Intentionally Offer Estate Tax 2024


Intentionally Defective Trusts Offer Estate Tax Benefits 2023

Intentionally Defective Trusts Offer Estate Tax Benefits 2023

In most circumstances, you wouldn’t consider implementing something that is deliberately defective, but when it comes to estate planning you just might. If your individual estate is worth more than $12.92 million or $25.84 million as a couple, which is the current estate tax exemption threshold, then you might want to use an “intentionally defective grantor trust” as part of your estate plan. The trust removes assets from your estate and prevents them from being subject to the estate tax at your death.

There are two ways to fund such a trust. You could make a gift to the trust. Note, that gift taxes for the amount you transfer to the trust won’t be invoked unless you exceed the lifetime gift tax exemption of $12.92 million for individuals and $25.84 million for couples.

You could also sell assets to the trust. You would do this in exchange for a promissory note, whereby the trust would pay you a certain amount, with a small amount of interest, for a set period of years. When selling assets to the trust, you won’t be taxed on any capital gains you realized since acquiring the assets.


If the assets in the trust generate any revenue, such as rental income from a real estate property or dividend or income payments from investments, you will have to pay the annual income taxes due on that revenue. This nuance is where the trusts get their name. They are “effective” for estate tax purposes because they remove assets from your taxable estate, but they are “defective” for income tax purposes because you still have to pay income taxes on the revenue the assets in the trust generate. You would not take the income for personal use however as it stays within the trust. Further, the income taxes you pay are not considered gifts to the trust, so the amounts paid for the income taxes are not also subject to gift taxes.

These trusts are irrevocable as you cannot ever regain ownership of the value of the assets placed in the trust. But they are unlike other irrevocable trusts because you can maintain some control over the trust. After establishing the trust, you can at some later point swap the assets in the trust for other assets of equal value. You may also be able to change the beneficiaries of the trust. The fact that you are still paying income taxes on the trust revenue is what enables you to maintain this degree of control over the trust.

These trusts also enable you to “freeze” the value of assets that might highly appreciate. If held outside a trust, any further increases in the value of that asset would be counted as part of your estate and potentially subject to estate taxes. Once inside the trust and outside your estate, however, any further appreciation in the value of the assets placed in the trust would be free of estate taxes.

Your tax advisors and estate planning attorney can help you determine if an intentionally defective grantor trust would be an effective part of your plan and, if it is, what assets would be most suitable to place in such a trust. For more information or to discuss this strategy in detail, contact your Anchin Relationship Partner, or Tara Burek, a Partner in Anchin’s Private Client Group.

Estate Tax Exemption Increased for 2023

The IRS has recently announced that the 2023 Estate Tax Exemption will be $12.92 million. This exemption represents the amount of a decedent’s estate (including previously taxable gifts) that is exempt from estate tax. The increased exemption is $860,000 more than the 2022 amount and is the result of the rising high-interest rates reflected in the rapid growth of the consumer price index.

2023’s larger exemption presents the opportunity for married couples who coordinate their estate planning to protect $25.84 million from estate taxes. Additionally, the exemption amount is unified with the federal gift tax exemption – utilization of this exemption through lifetime gifting reduces the amount of exemption available at death. The highest estate or gift tax rate remains the same at 40% next year.

Estate Tax Exemption Increased for 2023


For taxpayers who have previously used all of their available exemption through lifetime gifting, the increase in 2023 means that they can give an additional $860,000 next year without paying gift tax, while married couples can give a combined $1.72 million.


Since 2012, the estate tax exemption has been indexed for inflation and updated annually. At that time, the base was set to $5 million, but this base was doubled in 2017. The increased base is effective for tax years 2018 through 2025, and after 2025 will again be determined using the $5 million base.

  • Consideration should be given to estate planning to utilize this larger exemption amount before 2026.


Taxpayers who make annual gifts can exclude $17,000 of present interest gifts in 2023; this amount is an increase of the 2022 amount of $16,000. Present interest gifts are gifts that the donee can enjoy – generally cash or similar property, and gifts made to certain trusts.

For gifts to non-US citizen spouses, taxpayers can gift up to $175,000 in 2023 before utilizing their Estate Tax Exemption. While gifts to US citizen spouses are unlimited, gifts to non-citizen spouses are not.

The Two Mysterious Taxes of Commercial Real Estate Leases

The Two Mysterious Taxes of Commercial Real Estate Leases

Business owners and operators tend to be well aware of their income tax obligations, which are often taken into consideration when performing due diligence, compliance, and budgeting responsibilities. 

