Environmental Clean-up Expenses: Taxing Times for the BLM and Miners

In 2001, the BLM amended 43 C.F.R. Section 3809 to give the BLM the power to require that mining companies establish a trust fund to provide for long-term maintenance and water treatment. The amended regulations do not mention taxes, and there is no evidence in the legislative history that the BLM ever contemplated the income tax effect of utilizing a trust mechanism to provide for environmental clean-up. While a partner at a law firm, the author of this article had the privilege of being the primary drafter of the first two trust agreements ever required by the BLM under these relatively new regulations. This article focuses on the federal income tax issues related to drafting and funding these trusts. The author concludes that the law is currently unclear regarding the way they are taxed, and, as a result, the taxation of these trusts will depend on the way the trust agreement is drafted The author offers a proposal to change the tax law to establish a general rule regarding how these trusts will be taxed More specifically, this article proposes that mining companies should be allowed a present federal income tax deduction for any funds put into a trust at the request of the BLM Furthermore, such trusts should be tax-exempt entities if the mining company agrees to forego any reversionary interest or, if it does not agree to forego its reversionary interest, entities that are taxable separate from the mining company

Taxation Without Liquidation: Rethinking Ability to Pay

This Article proposes a novel way to tax wealth transfers. Specifically, it suggests that we divide all assets transferred by gift or bequest into two classes--illiquid assets and liquid assets. The recipient should include those assets in income but be allowed two options. With respect to illiquid assets, the recipient should be able to avoid immediate income inclusion if he takes the property with an income-tax basis of zero. With respect to liquid assets, the recipient should be allowed a full income-tax deduction if he rolls the gift or bequest into a deductible IRA. The combination of these simple rules would be much more equitable than our current system, and it would prevent people from having to sell illiquid assets to pay taxes

The Impact of Federal Law on a Decedent’s Digital Assets

Recently, estate planners and scholars have begun to grapple with the problem of transferring digital assets at death. In Probate Law Meets the Digital Age, Professor Naomi Cahn adds an interesting new dimension to this relatively new issue. She focuses on the effect of the Stored Communications Act (“SCA”) on estate administration. Although the SCA does not affect a fiduciary’s ability to distribute assets once they are discovered, it affects the fiduciary’s ability to examine on-line accounts to discover those assets

Estate Tax Repeal Under EGTRRA: A Proposal for Simplification

This Article generally discusses the Economic Growth and Tax Relief Reconciliation Act of 2001 and proposes a relatively simple change that would simplify and reduce the costs of estate planning. Specifically, the Article proposes that the first spouse\u27s unused basis step-up should be transferred to the surviving spouse automatically at the death of the first spous

Environmental Clean-Up Expenses: Taxing Times for the BLM and Miners

In 2001, the BLM amended 43 C.F.R. Section 3809 to give the BLM the power to require that mining companies establish a trust fund to provide for long-term maintenance and water treatment. The amended regulations do not mention taxes, and there is no evidence in the legislative history that the BLM ever contemplated the income tax effect of utilizing a trust mechanism to provide for environmental clean-up. While a partner at a law firm, the author of this article had the privilege of being the primary drafter of the first two trust agreements ever required by the BLM under these relatively new regulations. This article focuses on the federal income tax issues related to drafting and funding these trusts. The author concludes that the law is currently unclear regarding the way they are taxed, and, as a result, the taxation of these trusts will depend on the way the trust agreement is drafted The author offers a proposal to change the tax law to establish a general rule regarding how these trusts will be taxed More specifically, this article proposes that mining companies should be allowed a present federal income tax deduction for any funds put into a trust at the request of the BLM Furthermore, such trusts should be tax-exempt entities if the mining company agrees to forego any reversionary interest or, if it does not agree to forego its reversionary interest, entities that are taxable separate from the mining company

It Taxes a Village: The Problem with Routinely Taxing Barter Transactions

Under current law, all true barter transactions, such as babysitting cooperatives, create taxable income. Although the IRS often fails to catch unreported transactions, lawyers and accountants have an ethical duty to advise clients to report these taxable transactions on their income tax returns. This article proposes that Congress change the law to generally exclude barter transactions from income when they do not rise to the level of being a trade or business of the taxpayer. This simple change to the law will allow communities to work together without worrying about tax disincentives for doing so

Sales Gone Wild: Will the FTC\u27s Business Opportunity Rule Put an End to Pyramid Marketing Schemes?

This article analyzes the anticipated effect of the FTC\u27s Business Opportunity Rule on pyramid marketing schemes. Pyramid marketing schemes consistently rank in the top ten lists of consumer complaints received by the FTC and state consumer protection divisions, victimizing 1.5 million Americans a year. One recent class action settlement demonstrated that the victims, who are often relatively poor and uneducated, had an average loss of approximately $8,000 each. The FTC has promulgated a new Business Opportunity Rule in an effort to end these abuses. Promotors of business opportunities will be required to comply with the new rule beginning on July 1, 2008. This article carefully analyzes the rule and concludes that it will not be effective at stopping these schemes. The article suggests several key changes to the rule and recommends congressional legislation to stop the abuses

Reviving the Dead Hand After Repeal of the Rule Against Perpetuities

This blog post summarizes a recent article by Reid Kress Weisbord, Trust Term Extension, 67 Fla. L. Rev. 73 (2015)

Selecting a Trust Situs in the 21st Century

While members of Congress vigorously debate the advantages and disadvantages of keeping the current transfer tax system, states rapidly are enacting laws that entice long-term trusts to those states. Although establishing or relocating a trust to a state other than the grantor\u27s home state is not for every family, it is a planning technique that merits consideration by families with significant assets. The chart on pages 60-63 provides general information on the laws of all fifty states. This article focuses on three specific considerations related to selecting a favorable trust situs. First, it considers the effect of recent repeals or modifications of the Rule Against Perpetuities (RAP). Within this context, this article primarily focuses on generation-skipping transfer tax (GST Tax) implications. Second, it considers ways to carefully select a situs that can provide families with protection from creditors. Finally, the article examines ways to use favorable state tax laws to reduce a client\u27s state income tax. After discussing these three specific considerations, the article examines some general considerations related to trust situs