ralph e lerner: taxation plus.ppt
TRANSCRIPT
Taxation Plusby
Ralph E. LernerRalphELerner.com
[email protected] Madison Ave, New York, NY, 10022
(212) 521-4437
http://www.RalphELerner.com/
Cost
FMV
Deduction (within 30% limit)
Tax Saved (Fed. 35.0 rate)
Cost
UNTAXED PROFIT
$ 1,000
$ 10,000
$ 10,000
$ 3,500
$ 1,000
$ 2,500
and you enjoyed the use of the donated item for the period of ownership
The Art Tax Shelter
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The Four Questions
1. What type of donee organization - public charity or private foundation?
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The Four Questions
1. What type of donee organization - public charity or private foundation?
2. What type of property - ordinary income type property or long-term capital gain type property?
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1. What type of donee organization - public charity or private foundation?
2. What type of property - ordinary income type property or long-term capital gain type property?
3. Have you satisfied the related-use rule?
The Four Questions
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The Four Questions
1. What type of donee organization - public charity or private foundation?
2. What type of property - ordinary income type property or long-term capital gain type property?
3. Have you satisfied the related-use rule?
4. Have you obtained a qualified appraisal by a qualified appraiser?
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FUTURE INTEREST RULE
Section 170(a)(3) - There is no charitable deduction for a gift of a future interest in tangible personal property until there is no intervening interest in, right of possession of, or enjoyment of the property held by the donor, spouse or certain related individuals.
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FRACTIONAL INTEREST
Winokur v. Commissioner
Women of WarholMarilyn, Liz & Jackie
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CHARITABLE REMAINDER TRUST
However, an income tax deduction would be allowed under section 170(a)(3) when the trustee sells the musical instrument.
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FMVCOSTGAINTAXNET7%
$5,100,0000 100,000
5,000,0001,850,0003,350,000
227,500
$5,100,0000 100,000
5,000,000- 0 -
5,100,000357,000
129,500
per yr.28% LTCG
more per yr.
Note: 3,250,000 subject to 50%Estate tax leaves Net $1,625,,000
(Fed + St)
per yr.
35.0% LTCG
2 children and spouses6 grandchildren10 x 10,000 =
tuition
equalizes after 12 years
$100,000 30,000130,000
1.170A-4(b)(3)(i)The use by a trust of tangible personal property contributed to it for the benefit of a charitable organization is an unrelated use if the use by the trust is one which would have been unrelated if made by the charitable organization.
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Edgar Degas,LANDSCAPE WITH SMOKE STACKS
Pastel over monotype, ca. 1890-93http://www.RalphELerner.com/
FAIR MARKET VALUEHypothetical Willing Buyer/
Hypothetical Willing Seller
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Quedlinburg Treasures
Fair Market Value is determined in the retail market in which the item is most commonly sold to the public.
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Rev. Proc. 96-15Advance Valuation Ruling Request
1. Applies to items $50,000 and above
2. User fee of $2,500 for first three items, $250 for each additional item
3. Requires a qualified appraisal by a qualified appraiser
4. Can be used for income tax or estate tax purposes
5. The ruling, once issued, is binding on the IRS
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STATUTE OF LIMITATIONS - TITLE
§ 2-275
1 - prompt filing of suits
2 - protection for a defendant after period of repose - evidence can be lost or destroyed with passage of time
3 - promotion of free trade
An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued.
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Patriarchate of Jerusalem v. Christie’s
An owner’s reasonable diligence in locating his lost property is highly relevant to a laches defense
Doing nothing for 70 years is not reasonable
Archimedes Palimpsest 10th century manuscript contains writing of Archimedes
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STATUTE OF LIMITATIONS - AUTHENTICITYRosen v. Spanierman
Four year statute of limitations applies.
A warranty of authenticity does not extend to future performance of the goods.
Lack of knowledge of the breach is not a defense.
The Misses Wertheimer
John Singer Sargeanthttp://www.RalphELerner.com/
BALOG v. CENTER ART GALLERY
Hawaii
In the case of artwork which is certified authentic by an expert in the field or a merchant dealing in goods of that type, such a certification of authenticity constitutes an explicit Warranty of future performance sufficient to toll the U.C.C.’s statute of limitations - but only in Hawaii http://www.RalphELerner.com/
DAMAGES - BREACH WARRANTY TITLE
Menzel v. List
1932 - Menzel Purchases for $150
1941 - Painting taken by Nazis
1941-1955 - Location not known
1955 - Perls purchases from dealer in Paris for $2,800
1955 - Perls sells to List for $4,000
1962 - Menzel say “Give it back”
1966 - Jury for Menzel - value now $22,500
Jacob’s Ladder
Marc Chagall
Measure of damages $22,500 http://www.RalphELerner.com/
DAMAGES - FRAUDNacht v. Sotheby’s
1981 - Nacht purchases for
$23,815
1996 - Nacht discovers it is not authentic - if it was authentic value $225,000
Measure of damages $23,815
Francis Picabia
Josias
1930
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ROTHKO
Avoid Conflicts of Interest
Duty of Loyalty
An executor must care and manage the assets and affairs of the estate as would prudent persons of discretion and intelligence accented by “not honesty alone” but by the punctilio of an honor the most sensitive.
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