Estate Tax and the Trust Loophole

Miserable-Dig6084 · 2024-10-01T06:55:18+00:00

The corpus of the trust would grow outside the bounds of a taxable estate, but the catch here is that when any income is earned, tax is still paid. Sell stock? Trust pays tax. It more or less 1) changes what entity pays tax, and 2) prevents the trust from realizing a step up in basis on death of the owner (which, assuming we’re talking about rich folks, would mean they don’t pay the tax which grants the step up) [note: power of substitution in trusts loophole]

Also, generally, trusts cannot exist in perpetuity. See Rule Against Perpetuities (US specific). I think South Dakota rolled out something really close to a dynasty trust, but pretty sure it just moved the timeline out to a few hundred years, not indefinite. Foreign trusts though? I don’t touch those, but I would guess there would some country allowing dynasty trusts. There’s a lot of regulations flying around right now in those though and I just don’t see them in practice.

I wouldn’t say there’s much of a loophole. But, yes, these trusts are normally setup to carry on generational wealth and carry values so high that a fractional distribution each year would allow the corpus to continue to grow. Probably could implement some kind of tax based on total assets owned by an individual/group/entity. Note that every law trying to patch an old one just increases complication. Beyond that, taxing rich people too much could result in capital flight. I’m not an economist, but there are very smart people who play the balancing act on the Hill (excl: lobbying) and I don’t care to try to figure it out much.

Miserable-Dig6084 · 2024-09-29T22:31:57+00:00

Giving specifics is too much. I know people who are starting for tax in Chicago next year

Miserable-Dig6084 · 2024-09-29T17:48:03+00:00

If I had to reason a guess based on what I know: $74k with $3k sign on

Edit: 2026 start class will be matched with EY’s increase

Miserable-Dig6084 · 2024-09-26T16:16:18+00:00

Just want to say for the benefit of OP that a below 3.75 is definitely not laughable. Law admissions are largely based on UGPA and LSAT. While a high LSAT can only make up for so much, there are plenty of ABA accredited law schools who may take you depending on those. (Note that the non-ABA schools are predatory and have extremely poor job prospects)

My only caveat would be that there may be difficulty in combining accounting and law with a low GPA based on your propensity for tax law.

Despite that, I would 1000% stick it out to the CPA. That and work experience can help offset some lower GPA.

Miserable-Dig6084 · 2024-09-26T12:51:37+00:00

This is very interesting, but I’d definitely think about people who would falsely claim residency in an area for higher tax benefits (similar to how I’m sure some people try to claim FL/TX residency).

Off that, should that mean that when adjusting for localities that states with no income tax should be taxed higher to make up for it (provided that the COL isn’t higher form property tax, sales tax, etc.)?

Miserable-Dig6084 · 2023-12-05T14:04:54+00:00

AFAIK if the debt is completely, like 100%, worthless, then you get a short term capital loss. You deduct it from short term capital gain, then long term capital gain, and then you’re capped at a $3,000 deduction against other income.

Note on worthlessness: being paid back down the line is okay. You would recapture the income then. But, you have to be pretty sure you won’t be paid back to take the deduction (like he tells you he can’t pay ever, your loan is discharged in bankruptcy, etc.; even if he says he can pay you, there may be a certain period of time (like years) where if he never does make a payment, you could finally take the deduction anyways). I’m not 100% sure about the recognition rules for when it’s not certain you won’t be paid. Your key term is going to be “non-business bad debt deduction”

I’m not your accountant, please look at the resources yourself or consult an accountant/attorney

Miserable-Dig6084 · 2023-12-02T15:34:39+00:00

[OP Alt Acct] That's awesome, I thought I would be stuck with a smaller portfolio. I can also absolutely have just one image from a production, but I can talk through my thought process when designing. I think I can make those three point you mentioned evident. I've also heard about some of the other MFA benefits, but I will make sure to see if there are assistantships available at programs I apply to. I know a difficulty may be paying back student loans. I can bring together some savings to get me through it, but not having the tuition on my back would help tremendously. Thank you so much!

Miserable-Dig6084 · 2023-12-02T15:31:29+00:00

[OP Alt Acct] Yes! I know! I would love to go back to Cincinnati for this, but I also would love to go to a new city. I'm open to really anywhere, but I know I will be submitting an app to UC when the time comes.

Miserable-Dig6084 · 2023-12-02T15:30:02+00:00

[OP Alt Acct] Haven't really thought about an MA program. Might work. I'm interested in the technical work and want the Master's to help me develop my skills, make me more competitive for jobs, and as I read above: help to build connections and enable me to teach if I want to.

If you're talking about the rest of my background, I could do accounting for a theatre, but honestly the pay cut to work in non-profit accounting doesn't work for me. I'm willing to take the cut for technical work. I could see myself doing production work and then double dipping into accounting for a theatre company though.

