TA 344 FEDERAL INCOME TAXATION OF TRUSTS AND ESTATES SCHOOL OF TAXATION, GOLDEN GATE UNIVERSITY - SUMMER 2012

Instructor: Jeffrey M. Howson Howson & Simon LLP (925) 274-7690 [email protected]

Course Description:

This course provides a review of the federal income taxation of estates, trusts and their beneficiaries. In addition, it covers the grantor trust rules, income in respect of a decedent, the income taxation of a decedent for his/her final taxable year, and a brief review of charitable remainder trusts and state taxation of trusts. The course goes into a fair amount of detail with an emphasis on how federal tax applies to estates and trusts.

Course Objectives:

Upon completion of this course, the student should know how estates and trusts operate as legal entities, how they and their beneficiaries are taxed for income tax purposes with respect to the entity’s income, how the entity’s tax return is prepared, and why one would choose to use a trust or estate. The student should also be familiar with the tax ramifications of an individual’s death.

NOTE: It is not the aim of this course to teach the transfer tax rules, (e.g., estate, gift and generation-skipping transfer taxes).

Course Materials:

1. TA 344 Printed Materials 2. Internal Revenue Code and Regulations – a good source of most (but not all) of the code sections and regulations used in the course is the CCH single volume entitled “Federal Estate & Gift Taxes.” 3. Supplemental: Federal Income Taxation of Estates, Trusts, & Beneficiaries, by Ferguson, Freeland, and Ascher, published by CCH; Federal Income Taxation of Estates and Trusts, by Lane and Zaritsky, published by Warren, Gorham & Lamont; Income Taxation of Fiduciaries and Beneficiaries, by Abbin, published by CCH

In addition, you may wish to resort to other materials to aid in your studies. Many portfolios in the BNA series provide useful, in-depth analysis of a variety of issues affecting estates, trusts and their beneficiaries.

Class Meeting Time

The term will begin on Monday, April 30, 2012 and end on Monday, August 13, 2012. Class meeting time will start promptly at 6:00pm and end at 8:40pm. There are five exceptions to meeting on Monday evening: (1) class on Tuesday, May 29, (2) class on Thursday, July 12, (3) no class on Monday, July 23, (4) no class on Monday, July 30, and (5) class on Thursday, August 9.

Instructor Background:

I worked at Arthur Young & Co from 1968 through 1981, becoming a tax partner in 1978. I started Howson & Simon in 1981 to specialize in tax and financial issues for high net worth individuals, and our focus has remained the same to the present. I have a BA from Harvard College, an MBA from Harvard School, and an MBA in Taxation from Golden Gate University.

Instructor Office Hours:

I am generally available between 9 A.M. to 5 P.M. on Monday through Friday at the phone number listed above. In addition, you can contact me by e-mail.

Course Requirements:

Required prerequisites are TA 318 and TA 329. Background in estate tax and gift tax is helpful, but not required.

Grading:

Each student’s grade will be based upon total points earned on the midterm exam, final exam, class participation, and problem solutions handed in or presented in class. The midterm exam is a take-home exam that involves the entire probate of an estate, and the preparation of the estate’s one and only Form 1041. The midterm exam is a major undertaking that will require at least 30 to 40 hours of work. The final is a 2 hour 40 minute exam to be taken in class, but is open book, open notes. Since it covers all of the rules applicable to trusts, it is in effect a comprehensive exam. In other words, although you need not study the material related to estates, the exam does cover material we discussed from the beginning of the course forward. The course grade points are weighted as follows:

Midterm exam 35% Final exam 40 Participation/Problems 25 Total 100%

Please note that class participation, presentation of problem solutions in class, and handed-in problems will account for 25% (15% for seven problems handed in for grading, 5% for problems uploaded and presented in class, plus 5% for other class participation) in setting the class curve. Effective participation means the student has attended class, has demonstrated that he/she is prepared for class, and has taken part in classroom discussions in a meaningful way by asking informed questions and offering constructive comment and analysis.

In most Units I will assign a homework problem from the TA 344 Printed Materials to each student. Effective presentation of problems means that the student uploads a statement of the assigned problem and its solution by 9pm the night before class and explains the solution during class. If uploaded after 9pm the night before class, credit will be reduced by at least 50%. As stated below in the On-Line Content section, upload the statement and solution of your assigned problem in the Student Homework Solutions Forum for the relevant Unit.

Solutions to the following problems must be handed in by all students at the beginning of the designated class: Chapter II, Problem 2; Chapter III, Problem 12; Chapter IV, Problem 1; Chapter V, Problem 2; Chapter V, Problems 10 and 11; and Chapter IX, Problem 1. Problems handed in late will get zero credit.

