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News and Information 7/11/2008:
First American Trust articles featured in Click an image below for full size article 
6/26/2008: The Price of Estate-tax Repeal
Under current law, the federal estate tax does not apply in the year 2010.* Although that may seem to be a positive change, estate beneficiaries won’t necessarily be better off if the repeal takes effect as scheduled. As is so often the case with tax law provisions, the devil is in the details. Example: In 2008, Jill inherits stock from Jack that he originally purchased for $100,000. Instead of using the stock’s $100,000 cost when figuring her capital gain, Jill can use $500,000, the stock’s market value on Jack’s date of death. So, if Jill sells the stock for $500,000, her capital gain will be zero.
A BIG SHIFT Example: Lou dies in 2010, leaving his entire $3.5 million estate to his daughter Linda. The $1.3 million basis step-up is allocated to three parcels of land that are included in Lou’s estate. Like Jack, Lou also owned stock worth $500,000 that he originally purchased for $100,000. While Jill escaped capital gains tax on the sale of her inherited stock, Linda will have a $400,000 capital gain if she sells her stock for $500,000.
A TRADE-OFF 06/07/2007: First American Trust recently hosted a real estate seminar featurning Christopher L. Cagan, Ph.D., Director of Research and Analytics of First American CoreLogic. Click here to view the presentation "MORTGAGE PAYMENT RESET The Issue and the Impact".
1/24/2007:
Contributing to Charity? New Tax Rules Could Affect You
The Pension Protection Act of 2006 (PPA) took a long time to get through Congress and, when all was said and done, pensions weren't the only subject it addressed. It also included a number of changes in the rules applying to charitable contributions. Here's a brief look at some of the changes.
Backing Up Cash Contributions Starting in 2007, charitable deductions for a contribution of money will require a record of the contribution, no matter the amount. The record can be either a written communication from the charity that includes the charity's name, the date of the gift, and the gift amount or a bank record, such as a cancelled check. Gifts of Clothing and Household Items PPA provides, basically, that no charitable deduction will be allowed for contributions of clothing or household items made after August 17, 2006, unless the gifted items are in good used condition or better. The law also notes that the IRS has the authority to issue regulations denying deductions for the contribution of items having "minimal" monetary value (e.g., used socks). Tax-free Charitable IRA Distributions Another interesting aspect of the new law is a provision allowing an income-tax exclusion for distributions from traditional or Roth IRAs to charities for tax years 2006 and 2007 only. These tax-free IRA distributions can be authorized by individuals who are at least age 70˝, and the upper limit on such contributions is a generous $100,000. This annual limit is based on the aggregate amount of an individual's charitable "IRA gifts" in a year, so the tax-free IRA donations may be made up of a number of distributions from one or more IRAs, given to one or more charities. The contributions must consist of IRA distributions made directly by the IRA trustee to charity. No itemized charitable contribution deduction is allowed for "IRA donations," and such donations cannot be made from simplified employee pensions (SEPs) or SIMPLE IRAs. Qualified Conservation Contributions Charitable contributions of less than a taxpayer's entire interest in property are restricted under the tax law and, as a result, are often nondeductible. But the restrictions don't apply to "qualified conservation contributions" of certain real property interests. The new law encourages gifts of real estate for conservation purposes by increasing - from 30% to 50% - the percentage limitation applied to a contributor's "contribution base" (modified adjusted gross income) when calculating the allowable charitable deduction for 2006 and 2007. For qualified farmers and ranchers, PPA raises the deduction limit to 100% of modified AGI. The contributing farmers and ranchers have to specify that the donated land must remain available for agriculture or livestock production. Partial Interests in Artwork The new law has tightened up the rules applying to donations of partial interests in tangible personal property, such as the gift of a painting to a museum for a time. Among the changes is the requirement that the charity receiving the donation must take total ownership of the gifted property within 10 years or at the donor's death, whichever occurs first. Also, the charity must have physical possession of the donated item at least once during the period of partial ownership.
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