Welcome to CPA at Law, helping individuals and small businesses plan for the future and keep what they have.

This is the personal blog of Sterling Olander, Certified Public Accountant and Attorney at Law. For over five years, I have worked as a tax professional helping clients with tax mitigation strategies, tax controversies, business transactions, wealth preservation structures, tax-exempt organiations, and estate plans.

I write about any legal, tax, or technological information that I find interesting or useful in serving my clients. All ideas expressed herein are my own and don't constitute legal or tax advice.

50 States' Temporary Parental Power Delegation Forms

Many states have statutes allowing parents to temporarily delegate certain parental powers to another person. A standard form is often available; this post provides a link to a Temporary Delegation of Parental Rights form from an authoritative source in every state where such a form is available. This post will be updated as better sources become available; please comment below if you come across broken links or better forms or resources than what I currently have:

 Alabama  Illinois  Montana  Rhode Island
 Alaska  Indiana  Nebraska  South Carolina 
 Arizona  Iowa  Nevada  South Dakota
 Arkansas  Kansas  New Hampshire  Tennessee
 California  Kentucky  New Jersey  Texas
 Colorado  Louisiana  New Mexico  Utah
 Connecticut  Maine  New York  Vermont
 Delaware  Maryland  North Carolina  Virginia
 District of Columbia   Massachusetts  North Dakota  Washington
 Florida  Michigan  Ohio  West Virginia
 Georgia  Minnesota  Oklahoma  Wisconsin
 Hawaii  Mississippi  Oregon  Wyoming
 Idaho  Missouri  Pennsylvania   

Donations of Closely-Held Business Interests

A charitable donation of long-term capital gain property is a useful tax-planning technique for charitably-inclined individuals. The reason this works is because the donor (1) receives a deduction for the fair market value of the donated asset and (2) avoids paying tax on the built-in gain of the asset. However, in the case of a donation of an interest in a closely-held business taxed as a partnership, two issues often arise which impact this strategy: Business liabilities and ordinary-income property.

Because relief of debt is considered taxable income, a donor who has been allocated a share of a partnership's liabilities and who transfers the interest to a charity is deemed to have engaged in two separate transactions. First, a sale transaction has occurred, whereby the donor realizes income equal to the amount of debt relief. Second, a donation has occurred, whereby the donor makes a contribution equal to the fair market value of the interest less the amount of debt relief. The donor's basis is allocated pro-rata between the two transactions, meaning the donor will recognize and pay tax on the gain arising from the "bargain sale."

The donation is further complicated if the partnership owns ordinary-income property. This is because I.R.C. § 170 requires the amount of a charitable deduction to be reduced to the extent that a sale or exchange of the contributed property would generate ordinary income.

Chapter 7 of the IRS's Partnership Audit Technique Guide contains an example addressing the impact of the debt-relief issue, which I've modified below so that it also illustrates the impact of ordinary-income property, or "hot assets." In this example, an individual donor contributes a partnership interest valued at $50,000 to a public charity. The donor's basis in the interest is $40,000 and the donor is allocated $30,000 of partnership liabilities. In addition, the partnership owns a fully-depreciated piece of equipment which, if sold, would result in $2,000 of ordinary income allocated to the donor. The consequences of this donation on the donor should be as follows:

 Bargain Sale: Footnotes:
 Deemed Proceeds:
 30,000
1.
 Allocated Basis (pro-rata):
 -24,000
2.
 Gain on Bargain Sale:
 =6,000
 Ordinary Income Portion:
 1,200
3.
 Capital Gain Portion:
 4,800
 Donation:
 Gross Donation:
 20,000
 Ordinary Income:
 -800
4.
 Allowable Deduction: 
 =19,200

1. Rev. Rul. 75-194, 1975-1, C.B. 80.
2. Treas. Reg. § 1.1011-2(c).
3. The proper allocation of the gain on the bargain sale between ordinary income and capital gain is not clear. See Jonathan G. Tidd, Charitable Gifts of Limited Partnership and Limited Liability Company Interests, Trusts & Estates, October 2015.
4. I.R.C. § 170(e)(1)(A).

50 States' Health Care Directive Forms

All states have statutes allowing individuals to (1) express their health care wishes and/or (2) appoint an agent to see that those wishes are carried out in the event of incapacity. A standard form or set of forms is available in each jurisdiction for the public to use; this post provides a link to a health care directive form or forms from an authoritative source in every state. This post will be updated as better sources become available; please comment below if you come across broken links or better forms or resources than what I currently have:

 Alabama  Illinois  Montana  Rhode Island
 Alaska  Indiana  Nebraska  South Carolina
 Arizona  Iowa  Nevada  South Dakota
 Arkansas  Kansas  New Hampshire  Tennessee
 California  Kentucky  New Jersey  Texas
 Colorado  Louisiana  New Mexico  Utah
 Connecticut  Maine  New York  Vermont
 Delaware  Maryland  North Carolina  Virginia
 District of Columbia  Massachusetts  North Dakota  Washington
 Florida  Michigan  Ohio  West Virginia
 Georgia  Minnesota  Oklahoma  Wisconsin
 Hawaii  Mississippi  Oregon  Wyoming
 Idaho  Missouri  Pennsylvania