Restrictions and potential tax reduce stock valuations

Article Abstract:

Different justifications were used in two recent cases allowing taxpayers to discount the values of stock shares. In the case 'Estate of McClatchy,' restrictions imposed through securities law applied to the stock while it was owned by the decedent. The Ninth Circuit ruled that the value of the stock depends on who was the executor named. Moreover, shares of stock held by a decedent not exposed to securities-law limitations carry the risk of being valued subject to the limitations if the appropriate executor were installed. Meanwhile, a reduced valuation was allowed in 'Estate of Davis' since the corporation held appreciated stock subject to a likely built-in gains tax. Moreover, the limitations on the eligibility of the shareholders of S corporations would restrict the number of hypothetical willing buyers if an S election was made. The assumption that the stock would not be sold in the period of 10 years would have undercut the quality of the shares.

Cases, Stocks, Valuation

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Inflation adjustments for 1997 reduce tax bite

Article Abstract:

The newly issued Revenue Ruling 96-59, 1996-53 IRB 17 specifies inflation adjustments for a wide array of tax items for 1997. The adjustment minimizes tax on a fixed level income by allowing bigger deductions and exclusions and by raising the income limits for tax brackets. The standard deduction rose from $6,700 in 1996 to $6,900 in 1997 for joint returns, from $3,350 to $3,450 for married couples filing separately, from $5,900 to $6,050 for heads of households, and from $4,000 to $4,150 for single taxpayers. Personal exemption also increased from $2,550 to $2,650. Other changes are the raising of qualified parking to $170 a month, the increase in the threshold for luxury car excise tax from $34,000 to $36,000, and increases in the benefits that donors can receive from charities.

Prices and rates, Income tax, 1997 AD

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VEBAs can reduce taxes and preserve wealth

Article Abstract:

Voluntary employees' beneficiary associations (VEBAs) can be a useful instrument for gaining significant tax deductions especially for small businesses. Unlike retirement or deferred compensation schemes, VEBAs can offer several advantages. Some provide insurance-like life, disability and medical benefits while others generate severance and children's educational benefits. The shared characteristic of VEBA benefits, referred to as welfare benefits, is their relative unpredictability. As compared to a deferred compensation benefit, a welfare benefit becomes payable based on events not in the control of the recipient, including death, sickness and disability. Contributions made to a VEBA are deductible and plans are usually organized to allow earnings to be exempted from taxation.

Evaluation, Employee benefits, Voluntary employees' beneficiary associations

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