At the end of October 2024, the IRS announced that it will no longer automatically assess penalties for late reporting of large foreign gifts. Before assessing a penalty, the IRS will now review reasonable cause statements submitted with late-filed Form 3520, which reports gifts or bequests from foreign persons, to determine whether a penalty should be imposed.

Estate of Fields v. Commissioner, T.C. Memo. 2024-90 (Sept. 26, 2024) (Copeland, J.), provides a textbook example of a “bad facts” family limited partnership (FLP) that caused estate tax inclusion of the property transferred to the FLP under both sections 2036(a)(1) and (2) with loss of discounts for lack of control and lack of marketability. In doing so, the court applied the Tax Court’s 2017 holding in Estate of Powell v. Commissioner, 148 T.C. 392 (2017)—that the ability of the decedent as a limited partner to join together with other partners to liquidate the FLP constitutes a section 2036(a)(2) estate tax trigger—and raises the specter of accuracy-related penalties that may loom where section 2036 applies.

In Moore v. U.S. (36 F. 4th 930), the U.S. Supreme Court ruled on a constitutional challenge of IRC section 965, the mandatory repatriation tax (MRT). The MRT is a one-time repatriation tax (or “deemed dividend”) that passes through undistributed accumulated income of U.S.-controlled foreign corporations (CFCs). Section 965 is part of the 2017 Tax Cuts and Jobs Act (P.L. 115-97), which addresses foreign business earnings, including CFCs, inversions and the GILTI tax. The Act generally taxes U.S. shareholders owning 10% or more of a foreign corporation on otherwise tax-deferred foreign earnings.

Charitable contributions play a crucial role in addressing important needs within our communities, and the U.S. tax code recognizes their value by providing various incentives. By understanding tax strategies related to charitable giving, individuals can maximize their impact while also receiving significant tax advantages. This article will discuss some lesser-known aspects of direct charitable giving and common charitable planning strategies using trusts.

“In 1955, there were approximately 14 penalty provisions in the Internal Revenue Code. There are now [in 2011] more than ten times that number.”  Internal Revenue Manual (“IRM”) part 20.1.1.1.1.