IRS program for correcting 403(b) plan defects

Article Abstract:

The IRS implemented the tax-sheltered annuity voluntary correction (TVC) program in May 1995 to enable qualified employers to rectify, on a voluntary basis, the flaws they have found in their 403(b) tax-sheltered annuity schemes. Employers who intend to take part in this initiative must also give their consent to a payment of any negotiated fine or penalty. In return, the IRS will provide them written statements that the corrections are sufficient and a pledge that it will not reverse the income tax exclusion due to employer-identified and employer-corrected violations. However, defects that are determined by the IRS are not covered by the program. Employers that wish to enter the program should apply before Dec 31, 1998. Participation helps protect the tax exemption of employees and prevention of any disruption of the plan.

Management, Services, Compensation management, Tax shelters, United States. Internal Revenue Service, Annuities

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The impact of Wall, Vak and Revenue Ruling 95-58 on the power to change independent trustees

Article Abstract:

The IRS established in Revenue Ruling 95-58 that the grantor's retention of the power to replace an independent trustee of an irrevocable trust with another independent trustee will not result in the inclusion of the trust corpus in the grantor's estate. Retention of discretionary distribution powers by the grantor generally results in inclusion for estate tax purposes. Estate of Wall v. Commissioner and Estate of Vak v. Commissioner established that the retained power to replace independent trustees was not the equivalent to the grantor retaining trustee powers.

United States, Planning, Cases, Laws, regulations and rules, Estate tax, Estate taxes, Trusts and trustees, Trustees, Trusts (Law), Powers (Law)

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Shareholder guarantees of an S corporation: review and analysis of the basis dilemma

Article Abstract:

The relationship between shareholder loan guarantees and basis in an S corporation has been subject to contradictory interpretations by the IRS, circuit courts and the Tax Court. The courts all use the economic outlay doctrine to interpret IRC sections 1366 and 1371. However, they do not agree on whether a loan guarantee is a loan in fact or only an agreement which does not involve capital and therefore would not effect basis. The safest tax planning for shareholders would be to inflate basis through another method, of which several are included.

Analysis, Stockholders, S corporations, Basis (Taxation)

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