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, a Certified Public Accountant and Utah-licensed attorney. For over nine years, I have assisted clients with estate planning and administration, tax mitigation, tax controversies, small business planning, asset protection, and nonprofit law.

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.

Estate Planning Fundamentals

Every estate plan should include a last will, power of attorney, and health care directive; additional benefits can be realized by including a revocable living trust. Each document serves a particular and important purpose that cannot be served by any of the other documents; these purposes are described below.

A last will and testament specifies who will receive and who will manage and distribute your assets upon your death. It also names a guardian for your minor children. If you pass away without a will, you are said to have died “intestate,” and the laws of the state will determine who receives your assets. In addition, since all minor children under 18 years of age must have a guardian, a guardian will be selected for your children through a judicial process if you pass away without a valid will.

A will does not allow your estate to avoid the probate process; it simply gives directions to the probate court, and a will must be probated in order to be effective. Probate is the legal process for establishing the validity of your will and transferring your “probate property” in accordance with your will. However, incorporating a revocable living trust into your estate plan can allow you estate to avoid the probate process and achieve additional planning objectives.

A revocable living trust is essentially a contract whereby you, as “grantor,” transfer your assets to a “trustee” with specific instructions contained in the trust agreement describing how the trust assets are to be managed. You will typically serve as the initial trustee of your revocable living trust as well as the grantor, meaning that you retain complete control over all of your assets while you are living. A trust can be an especially useful tool for reducing estate taxes that would otherwise be owed or establishing protective trusts for the benefit of your descendants upon your death.

When the grantor of a trust passes away, the successor trustee distributes the trust assets according to the instructions in the trust agreement. This is the mechanism for avoiding probate; the successor trustee legally takes over the management and distribution of your estate. Any property transferred to your revocable trust will avoid probate. Note that some assets pass by operation of law without the need for a trust or probate; these include property held in joint tenancy with rights of survivorship, retirement plans and life insurance policies that have a beneficiary designation, payable-on-death bank accounts, etc.

If you have a revocable living trust, you still require a last will and testament just in case an asset remains in your estate upon death. If your plan includes a trust, your will is often referred to as a “pour-over” will since it simply directs that all of your assets be “poured-over” into your trust to be disposed in accordance with its terms.

A durable power of attorney authorizes whoever is named in that document to act on your behalf to the extent authorized in the document. This document is effective if you are physically or mentally incapacitated, but ends upon your death; this allows another individual to manage your affairs during any time that you are unable. A power of attorney may be drafted so that it is effective from the moment it is signed, or may become effective only if you become incapacitated. After death, the successor trustee of your revocable living trust (or the personal representative named in your will if you do not have a living trust) will possess the powers of management and the right to distribute your assets to your beneficiaries.

An advance health care directive specifies your preference for health care treatment, such as whether life support systems should be continued if there is no hope of recovery. It also appoints someone else to make these decisions for you if ill health prevents you from being able to specify your own wishes. An estate plan may include any number of addition documents, but these are the basics.

More Guidance on IRS Online EIN Applications

The owner of a new business entity can obtain an Employer Identification Number online from the IRS at no charge; in a previous post, I described how to resolve error codes in the online EIN application form. Alternatively, the owner can complete IRS Form SS-4 and submit the form to the IRS so that an IRS agent can assign the EIN. Finally, the owner of a business can enlist the assistance of someone else to obtain an EIN on his or her behalf; such person is known as a "Third Party Designee."

Before a Third Party Designee can obtain an EIN number, he or she must have an IRS Form SS-4 signed by the business owner with the Third Party Designee section completed. This authorizes the designee to receive the entity’s EIN and answer questions the IRS may have about the completion of the form. The requirement that the designee have a completed Form SS-4 signed by the business owner applies regardless of whether the designee is submitting the Form SS-4 to the IRS or applying for the EIN online; however, the designee will not need to actually produce the Form SS-4 if the online application process is utilized.

According to the IRS, a designee who has a signed SS-4 and intends to obtain an EIN online for the business owner must also have the taxpayer sign an additional statement: "The taxpayer must read and sign a statement that he/she understands that he/she is authorizing the third party to apply for and receive the EIN on his/her behalf, and answer questions about completion of the form. A copy of the signed statement must be retained in the third party's files." This additional statement is clearly in addition to the SS-4, because the designee must certify in the online application process as follows: "The taxpayer has completed and signed a Form SS-4, including the TPD Section and has read and signed a statement authorizing me to apply for and receive an EIN on his/her behalf. I have retained copies of both documents in my files."

