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A Way to Offset Provision in Tax Overhaul?

Posted by Nina Whitehurst | Jul 13, 2018 | 0 Comments

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Deductions for state and local taxes face a new limit.

One of the more controversial changes in the new tax laws passed in late December was that the itemized deduction for state and local taxes is now limited to $10,000.

Some state governments have tried to figure out a way around the limit for their citizens.  However, the IRS shot most of those down. Some estate planning attorneys might have found a solution, according to Bloomberg in "How the Rich Can Dodge Trump's Property Tax Hike."

The idea is to first create an LLC in a non-tax state such as Delaware or Alaska. Real estate ownership is then transferred to the LLC. After that,  several non-grantor trusts are created. Ownership of the LLC is then divided up and transferred to the new trusts. When tax time comes around each non-grantor trust can take a $10,000 deduction for any property taxes that were paid by the LLC. Effectively, the new deduction limit can be rendered moot.

Of course, the solution still faces the scrutiny of the IRS.

Reference: Bloomberg (June 15, 2018) "How the Rich Can Dodge Trump's Property Tax Hike."

About the Author

Nina Whitehurst

Attorney at Law Nina has been practicing law for over 30 years in the areas of estate planning, real estate and business law She is currently licensed in Alaska, Arizona, California, Colorado, Oregon and Tennessee. Her Martindale-Hubbell attorney rating is the highest achievable: 5 stars in peer...

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