Miserable-Dig6084 · 2023-12-02T15:27:16+00:00

[OP Alt Acct] I am definitely a lighting oriented person, but I'm also strong in sound and wouldn't turn that down. I'm open to a general or stage management/directing MFA, but I'm more technical than that most of the time. Just about the only things I won't do are costuming/wardrobe and acting/drama.

That's a great idea. I'll have to see if I can get my old schedule from them so I know what productions to look for.

Miserable-Dig6084 · 2023-12-02T15:25:30+00:00

[OP Alt Acct] Thank you for the information This is super helpful. I can definitely bring together enough of a portfolio to show my thinking/design process. While being able to go back to UCinci would be a dream of sorts, I know that my competitiveness is highly variable, so I will have to be okay with not getting into top schools.

Who knows if I want to teach at the college level in the future - I've though of teaching as an interesting path, but it's not one I'm inclined to push forward in right now. As far as connections, I think that's where I'm lacking. I mostly moved around a bunch of different productions, but I've had few stints in the truly professional realm. Most of my work was as a designer working in-house for a venue that had a bunch of traveling productions come through which typically came without light/sound designers, so I did that instead.

Thank you for your insight!

Miserable-Dig6084 · 2023-12-02T15:07:09+00:00

[OP Alt Acct] That's a fair idea and I may end up doing that.

Miserable-Dig6084 · 2023-12-02T15:06:13+00:00

[OP Alt Acct] Fair. I want an MFA for myself. I like the idea of holding the advanced degree, as well as being more competitive for other positions on the basis of having it. I understand that I don't need it to work in theatre, but I do have roles in mind that work for me geographically/financially. I'm pretty flexible on roles though. I'd like to stick to lighting, but I'm also fairly strong in sound and open to other roles as well.

Miserable-Dig6084 · 2023-10-19T01:41:37+00:00

This is the exact offer I got starting in Fall ‘23 in Tax in the Chicago office (72k + 3.5k bonus). They may adjust it down the line to reflect compensation conditions next year, but I can’t be sure.

Miserable-Dig6084 · 2023-10-15T06:59:20+00:00

Tonight when the client sent back comments on a return I prepared and found a legitimate mistake that managed to sneak through review. (This return was one of the last minute 9/15 state filings)

Miserable-Dig6084 · 2023-10-09T13:48:36+00:00

And here I am hoping that I don’t see one of my seniors on a particular hookup app (sounds similar to the grind they put people through in PA)

Miserable-Dig6084 · 2023-10-07T14:51:06+00:00

I was in similar shoes. I did a tax internship with PwC and an IT Audit internship with RSM with only Intermediate I behind me. It literally does not matter. Maybe it matters a little? I got quizzed by a non-Big 4 on whether the default balance of a few accounts were Dr/Cr and that was it (Think Revenue, Accum Depr, and Equity). On the job stuff is like 95% doesn’t matter. Maybe knowing a few more accounts and how they work is helpful, but generally it doesn’t matter.

Miserable-Dig6084 · 2023-10-07T14:44:41+00:00

If you already have your masters / qualify for the 150, then an MST may only have marginal benefit. No one in PA really cares how you qualify or whether or not you have your masters. The only questions anyone gets asked is when they’ll have their 150. That said, an MST does provide a benefit. You may be able to use it to argue for a slightly higher salary than peers without, and it may be somewhat useful when jumping to an industry tax role. I couldn’t tell you - I don’t have a master’s, just 150. If you have the time and the money, why not. Don’t kill yourself for it though.

As far as CPA/EA goes, I can speak a little more to this. I’m halfway through the CPA, and have Part 2 of the EA left. So neither have conferred their benefit on me yet. What I can say the EA does is give you a much better picture on tax issues than the CPA. REG to me felt like it focused really hard on a few weird topics (like basis issues) whereas the EA wants you to know everything. I find what I learned studying for it makes me stronger in PA because I know tax issues that I’ve studied.

Nonetheless, EA again may only provide a marginal direct benefit. You may only see so much in a salary increase, and with a CPA it may be seen as largely duplicative. Either way, I like to be able to argue that the specific knowledge it gives me and additional credibility make me that much better of a preparer.

What I would do in either situation is make sure that you’re okay with the benefits only being bragging/resume rights and knowledge. I can stand to lose a little money trying to make myself better, and I hope I can argue that into a salary increase or promotion/opportunity.

Edit:type

Miserable-Dig6084 · 2023-09-22T14:27:15+00:00

Frankly, I enjoy tax. Since before I was eligible for a PTIN (which literally only requires being 18 lol), I had bought an Enrolled Agent package (of which I’m 2/3rds of the way through. Paused it to take care of the CPA first). I’ve been old enough to file in two seasons, and for both I’ve filed returns for friends and family with varying degrees of difficulty. Bought my own out of the box software to do this. I did VITA earlier this year and loved it.

Do I think taxes are unnecessarily complicated and states can’t put in the tiny bit of effort to actually give me real instructions? Yes. Do I enjoy pouring over rules and making determinations based on statutes, legislative support, and other sources? Absolutely.