After I grade your midterms, I will assign you a letter grade to give you an indication of how well you are doing in the course. With the exception of students withdrawing from the course, (see “Withdrawals and Incompletes” below), these letter grades have symbolic meaning only. Your final course grade will be based upon total points earned on your midterm exam, final exam, and class participation/problems, with points being taken into account on a weighted basis as indicated above.

Generally no late work will be accepted without prior instructor approval. Thus, the take-home midterm must be submitted at the beginning of class on the date specified in the syllabus, and the final exam must be taken in class on the date specified in the syllabus. Failure to comply with this rule means that the student will be assigned no points for the missed assignment, and the student’s grade in the class will be determined on the basis of points earned on timely submitted assignments and through class participation.

Administrative Policies:

I shall administer the course in accordance with Golden Gate University (GGU) policies and procedures.

Academic Integrity. GGU's Policy on Student Academic Integrity is in effect at all GGU teaching locations, including regional classroom sites, corporate sites, and distance courses delivered in any medium. This policy applies to all business, taxation, and technology students at Golden Gate University.

Academic integrity means doing academic work in a manner that strives to achieve the learning objectives your courses have set out for you. It means that you follow the rules and procedures prescribed by your instructors so that you acquire the skills and knowledge your courses are designed to give you. It means that you engage in ethical practices in taking tests and doing assignments and that you respect intellectual property rights by fully disclosing sources of information that appear in your papers and presentations.

Please read GGU’s Policy on Student Academic Integrity: Policy on Student Academic Integrity. For your reference, the link is: http://www.ggu.edu/student_services/student_life/griffin_student_handbook/policy_on_academic _integrity

Because there are only two examinations which count toward your grade--the midterm and the final--the opportunities for academic dishonesty are limited. Your midterm examination is a take- home exam. You will have six weeks within which to complete it. Since I am in no position to prevent students from talking to one another during this period, I do not prohibit them from doing so. You may talk to one another during this six week period. However, the work you hand in must be your own. If, in my vigilant reading of your papers, it appears to me that two or more students are handing in the same work either in whole or in part -- i.e., the same or substantially identical language, format and/or analysis are utilized -- all of these students will be dealt with accordingly. Your final is an in-class, open book, open note examination. As such, the only way one could cheat would be to copy another student’s paper. Be forewarned -- I proctor my own examinations! Anyone caught cheating on the final -- either in the act or upon reading your exams -- will likewise suffer the sanctions permitted under University policy.

Withdrawals and Incompletes. Students wishing to withdraw from, or take an incomplete in the course must do so in accordance with the University’s policies on withdrawals and incompletes. (See the Golden Gate University Catalog.)

A student desiring to withdraw from the course may do so at any time during the first ten weeks of the semester, (termed the “voluntary withdrawal period”), by completing an Add/Drop form and submitting it along with the applicable fee to the Registrar. (Add/Drop forms may be obtained from the Registrar’s office or the Tax School.) After the voluntary withdrawal period, a grade of “W”, (signifying a withdrawal from the course), may only be awarded by me. I will award it to any student (i) who makes his/her request prior to the final exam, and (ii) who is in good academic standing in the course at the time he/she makes the request. To be “in good academic standing in the class,” the student must have a grade of at least “B.” I will make that determination by relying on the grades earned on your midterm and problems handed in. (See Grading above.)

I will award a grade of “I”, (signifying an incomplete in the course), to a student who wishes to be given additional time to complete the course provided the student (i) makes his/her request prior to the final exam, (ii) is in good academic standing in the course at the time he/she makes the request, and (iii) needs additional time due to unforeseen and fully justifiable circumstances. An appropriate deadline for completion of the course will be set. This deadline will in no event be later than the last day of the next succeeding semester, (December 14, 2012), although it may be of a shorter duration. If the student fails to complete the course by the agreed upon date, the missing work will be treated like any unapproved late work, and the student’s final course grade will be determined accordingly. (See Grading above.) Note that the award of an “I” only provides the student with additional time within which to complete the course; it does not allow the student to sit in on the same course in a subsequent semester. Furthermore, a student requesting an incomplete will not later be allowed to withdraw from the course.

Students requesting a withdrawal or an incomplete after an assignment is due without having handed in that assignment, (e.g., either the midterm or final exam), will be treated in the same manner as any student who missed an assignment without prior approval. (See Grading above.)

On-Line Content

An integral part of the course is the online content. The computer screen contains a series of Units from 1 to 16. By accessing the items within each Unit, you will find additional required reading, lecture material, “board” outlines, problem formats and problem answers.

As stated above, you should timely post answers to assigned problems to be presented in class in the Student Homework Solutions Forum for the relevant Unit.

In addition, you will be given a password enabling you to use RIA Access.