Oddly, the Form SS-4 instructs the business owner to complete the Third Party Designee section if they "want to authorize the named individual to receive the entity’s EIN and answer questions about the completion of this form." It is difficult to see what additional benefit arises when the business owner signs the additional statement because it is substantially similar to a statement already appearing on the SS-4. The requirement for the additional statement only arises if the designee is utilizing the online application process, but the additional statement isn't even required to expressly state that the online application process will be used. Nevertheless, these two documents are what a third party designee is instructed by the IRS to obtain and retain in their files.

Covenants Not to Compete

A covenant not to compete is an agreement between an employer and an employee whereby the employee agrees not to engage in a business similar to the employer's business, thereby competing with the employer's business. Under common law in Utah, such covenants are not enforceable unless they are "supported by consideration, negotiated in good faith, necessary to protect a company's good will, and reasonably limited in time and geographic area." TruGreen Companies, L.L.C. v. Mower Brothers, Inc., 199 P.3d 929 (2008).

Until 2016, Utah had no statute governing the enforceability of covenants not to compete. However, the Post-Employment Restrictions Act now voids any covenant not to compete entered into on or after May 10, 2016 that lasts more than one year from the date on which employment ends. This restriction supplements any additional restrictions provided for by common law. This one-year maximum does not apply to nonsolicitation, nondisclosure, or confidentiality agreements; it also does not prohibit severance agreements or business sale agreements which include covenants not to compete.

Importantly, the current law provides an award of arbitration and court costs, attorney fees, and actual damages for an employee if an employer has sought to enforce a covenant not to compete that is found to be unenforceable. Proposed legislation would further protect employees by voiding covenants not to compete that are signed in exchange for mere continuation of employment at the same position and pay level. This proposed law would also void covenants not to compete if an employer fires the employee without cause within six months of the employee's signing the covenant not to compete.

Covenants not to compete can protect an employer's legitimate business interests and should be considered anytime an employee is hired. It is also critical to consider whether an existing covenant not to compete will restrict someone desiring to start a new business. In summary, these contracts are important throughout the entire life cycle of any business.

Planning with Multiple Person Accounts

There are many reasons why you might desire to involve someone else with your bank account. You may want to share ownership of the funds in the account. You may want another person to receive the funds in the account upon your death. You may simply want another person to have the ability to facilitate transactions without any ownership or survivorship rights. You may have more than one of these objectives. In order to create more predictability in light of each of these objectives, the Uniform Law Commission produced the Uniform Multiple Person Accounts Act, which has been adopted in many states.

There are three types of multiple-person accounts under the uniform law: joint accounts, pay-on-death accounts, and trust accounts. It is critical to understand the rights you are granting to another person by involving such person with each of these kinds of accounts. A trust account allows a person to serve in a trustee or agency role with respect to the funds without ever obtaining a beneficial interest. Funds remaining in a pay-on-death account on the death of the owner become the property of the pay-on-death beneficiary.

The key feature of a joint account is that while the funds "belong" to the contributor of the funds, any party to the account may unilaterally withdraw the funds in their entirety. The contributor may attempt to recoup funds that they contributed and which another party has wrongfully withdrawn, but this is a difficult and expensive process. Most people assume that the surviving owner of a joint account will necessarily own the remaining amounts in the account upon the death of the other owner, but technically, a joint account may or may not have these survivorship rights.

If your intent with respect to your account is both (1) that another person receive the remaining balance of the account upon your death and (2) that they also "own" the account during your life, then a joint account with right of survivorship makes sense. However, if you have objective (2) but not objective (1), you should ensure that the joint account has a pay-on-death option in lieu of a right of survivorship. On the other hand, if you have objective (1) but not objective (2), you should definitely not have a joint account, but rather a pay-on-death account.

If you have neither objective (1) nor objective (2), but rather simply desire that someone have the ability to facilitate transactions on the account, that person should simply be made trustee of a trust account of which you are the beneficiary. Better yet, a proper estate plan can also facilitate each of these objectives and provide many additional benefits as well.