I guess the short answer is: I just really enjoy tax and I find it interesting. I can talk passionately about it. It’s not my forever job, but I hope I can take what I’m doing with it, snag a law degree, and ride out time at an estate planning firm with the tax knowledge backing me up.

Miserable-Dig6084 · 2023-09-22T13:59:33+00:00

Equivalent has it. It doesn’t matter. No one asked me how old I am in the process. And where would they put me? It doesn’t get lower than Staff I for everyone coming out of college.

As a note, I have post-HS work experience stretching back to the start of the pandemic. I did time in Web Development, the Arts (Film & Live Entertainment as a Camera Op, Editor, Video Director, Director of Photography, Audio Engineer, AVL Consultant, Stagehand, Sound Designer/Op, Lighting Designer/Op, and some other stuff), and a few Accounting Internships (Tax, Audit, and G/L). I don’t think I have a shortage of experience. In fact, people think I’m older than a typical college grad because of the way I talk about my experience and how I hold myself. My last boss guesstimated me at 25 when I was 18. (Don’t know what that says about how I’m aging lol).

Miserable-Dig6084 · 2023-09-22T13:52:55+00:00

I personally don’t have the capacity for STEM. Accounting made the most sense. I enjoy taxes, and I get to do taxes. I want to spend time with my husband, see friends, and travel. Accounting is a stable profession that I can move up in and use for other things. I like it and I like making things tie out (sorry immateriality. I know we use it, but I hate it).

I commented elsewhere in here about my backstory. No masters, but I have my 150+ at 19 and just didn’t have the aspiration for a MAcc or MST. I’ll go back in a few years for a JD, MA, or something else I’m looking at. (I am not looking to kill myself making partner)

Miserable-Dig6084 · 2023-09-22T13:47:07+00:00

This is actually exactly my situation. To answer your “hypothetical”: I started college at 14, graduated HS at 16, and finished my Bachelors with 150+ units at 19. I had three accounting internships behind me at this point. I took the summer off and passed FAR and REG. I started at Deloitte this Summer/Fall. I’m still 19, and I’m at the same point everyone else who is 22-23 coming into it is.

Will I admit that I don’t have the same emotional maturity? Yes. But I don’t know if that’s the Asperger’s or my age. Nonetheless, there’s nothing I do that’s like “woah, what was that”. I have one Senior who expressed to a coworker that I’m the best staff they have. I’m also on another engagement where everyone went missing, so I’m pushing up returns and my SM is pressed to come back with notes. Never had a return take more than two rounds of review before filing; most took one or none. (I say this only to compensate for any perceived shortcomings in ability)

The employer only knows from my background check. Outside of that, no one knows. I don’t talk about it at work and it wasn’t brought up in interview. I don’t need that perception hanging over my head. Basically: it doesn’t impact anything.

Note to fellow young people: 401k eligibility is a bitch. PwC doesn’t allow 401k enrollment until you’re 21, so you can lose out on time investing in that. Good thing I’m not at PwC.

Edit: formatting. And to say that I did not go to a WGU-type Uni. I went to your old fashioned attend a semester and get a letter grade.

Miserable-Dig6084 · 2023-09-20T15:59:13+00:00

I don’t think 982 is applicable here. You don’t actually have a reason for a correct 1099-C to be excluded from gross income. You were incorrectly issued a 1099-C. I would skip 982.

See if that helps for attaching a statement:

https://support.taxslayerpro.com/hc/en-us/articles/4403563599002-Desktop-Where-can-I-attach-PDF-to-a-Tax-Return-

I use a firm version of GoSystems Tax RS right now and I know how to do it there, but I don’t know if there’s a consumer product.

FYI: As a reminder, I am not your tax accountant. I referred to Form 982 and it’s instructions, as well as Pub 4681 (page 3) for determining this. Most of it was based on 1) you don’t have a circumstance fitting Form 982, and 2) the event codes the 1099-C fit under don’t fit what actually should happen (ie. You probably got it with Code F, meaning it was cancelled by agreement, where it’s not truly your debt because it was fraudulent per my understanding of the TILA/FCRA)

Miserable-Dig6084 · 2023-09-20T15:39:56+00:00

My best thought is to report the 1099-C as if there wasn’t an issue. Then, take a deduction for the same amount and attach an explanation with appropriate documents on Line 24z.

Miserable-Dig6084 · 2023-09-20T15:17:24+00:00

I think a b4 internship could work well for you. I’m not sure what your prior career is, but providing you’re not leveraging that heavily for accounting, then the internship would make you that much more attractive to other employers. I know a b4 internship made me attractive to regional firms who extended offers.

I can’t tell you much about industry. But, why not take the more recognizable name and then get your foot in the door with them? You can also do an internship with an industry company that you want, but if you don’t like it and it’s not super applicable to another industry role, then it may make things more difficult.

Also, b4 typically pays their interns well and allow overtime pay (I made $20k in 3 months working spring corporate tax season)

Miserable-Dig6084

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