COURSE SCHEDULE

UNIT: DATE CHAPTER ASSIGNMENT

1: 4/30 Introduction Read: All Unit 1 online materials and textbook Preface Download the following documents in Unit 1: Simple Trust Format – FAI>DNI, Smith Family Trust Agreement, Comments on Smith Family Trust, Will of Calvin P. Archibald, Comments on Archibald Will, Revocable Trust Flowchart, Revocable Trust Agreement (optional), Pour Over Will (optional), Trust and Will Diagrams

2: 5/7 I Entities Subject to Subchapter J Read: All Unit 2 online materials and textbook Chapter I. Morrissey case has been superseded by “check the box” regulations, so read carefully §301.7701-4(a), §301.7701-2(a), §301.7701-3(a), (b)(1). Problems: All

3: 5/14 II Fiduciary Income Appendix A Read: All Unit 3 online materials, textbook Chapter II, pages A-1 through A-4 of Appendix A in tab 11 Download the following documents in Unit 3: Lecture Estate of Joe Smith Example Format; Chapter II, Problem 1 Format; Chapter II, Problem 2 Format; Lecture Trust Example Format; California Uniform Principal and Income Act Problems: All Hand in: Chapter II, Problem 2 Hand Out: Midterm Exam

4: 5/21 III Taxable Income Read: All Unit 4 online materials and textbook Chapter III through material on Net Operating Losses (through page III-41) Download in Unit 4: Knight v. Comm. Problems: 1 - 6

5: 5/29 III Taxable Income, continued Tuesday Read: All Unit 5 online materials and remainder of Chapter III Download in Unit 5: Chapter III, Problem 12 Format Problems: 7 – 12 Hand in: Chapter III, Problem 12

UNIT: DATE CHAPTER ASSIGNMENT

6: 6/4 IV Distributable Net Income Read: All Unit 6 online materials and textbook Chapter IV Download the following documents in Unit 6: Chapter IV, Problem 1 and Chapter V, Problem 2 Format; Chapter IV, Example 4.1 Format; DNI – Capital Gain Problems: All Hand in: Chapter IV, Problem 1

V Distribution Deduction Read: Textbook Chapter V through material on Simple Trusts (through part of page V-43) Download in Unit 6: Simple Trust Format – DNI>FAI Problem: 1

7: 6/11 V Distribution Deduction, continued Read: All Unit 7 online materials and textbook Chapter V through material on Complex Trusts, Estates and Separate Share Rule (through page V-53) Download in Unit 7: Lecture Example Format Problems: 2 – 7 Hand in: Chapter V, Problem 2

8: 6/18 V Distribution Deduction, continued Appendix B Read: All Unit 8 online materials and remainder of textbook Chapter V, Appendix B, and Chapter IX pp. 17-23 Download in Unit 8: Chapter V Problem 10 Format Problems: 8 – 11 Hand in: Chapter V, Problems 10 and 11

9: 6/25 VII Passive Activity Losses Read: All Unit 9 online materials and textbook Chapter VII Download the following documents in Unit 11: Mattie K. Carter Trust, Passive Loss Examples 7.20 and 7.21 Format; TAM 200733023

MIDTERM EXAM DUE (Note: if Midterm Exam is handed in late without prior instructor approval, student will be awarded no points.)

UNIT: DATE CHAPTER ASSIGNMENT

10: 7/2 VI Grantor Trusts Read: All Unit 10 online materials; textbook Chapter VI through page VI-17; §§671, 672, 673, 677 and Regs. thereunder Problems: 1 - 7

11: 7/9 VI Grantor Trusts, continued Read: All Unit 11 online materials; remainder of textbook Chapter VI; Articles THIRD, FOURTH, FIFTH, and SEVENTH in Smith Family Trust Agreement; §§674, 675, 676, 678, 679 and Regs. thereunder (except those for §679) Problems: 8 - 12

12: 7/12 VIII Income in Respect of a Decedent Thursday Read: All Unit 12 online materials and textbook Chapter VIII Problems: All, except do Problem 5 in online Unit 12 rather than Problem 4 in the textbook.

13: 7/16 IX Decedent’s Final Return/Post-mortem Planning Read: All Unit 13 online materials and textbook Chapter IX Download in Unit 13: Chapter IX Problem 1 Format Problems: All Hand in: Chapter IX, Problem 1

7/23 No Class

7/30 No Class

14: 8/6 X Procedural matters, Charitable Remainder Trusts, and State Taxation of Fiduciaries Read: All Unit 14 online materials; textbook Chapter X; §664 Download the following documents in Unit 14: CRT Reading, CRT Examples, and CRT Analysis. Additional documents on state fiduciary taxation from the guest speaker will be available when uploaded.

15: 8/9 Review Thursday Download and prepare: Practice Exam in Unit 15 online materials

16: 8/13 FINAL EXAMINATION