciary, guardian or otherwise, is not without risk. A New Jersey case evaluated the performance of a court appointed guardian for an incompetent ward. The probate court approved the settlement of the formal accounting of the guardian who managed the ward’s substantial estate during her final years, but only after a battle with the remainder beneficiary. The beneficiary also argued that the trial court should have charged the guardian (an attorney) for alleged losses incurred in her efforts to dispose of the ward’s real property and should have disallowed legal fees and accounting fees to an outside accountant. In the Matter of J.F., 58-2- 2529 (N.J. Super. App. Div.).

■ Precautions:

■ Have a plausible purpose for each trust and entity and be able to explain it.

■ Have the correct person, in the correct capacity, sign each document. If your brother is your trustee, then he not you, should sign trust documents (other than you signing the trust as grantor).

■ Issue Crummey notices (yes, really!) and observe other formalities.

■ Every trust and entity should have its own bank account.

■ Have financial statements prepared before making transfers.

■ Sign solvency affidavits before making significant transfers.

■ Have your wealth adviser do projections demonstrating you can support yourself without having to tap irrevocable trusts or entities.

■ Correctly list trust and entity assets as belonging to the appropriate trust or entity, not as your personal asset.

■ Attach schedules to a prenuptial agreement listing all assets.

■ Don’t disregard the formalities of trusts and entities.

■ Have at least an annual review meeting with all your advisers in attendance so that each adviser is aware of the plan and each adviser can help police the proper administration of your plan within her expertise.

■ Corporations should have bylaws, a shareholders’ agreement and annual minutes.

■ For LLCs, do not rely on state default rules and instead have an operating agreement. Corroborate meetings with written and signed minutes or consents.

■ The mere fact that the managers and members of the LLC meet with all their advisers may itself help demonstrate that the entity is not a mere alter-ego for the members.

■ Have the correct trust or entity pay its expenses, not the one that you think nets the best tax bennie.

■ Plan upfront, before you need it, not after the stuff hits the fan.

■ Separate different liability risks into different entities. If you have three retail stores or rental properties each should be in its own separate entity, e.g. an LLC.

■ Have your wealth adviser create an investment policy statement for each trust or entity with investment assets.

■ Periodically review the governing documents (e.g. trust instrument, operating agreement) with your attorney to make sure you understand the operational and administration aspects of that agreement.

■ Hire a pro. If you have a substantial trust, name an institutional trustee that professionally administers trusts. Have a CPA do tax returns. Have your insurance consultants review policies periodically. Consult with a property, casualty, and liability consultant as there are more nooks and crannies to insurance coverage than a Thomas’ English Muffin.

■ Entities should often have multiple owners, and that your interests, when feasible, are held by irrevocable trusts. Layers of properly crafted and administered entities are critical to your safety.

Creating a 1-Page Quarterly Action Plan for Your Business 

By David Finkel

As a leader of your company you know it’s your job to lead your team and keep the company focused on the right things.

In fact, in order to successfully scale your company requires that you balance the need to holding a firm focus on those fewer, better things that will make a leveraged difference for your company and your need to maintain your flexibility so you can adjust as you go.

It’s as if you had a two-sided equation.  On one side of the equation you have to balance the need for flexibility—markets change, opportunities appear, and tactics succeed or fail.  And on the other side of the equation is your need to gain momentum, and for your staff to have the time to get meaningful blocks of work done.

Essentially, you have to balance making sure your action plan can be adapted for the changing circumstances of your marketplace, and the high cost in lost momentum and frustrated team if you change your company’s focus too frequently.  (One of the biggest challenges our business coaching client’s staffs tell us about is how dizzy they are when their founder/owner changes too many things too frequently.)

So what’s the key to maintaining this dynamic balance between flexibility and momentum?  It is the quarter.

The quarter is the perfect unit of time to bridge your big-picture goals, which likely have a two- to five-year timeline or longer, and your weekly planning and daily action.  The quarter is the key to executing on your strategy to accomplish your business goals.

It’s long enough that you can get meaningful units of work done that collectively bring you closer to your long-term goals, but short enough so that you can frequently course correct and hold your focus.