50 States' Disclaimer of Property Interests

A disclaimer is the refusal to accept the right to receive property. Disclaiming a property interest is an estate, gift, and generation-skipping tax avoidance technique allowed by Section 2518 of the Internal Revenue Code, and the right to disclaim is codified in each states' statutes. A disclaimer is also useful where a person simply does not want the property they would otherwise receive.

The Uniform Law Commission has completed a uniform Disclaimer of Property Interest Act that has been adopted by 20 jurisdictions; a prior version has been adopted by 11 jurisdictions. The American College of Trust and Estate Counsel has an old but somewhat useful summary of each states' law on this matter located here.

Below are current references to each states' property interest disclaimer statutes. This post will be updated as laws change; please comment below if you come across any incorrect or outdated information:

 Ala. Code § 43-8-290
 755 ILCS 5/2-7
 §72-2-811, MCA
 Rhode Island
 R.I. Gen. Laws § 34-5-1
 A.S. § 13.70.010
 I.C. § 32-17.5-1-0.2
 Neb. Rev. Stat. § 30-2352
 South Carolina
 S.C. Code § 62-2-801
 A.R.S. § 14-10001
 Iowa Code § 633E.1
 N.R.S. § 120.100
 South Dakota
 SDCL § 29A-2-801
 Ark. Code § 28-2-201
 K.S.A. § 59-2291
 New Hampshire
 RSA § 563-B:1
 T.C.A. § 31-1-103
 Ca. Prob. Code § 260
 KRS § 394.035
 KRS § 394.610
 New Jersey
 N.J.S. § 3B:9-1
 Tex. Prop. Code § 240.001
 C.R.S. § 15-11-1201
 La. C.C. § 947
 New Mexico
 N.M.S. § 46-10-1
 Utah Code § 75-2-801
 Conn. Gen. Stat. § 45a-578
 18-A M.R.S. § 2-801
 New York
 N.Y. Est. Powers and Trusts Law § 2-1.11
 14 V.S.A. § 1951
 12 Del. C. § 601
 Md. Code, ET § 9-216
 North Carolina
 N.C. Gen. Stat. § 31B-1
 Va. Code § 64.2-2600
 District of Columbia
 D.C. Code § 19-1501
 Mass. Gen. Laws ch. 190B, § 2-801
 North Dakota
 N.D.C.C. § 30.1-10.1-01
 RCW § 11.86.011
 Fla. Stat. § 739.101
 M.C.L. § 700.2901
 R.C. § 5815.36
 West Virginia
 W. Va. Code § 42-6-1
 O.C.G.A. § 53-1-20
 Minn. Stat. § 524.2-1101
 Okla. Stat. tit. 60, § 751
 Okla. Stat. tit. 84, § 22
 Wis. Stat. § 854.13
 H.R.S. § 526-1
 Miss. Code § 89-21-1
 O.R.S. § 105.623
 W.S. § 2-1-401
 Idaho Code §15-2-801
 §469.010, RSMo
 20 Pa.C.S. § 6201

Avoiding a Partnership Tax Return Filing Requirement

According to the IRS, a partnership is a "relationship between two or more persons who join to carry on a trade or business..."  No formal agreement is required; in fact, a partnership can be formed inadvertently, in which case an IRS Form 1065 partnership tax return must be filed.  However, there are a few situations where two or more persons can carry on a trade or business without creating a partnership tax-filing requirement.

If two or more persons have a business relationship that, for tax purposes, constitutes a corporation or trust, obviously such an arrangement is not a partnership. However, a venture that is not a corporation or trust avoids partnership classification if the parties are merely sharing expenses. In addition, a married couple has the option of not filing a partnership tax return if they "materially participate as the only members of a jointly owned and operated business" and file a joint tax return.

Such an arrangement is known as a "qualified joint venture" and cannot be operated through a state-law entity. However, a husband and wife in a community property state may own and operate a business through a state law entity other than a corporation, such as an LLC, and elect to have that LLC disregarded for federal income tax purposes. The business entity must be owned as community property and have no other owners; if so, no partnership tax return is required. These rules are contained in Rev. Proc. 2002-69.

A final example of partnership-type arrangement that does not give rise to a partnership tax return requirement is co-ownership of real property, other than mineral property, but including rental property. Each co-owner must be a tenant-in-common, and title to the property as a whole may not be vested in a state-law entity. However, each tenant may own their interest in the property through an entity that is disregarded for tax purposes. A number of other requirements are set forth in Rev. Proc. 2002-22 which, if satisfied, will result in no partnership filing requirement.