However, many businesses are surprised to learn that certain jurisdictions have an additional tax requirement in connection with their office or retail space leases. In fact, these taxes are rather counterintuitive to the typical application of tax. Normally, a landlord or real estate owner is taxed on the rental income they receive. Yet, these taxes uniquely deviate from that general concept and are instead imposed on the business lessee. If you lease commercial real estate, continue reading below for information on some mysterious taxes that may impact your company.


One of the most overlooked New York taxes is the Commercial Rent Tax (CRT). The tax is imposed at a 6% rate on commercial tenants located from the south side of 96th street all the way down to the southern tip of Manhattan. The CRT is triggered when a lessee’s annual rent, or annualized rent in a partial year, is $250,000 or more. For purposes of the CRT, rent is defined very broadly and includes a host of tenant charges beyond simply the contracted rent, such as utilities and real estate taxes. However, it should be noted that deductions for subleases and certain small business credits can help reduce or even eliminate the CRT in some instances.

Due to such non-compliance, New York has recently stepped up their audit efforts to a furious pace around the CRT. The taxing authorities are well aware that many taxpayers are not paying CRT and have committed additional resources to enforce compliance. Moreover, New York City business tax returns for both corporations and partnerships now include specific questions verifying a business’ rent for CRT purposes and confirming its CRT filing status.


While the state of Florida may be the place to escape personal income tax, many out-of-state businesses are stunned to learn that their commercial real estate leases in Florida are subject to the sales tax. In other states, sales tax is primarily levied on tangible personal property that one can touch, move and consume. The real property however is not deemed taxable. That is unless the real estate is commercially rented in Florida, in which case it is subject to the state’s 5.5% sales tax and potentially additional discretionary county surcharges.

In determining the base rent subject to tax, payments including common area maintenance, parking, and janitorial services are taxable. Further, payments made by a tenant on behalf of the landlord are likewise subject to tax, such as real estate taxes and insurance. Subleases are also subject to tax but are creditable to the primary tenant on a pro-rated basis for the sales tax and surtax paid to the landlord on the portion of the space subleased.


It is odd to think that a lessee of real estate would be subject to a tax on their lease payments. However, the New York City CRT and Florida sales tax are just that – oddities. They are the only two taxes imposed on commercial real estate leases and, therefore, are often missed. Failing to comply with these taxes can lead to painful audit examinations causing large tax liabilities and penalty assessments. Thankfully, taxpayers can mitigate their exposure to these outstanding liabilities by taking advantage of voluntary disclosure programs which enable companies to return to compliance while limiting the extent to which back taxes are collected.

If you have questions regarding your company’s tax compliance with respect to its commercial lease or seek more information about applying for voluntary disclosure in connection with these taxes, please contact Alan Goldenberg, Principal, and Leader of the State and Local Taxation and Tax Controversy groups, or your Anchin Relationship Partner. If you have specific questions about the Florida Sales Tax, please contact Kathleen Braica, Florida Office Leader and Partner in the Private Client group.

Key Reminders when Planning to Take Advantage of the New York Pass-Through Entity Tax (PTET)

With the approaching New York Pass-Through Entity Tax (PTET) deadlines, it’s important for pass-through entities to be aware of the related due dates and deadlines in order to avoid penalties, costly fees, and missed tax-saving opportunities. The New York State 2023 Fiscal Year Budget Bill made significant changes to the New York State Pass-Through Entity Tax (NYS PTET) and also introduced a New York City Pass-Through Entity Tax (NYC PTET).

  • Below are a few things to keep in mind as the New York PTET deadline approaches.


  • The 2022 NYC PTET election is still available until March 15, 2023, but you must have already been elected into the NYS PTET for 2022.

Note: An entity that did not opt into the NYS PTET by the September 15, 2022, extended election date cannot participate in the NYC PTET for the 2022 tax year.


  • 2022 NYS and NYC PTET returns are due by March 15, 2023. An electing entity can, however, request an extension of six months through its Business Online Services account.

Note: This is only an extension to file the PTET return and not an extension of time allowed for payment of any taxes due.


  • For those opting into the 2023 PTET for NYS and/or NYC, the election deadline is March 15, 2023. A first-quarter estimate is due by March 15th as well.

Note:  It is crucial for pass-through entities in New York to remain aware of the various PTET deadlines and due dates in order to ensure timely elections, filings, and payments of their tax obligations, avoid potential penalties, maintain compliance, and benefit from these tax regimes.

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