Tax Issues and IRS Guidance for Irrevocable Grantor Trusts

The significant increase in the federal estate tax exemption under current tax law emphasizes the need for estate planners to minimize income taxes for beneficiaries on assets passed through inheritances and trusts. Revenue Ruling 2023-2 provides guidance regarding the tax basis for assets for certain trusts for federal income tax purposes passing from a decedent upon the owner's death and other key issues. Estate planners and advisers must have a complete understanding of current tax rules and IRS guidance and their potential impact on estate and tax planning.

As fewer estates are subject to estate or gift tax, planners and fiduciary advisers must focus on managing tax basis to minimize the tax cost of transferring assets to beneficiaries. Section 1014 allows inheritors to step up the tax basis of assets, which may reduce capital gains taxes. The basis consistency rules allow the IRS to assess penalties under Section 6662 against the estate or beneficiary for basis reporting inconsistencies stemming from valuations aimed at eliminating income taxes. This accuracy-related penalty for the underpayment of tax resulting from a valuation misstatement can be costly for estates and beneficiaries.

Estate planners must ensure that any valuation of assets for the purpose of achieving a step-up in basis adheres to the tax basis rules under current law and recently issued Revenue Ruling 2023-2. Estate planning advisers must also consider other options such as gift planning techniques, transfers of assets, and the use of trusts to obtain a step-up in basis and avoid the severe consequences of a misstep.

Listen as our panel discusses options and key provisions in structuring trusts, Revenue Ruling 2023-2 and its impact on basis and estate and tax planning, determining and substantiating tax basis, planning considerations for U.S. persons, and other tax issues and basis conundrums encountered by estate and trust advisers

1. Revenue Ruling 2023-2
2. Challenges for taxpayers with irrevocable trusts
3. Identifying low basis assets subject to potential income tax consequences
4. Transfer strategies
5. Post-mortem tools for achieving income tax basis step-up
6. Potential tax risks of basis adjustment strategies

The panel will review these and other important topics:

• Impact of Revenue Ruling 2023-2 on taxpayers with irrevocable trusts
• Reevaluating income tax planning and alternative options for completed gift grantor trusts
• Which class of assets benefit from basis adjustment transactions?
• Using trust decanting and other post-mortem actions to achieve basis step-up
• Structuring sale and exchange transactions between trusts to maximize tax basis
• Tax and other risks involved in basis adjustment transactions and strategies

Learning Objectives

After completing this course, you will be able to:

• Recognize key provisions and planning considerations in light of Revenue Ruling 2023-2
• Understand the Impact of Revenue Ruling 2023-2 for taxpayers with irrevocable trusts
• Ascertain income tax planning and alternative options for completed gift grantor trusts
• Identify which class of assets benefit from basis adjustment transactions
• Understand how to use trust decanting and other post-mortem actions to achieve basis step-up
• Ascertain methods for structuring sale and exchange transactions between trusts to maximize tax basis

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite:

  Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of estate, gift and trust taxation including various trusts types, the unified credit, and portability.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).