In summary, a partnership can automatically arise for federal tax purposes even where no entity exists under local law. An arrangement of this kind includes a "syndicate, group, pool, joint venture, or other unincorporated organization through or by means of which any business, financial operation, or venture is carried on..." However, arrangements like those described above avoid partnership classification.

Donations of S-Corp Stock

Public charities have been permitted shareholders of S-Corporations since 1998. Since that time, charitably-inclined business owners have sought to donate shares of their closely-held business stock to charitable organizations. Normally, donating long-term capital gain property to a charity is highly tax efficient because (1) the donor receives a deduction for the fair market value of the donated asset, (2) the donor avoids paying tax on the asset's built-in gain, and (3) the charity, being tax-exempt, also avoids paying tax on any gain from the sale of the asset. In a previous post, I addressed some situations where the charity may some tax.

In the case of S-Corp stock, however, charities pay a lot of tax. Section 512(e)(1)(B)(ii) of the Internal Revenue Code requires that "any gain or loss on the disposition of the stock in the S corporation" is included in unrelated business taxable income (UBTI). Unlike the gain on "virtually every other asset that a charity might own," only the gain on the sale of S-Corp stock is includible in UBTI. See Christopher R. Hoyt, Charitable Gifts of Subchapter S Stock: How to Solve the Practical Legal Problems. This is a significant issue because charities typically seek to sell closely-held business interests as quickly as possible, especially stock in S-Corporations.

However, different charities pay different rates of tax on sales of S-Corp stock. Specifically, charities that are trusts pay less tax on gains included in UBTI than do charities that are corporations. This is because trusts are taxed at trust rates, which impose a 20% rate on long-term capital gains, whereas all corporate income, including long-term capital gains, is taxed at corporate rates of around 35%. Moreover, a trust is able to deduct up to 50% of its adjusted gross income for donations to other charities, while corporations are limited to 10%.

This is what makes a Donor Advised Fund at a charity that (1) is a trust and (2) maximizes contributions to other charities, such as Fidelity Charitable, an attractive target for a gift of S-Corp stock. The legal structure of the charity reduces the tax erosion of the gift, while the donor still has the right to advise what organization will ultimately receive the proceeds from the stock sale. Below is a comparison of the post-tax benefits that a corporate charity and trust charity would enjoy from the donation and immediate sale of S-Corporation stock:

 Corporation   Trust 
 Gain from S-Corp. Shares   1,000,000   1,000,000 
 Maximum Charitable Deduction   (100,000)   (500,000) 
 Net Unrelated Business Taxable Income   900,000   500,000 
 Estimated Tax Rate   35%   20% 
 Unrelated Business Income Tax   315,000   100,000 
 Effective Tax Rate   31.5%   10% 

Recognizing an IRS Impostor Scam

In a previous post, I discussed a scam whereby a person purporting to be an IRS agent calls demanding immediate payment of past-due taxes. In this post, my hope is to provide additional insight into how to recognize these scams by reproducing a transcript of an actual phone call to an IRS impostor. The target of the scam in this case was instructed to call 479-935-1612; I am also aware of a scam involving phone number 512-212-1838. The transcript begins when the target returns the call:

JS: Internal Revenue Service, how can I help you?

WC: Yeah, I got a call that said I have to call this number or I'll be arrested.

JS: Alright, and when did you receive this call?

WC: Uh, just a half hour ago.

JS: On this very same number?

WC: Yep.

JS: Can you please confirm for me your first and last name?

WC: Wayne Curley.

JS: Williams Curley?

WC: No, Wayne Curley.

JS: Alright, alright; and can you please confirm for me your area's zip code?

WC: 36608.

JS: 36608, correct?

WC: Yeah.

JS: Alright, now do you have a piece of pen and paper?

WC: Yes.

JS: I want you to take a piece of pen and paper and write down some information. My name is officer Jack... my name is officer Jack Smith and my badge ID number is IRM11010. 11010.

WC: K.

JS: Now, I will go ahead an read out the legal charge against your name, so while I'm speaking do not interrupt me. I will give you a fair time to speak once I am done, alright?

WC: Alright.

