IRS and courts rule on exclusion of damages received in employment discrimination and benefit plan cases

Article Abstract:

The IRS and the US District Court for the Southern District of Ohio have addressed the income tax exclusion of damages resulting from employment discrimination. In Gerbec v. United States, the court found that under pre-1996 law the settlement received by a class of employment discrimination plaintiffs was not based on tort-type claims and was not excludible. The IRS assessed the new IRC section 104(a)(2) enacted under the Small Business Job Protection Act of 1996 and found that employment discrimination emotional distress damages are only excludible to the extent of medical expenses actually incurred.

Public Finance Activities, Tax Deductions & Exemptions, Remedies, Tax deductions, Personal injuries, Employment discrimination, Damages, Damages (Law)

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PLR provides example of useful IRA post-death planning technique

Article Abstract:

The favorable ruling that the IRS granted the taxpayer in PLR 9711032 regarding her rollover of her decreased husband's individual retirement account (IRA) into a new IRA she owns suggests a significant planning opportunity. The IRS allowed the transfer despite the fact they had both reached minimum required distribution age and ruled that she could treat her husband's IRA as her own. The IRS also accepted a delayed required beginning date for the new IRA and allowed her son, the new beneficiary, to be used to determine the required payout period.

Commercial Banks, Investment Banking and Securities Dealing, Bank Individual Retirement Accounts, Methods, Estate planning

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IRA proceeds included in decedent's estate; 1986 TRA transition rules not applicable

Article Abstract:

Proceeds from individual retirement accounts (IRAs) must follow the 1984 Tax Reform Act (TRA) transition rule independent of the 1986 amendment in order to constitute a tax exclusion from the decedent's gross estate. Section 525(b)(2) of TRA specifies the transition rule whereby exclusions existing before the act would still apply to the estates of those dying after 1984, if the decedent was a plan participant and in pay status on the last day of 1984, and had irrevocably chosen the mode of payment of the retirement benefit before Jul 18, 1984.

Decedents' estates

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