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Product ID: 405792EAU
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Issues and Complexities With Income Splitting

OnDemand Webinar (110 minutes)

Understanding the complexities with income splitting can help you make an informed decision and do what makes sense for you and your family.

The focus now is on income tax. With the recent doubling, at least temporarily, of the applicable exclusion from gift and estate taxation, planning professionals are turning their attention to reducing the aggregate income tax burden on the family unit, often by shifting income from a taxpayer in a higher marginal rate bracket to one or more taxpayers in lower brackets. This topic will review the fundamental tax policies underlying the taxation of income, the progressive rate structure, the realization requirement, and the definition of the family as an economic unit, and consider what these policies may imply with respect to opportunities for income shifting. We will look closely at several income shifting strategies, seeking to identify some of the advantages, disadvantages, uncertainties, and limitations of each. You will come away with a much clearer understanding of which techniques might be appropriate to a particular situation, and where the opportunities lie.


Russell A. Willis III, J.D., LL.M., Planned Gift Design Services


Tax Policy Concerns

• The Progressive Income Tax

- 1) Realization

- 2) Characterization

• The Family as an Economic Unit

- 1) Dependents

- 2) Obligations of Support

Lower Bracket Taxpayers

• Children, Grandchildren


- 2) Nongrantor Trust

- 3) the Kiddie Tax

- Pre-2018 and Through 2025

• Former Spouse

- 1) Permanent Repeal of Alimony Deduction, Section 682

- 2) Increased Focus on Qualified Plans

• Other Entities

- 1) Corporation, Passthrough

- 2) Nongrantor Trust


• Wages

- 1) Not Subject to Kiddie Tax, but

- 2) Employment Taxes

• Transfer of Assets, Outright or in Trust

- 1) Unrealized Appreciation

- 2) Ordinary Income, e.g. Passthroughs

• Gift vs. Sale

- 1) Annual Exclusion, Carryover Basis

- 2) Below Market Rate Loan

• 529 Plans, Heet Trusts, etc.

• Split-Interest Trusts