JS: We conducted an audit in your tax return for a term of last five years, and we found out that there was a numerical miscalculation error in your tax return, and the return in your file does not match the record that we have. So, according to the section 26 U.S. Code 6651 there is an outstanding amount left for you to pay. Failure to do so will result in your arrest. You will be taken into federal custody as an arrest warrant has been already issued in your name. Your travel will cease and all of the property that is in your name will be seized and even your bank account will be totally frozen, and you will be in federal imprisonment without appeal for a minimum of five years. Now, the total outstanding amount in your name which you owe to the Internal Revenue Service that is 4,987 dollar. So, Mr. Wayne, have you done this intentionally or was it by mistake?

WC: Definitely a mistake.

JS: So, at this point of time do you have an attorney ready to fight in your defense? Because you will be summoned to the United States Tax Court in Washington DC in a matter of 48 hours and the second option is that you can resolve this case outside the court house. So that is your decision because we are not here to force you, we are not here to convince you, we are just here to help on how to resolve this case. You make a right decision; that is your wish. So which option do you want to go for it?

WC: Well, I can't afford an attorney.

JS: So you want to resolve this case outside the court house, this correct?

WC: Yeah.

JS: So, in that case, I am going to connect this call to the senior officer who is handling your case right now and he is the decision maker how to resolve your case and how to make a payment plan for you alright?

WC: Okay.

JS: Stay connected with me, alright?

WC: Okay.

JS: Thank you very much.

JH: Thanks for being on hold, your line has be transferred to Jason Horner; how may I help you?

WC: Well, I'm just trying to resolve my account.

JH: I'm sorry?

WC: Just trying to resolve my account.

JH: Alright sir, your line has been transferred to me so that you want to rectify outside a court house without facing any legal consequences, right?

WC: Yeah.

JH: Alright, so I hope you understand, if you want to resolve this case, then you need to pay what you owe, right? The full outstanding amount is 4,987 dollars, that is the outstanding amount that you owe to the IRS.

WC: Yes.

JH: So, if you want to resolve this case then as I've told you, you need to pay the outstanding amount that you owe to the IRS so can you come up today in order to... in order to resolve this case?

WC: Yeah.

JH: Alright, so if you want to resolve this case, then you need to be online with me you need to stay connected with me on the same recording line, you need to follow the procedure alright? I will guide you step by step how you are going to resolve this case, alright?

WC: Ok.

JH: So at this time the payment is not going to be accepted over the phone call, check, or online payment; this time the payment will be done using electronic federal tax payment system, which is a tax pay voucher that you need to purchase from a government-certified store. I will be guiding you where you have to go and which voucher you need to purchase in order to resolve this case, alright?

WC: Alright.

JH: So, uh, is this your home phone number or this is your cell phone number?

WC: Cell phone.

JH: Alright, so you need to stay connected with me while you're on this recording line; you cannot put me on mute, you cannot put me on hold, you need to stay connected, is that understood?

WC: Yes.

JH: So, you need to drive down to a... a store, a government-certified store, which is... by the government. You can go to either Walmart or a Target or a Rite Aide store. So which store will be convenient and nearest to you?

WC: Um, I'm not sure, I'll have to drive around and see what's closest.

JH: Do you have any nearby store like Walmart or Target?

WC: Um, let me, let me look outside and kind of see where I am. Now I can't... I can't pay this over the phone?

JH: No, no, you're not going to pay a single penny over the phone call.

WC: Oh, and should I go to the IRS website and use their online payment option?

JH: No, no, there is a procedure, alright? Before your warrant get expired, I need to cancel your warrant, so there is a procedure you need to follow the protocols of the IRS, alright, if you want to resolve this case. As I've told you, you need to stay connected with me on this same recording line until... resolve this case; you cannot put me on mute, you cannot put me on hold, alright?

WC: Alright, but I know you can pay online with the IRS's EFTPS system, and you're saying I shouldn't do that?

JH: If you can follow the procedure, I'm here to guide you, I'm here to help you, if you don't follow the procedures that's okay, alright. You can disconnect this call, and just wait to face the consequences.

WC: Can I... can I just mail a check in to the IRS?

JH: No, we are not going to accept from a check or online payment; we're not going to do that.

WC: Why?

JH: As I've told you, there is a procedure, right? If you want to resolve this case, than you need to follow the procedure.

WC: It sounds like...