In a moment I’ll share the format we use for our 1-page plan of action, but first I want to share why I emphasize the need for a one-page plan. Why one page?

It’s because we’ve learned from our work coaching hundreds of companies that in the rush of the day to day, you need to be able to take in your company action plan in one gestalt whole.  If your plan is 2 pages, or 3 pages (or heaven forbid – 14 pages!) you just won’t use it weekly.

We coach our business coaching clients to review their companies’ quarterly action plan each week.  In essence it becomes a clear accountability tool and GPS to make sure that your team is focusing on the right things, and hitting the key milestones on time.  And with your plan being 1-page, you and your team can take it in with one look.

This discipline of working with a quarterly ONE PAGE action plan has helped our business coaching clients enjoy an average annual growth rate of 32.4%.  It just works.

Here is what our formatted action plans look like.

Creating Your 1-Page Quarterly Strategic Action Plan in 3 Simple Steps

Step One: Pick Your Top Three “Focus Areas” for the Quarter

Your Focus Areas are the most important areas for your business to spotlight during the coming quarter.

Sure, you’ll still have to take care of the day-to-day operational needs of your business, but your Focus Areas are those areas you’ve identified where you will invest a portion of your best resources that quarter because you know that these areas are what will really help you scale and develop your business.

Each quarter my coaching for you is to meet with your leadership team (or solo if you don’t have a leadership team) and decide on the top 2-3 Focus Areas for your business for that quarter.

Potential Focus Areas could be:

  • Increasing your lead flow.
  • Improving your sales conversion system.
  • Speeding up your collections cycle.
  • Making a specific key hire.
  • Developing a new product.
  • Progressing on a key project.

I strongly advise you to limit your company to only three Focus Areas for the quarter as your top priorities (and in many cases, having only one or two Focus Areas for the quarter may be an even better choice.)  Why limit your company to three Focus Areas? Because too many top priorities means you have no top priorities.

Ninety days comes fast, and if you spread your company too thin, you’ll find that you partially do more things instead of fully doing a few key chunks that actually produce value for your company.

So pick your Focus Areas carefully and invest your resources to get something special done on these fewer, better areas.

Step Two: Clarify the Criteria for Success for Each of Your Three Focus Areas

Now that you’ve picked your three Focus Areas for the quarter, the temptation is to immediately go lay out your action steps in this area for the quarter.

Don’t.  Step two says first pause and clarify your criteria of success for each.

What would you need to accomplish this quarter in order to feel successful in this Focus Area?

Be ruthlessly realistic about what is possible for you to accomplish in ninety days.

Generally we suggest that you try to pick criteria of success that you have control over (or at the very least over which you have a great deal of influence.) It’s important to look for criteria that are as objectively and quantitatively measurable as possible. When criteria are too subjective, you may reach the end of the quarter without agreeing on whether or not you succeeded.

Also, we suggest that for every focus area you pick one “Key Performance Indicator” (KPI) to track. If you look to this KPI to determine your performance, you’ll know if your company is on track to succeed in this Focus Area.

Look for 3-4 definite criteria of success for each Focus Areas.  (See the sample plan of action above for what these could look like.)

Your written criteria of success for each Focus Area gives you a clear yardstick against which to measure progress as you go.   Also, by starting with your criteria of success before you create your plan is that by laying out your criteria of success for each Focus Area you’ll have clear clues for what action steps you’ll actually need to take over the quarter. Most of your action steps are obvious in your criteria of success.

Step Three: Lay Out Your Key Action Steps and Milestones for the Quarter

The final step is to lay out the key action steps and milestones you need to take or reach to accomplish your criteria of success for each Focus Area over the coming quarter.

In order to keep your plan to one page, you’ll likely break each Focus Area down into five to seven action steps and milestones.

While your plan must be detailed enough to guide your actions, it must not be so detailed that you feel overwhelmed or lose yourself in the minutia.

For each action step, pick a specific team member to be ultimately responsible for executing the step by a definite date. While you can have multiple people contribute to a specific step or steps, you need to pick one person who is tasked with the responsibility and authority to get that step done and done well. We say that this person “owns” the task. This sense of ownership is critical to your success. It’s hard to hold anyone accountable for missed milestones when it wasn’t clear who was really responsible in the first place.

With this structure, the owner doesn’t have to do all of the work herself—she just needs to be responsible for making sure that it gets done in the best way possible within the company.

If you enjoyed the ideas I shared, then I encourage you to download a free copy of my newest book, Build a Business, Not a JobClick here for full details and to get your complimentary copy.


Thoughtful Corner-

Make it Easier on Everyone Involved-Share Compares and Documents in Editable Format by Chris Denicolo

Recently, we had the pleasure of working on a business transaction with smart, courteous and knowledgeable lawyers representing the other side.  Our interaction with the other side’s lawyers was pleasant and collegial, as we collectively worked toward our respective clients’ common goal to complete the transaction based upon their agreed upon arrangement.  However, we found that the other side’s lawyer on numerous occasions did not send us their changes in editable format (such as Microsoft Word or Word Perfect), and sometimes did not provide us with comparison documents to track changes that were actually made.


The benefits of running a comparison document are significant because they permit each party to see exactly what was changed without having to read every line of the revised clean document.  Further, providing an editable version of the revised document allows the other party to make further changes to the most recent version of the document, which aids in running comparison documents and minimizes the time each party has to spend in reconstructing changes that were previously made.


In business transactions, the lawyers are often working together against a deadline to get the documents completed in a manner that reflects what their clients have agreed upon.  Sending compares and editable versions of documents helps each side progress toward the common goal in an expeditious and cost effective manner.  Clients will appreciate this as well with their lawyer fees being reduced as a result.



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.

This week, the article of interest is Doctor’s Defamation Suit Highlights Online Patient Reviews by Joe Palazzolo.  This article was featured on September 22, 2017 in The Wall Street Journal.

Richard’s description is as follows:


A defamation lawsuit filed by an Ohio plastic surgeon that is slated to go to trial early next year could have far-reaching consequences for disputes between doctors and their patients over online reviews about the quality of medical care, according to legal experts.

Dr. Bahman Guyuron, former chairman of the department of plastic surgery at Case Western Reserve University School of Medicine, sued Marisa User in 2015 over anonymous reviews she had posted on the cosmetic-surgery website RealSelf and other sites where patients swap information about doctors.

Legal experts who reviewed the case at the Journal’s request said it could become a bellwether in future disputes between doctors and patients over online reviews.To View the Full Article Click Here



Humor! (Or lack thereof!)

In The News with Ron Ross









The new “I” Phone is all about you

Maximizes the “I” in all you do

Read the news: Typhoon in the Red Sea?

Ask I Phone, “What does that mean to me”?

The facial recognition says, “You look great!”

Everyone on your phone will want a date

The new I Phone looks in your head

Plans your career and prescribes a med

What about the world? Haven’t a clue

No one’s half as important as you!

[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] 2017 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/2017-IRA-Contribution-and-Deduction-Limits-Effect-of-Modified-AGI-on-Deductible-Contributions-If-You-ARE-Covered-by-a-Retirement-Plan-at-Work (Nov. 14, 2016).

[6] Id.

[7] Id.

[8] Id.


[10] Retirement Topics – IRA Contribution Limits, I.R.S.,,-Employee/Retirement-Topics-IRA-Contribution-Limits (last visited Feb. 23, 2017).



[12] Id.

[13] Amount of Roth IRA Contributions That You Can Make for 2016, I.R.S.,,-Employee/Amount-of-Roth-IRA-Contributions-That-You-Can-Make-for-2016 (last visited Jan. 29, 2016).


[14] See Leimberg Information Services Newsletter Archive #549 by Alan S. Gassman, Kenneth Crotty and Christopher Denicolo, entitled One Good Reason Not To Do A Roth IRA Conversion.


[16] Bobrow v. Commissioner confirmed this in 2014 when it severely penalized a taxpayer that attempted to roll over multiple IRAs in one calendar year.

[17] Code Sec. 402(c)(A)(4)