JH: Step by step, I will guide you on how... on how you're going to make a payment.

WC: It just sounds like an unusual procedure.

JH: I'm sorry?

WC: The procedure you've described sounds very unusual. I didn't know the IRS did that.

JH: So, I'm not here to force you, I'm not here to convince you, you can just disconnect this call and just wait to face the consequences.

WC: And what are the consequences again?

JH: You will be getting arrested within 45 minutes, your state police department will be at your doorstep and your house, your car, your bank account, everything will be seized by the government.

WC: That also sounds unusual, I didn't think the IRS acted in that way.

JH: Why? Why did you say that?

WC: Well, from what I know, the IRS always sends out letters before they take collection action.

JH: Uh-huh. And?

WC: And I didn't get any.

JH: What else?

WC: Well, I didn't get any letters, so why is that?

JH: As I've told you, you can just disconnect this call and just wait to face the consequences, alright?

WC: Are you really the IRS?

JH: No, no I'm not from the IRS.

WC: Where are you from?

JH: I'm from Washington DC.

WC: But do you work for the IRS?

JH: Yes, exactly, why do you ask that kind of question?

WC: What office? Which IRS office are you out of?

JH: Uh, today, sir, if you want to resolve this case, then you need to go down to Walmart, alright?

WC: I don't think you work for the IRS. I think this is a scam.

JH: What?

WC: Yep, I think this is a scam.

JH: Why, why are you saying that?

WC: The IRS doesn't take collection action without sending letters first.

JH: So why... why did you say you want to resolve this case?

WC: Just wanted to see what would happen

JH: Hmm?

WC: So who do you really work for? Where are you located?

JH: We are located 1111 Constitution, Washington DC. Is there any problem?

WC: Well, who do you really work for if your not the IRS?

JH: Are you an idiot?

WC: No.

JH: Then why are you asking these kinds of questions? So get ready to face the consequences. Alright, bye.

WC: Okay, bye.

Reporting Refunds of Charitable Contributions

A donation to a charitable organization is an irrevocable gift, and even if the donor changes his or her mind about the gift, they generally have no legal basis on which to seek a return or refund of the donation. Furthermore, even if the charity desired to return the gift, the rules under the Internal Revenue Code are such that it should be hesitant to do so. For a good summary of these issues, see Richard R. Hammar's article, Refunds of Charitable Contributions.

If a charity nevertheless decides to refund a charitable donation, the question of whether it must then issue an IRS Form 1099 to the donor arises. In general, businesses must file a Form 1099 to report many types of income; the requirement also applies to charities.

It is clear that a taxpayer who receives the full tax benefit of a charitable donation in one year and who receives a refund of that donation in another year is required to include in gross income the amount previously deducted. In this situation, it makes sense that a charity should issue the former donor a Form 1099.

However, if the donor only received a partial tax benefit or no benefit for the donation, the charity would be placing the donor in an unfair position by issuing a Form 1099. Fortunately, the Internal Revenue Code contemplates this and does not require the charity to issue a 1099 when it refunds a charitable donation.

IRC § 6041(a) imposes the 1099 filing requirement where an organization makes a payment of, among other things, "fixed or determinable gains, profits, and income... of $600 or more." PLR 200704004 interprets this provision as follows:
While any accession to wealth can be income, not all income is fixed or determinable. Income is “fixed” when it is to be paid in amounts definitely predetermined [and] is “determinable” when there is a basis of calculation by which the amount to be paid may be ascertained. Because section 6041(a) is conditioned on a payor knowing that a payment to a payee is in the nature of income and the amount of income, if a payor cannot determine either that a payment is in the nature of income or in what amount, then the payor is not required to file an information return under the section...

The effect of the tax benefit rule can be seen in a number of contexts, for example, casualty losses, real estate tax refunds, and charitable contributions... If by its nature a payment to a taxpayer would not be an item of gross income unless the tax benefit rule applies, and the payor has no way of knowing one way or the other, then the payment is not “fixed or determinable” income falling within section 6041(a).
Accordingly, a charity should not need to report refunded charitable donations on Form 1099.

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:
 Allocated Basis (pro-rata):
 Gain on Bargain Sale:
 Ordinary Income Portion:
 Capital Gain Portion:
 Gross Donation:
 Ordinary Income:
 Allowable Deduction: 

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