Matthew Grosh

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The IRS issues its Standard Mileage Reimbursement Rate each year. The rate determines the amount that can be used as a deduction for business travel and serves as a guideline for employers who reimburse their employees for the same. It reflects not only fuel costs, but also factors in average wear and tear on a…

One of the more popular shows on televisions is Modern Family.  For those of you who have not seen it, the comedy revolves around three interrelated households facing the trials and tribulations of "modern" life.  One of the households belong to Cam and Mitchell, two same-sex partners who have adopted an adorable little girl from Vietnam.  Now, while plotlines featuring them tend to be quite amusing, I can understand that how Cam and Mitchell file their taxes is probably not at the forefront of most viewers’ minds.  However, a recent decision by the Internal Revenue Service regarding its treatment of same-sex couples actually made me consider the notion.

The IRS has recently decided that, for federal tax purposes, it will recognize a same-sex marriage if it is valid where the marriage was entered into, regardless of where the couple actually resides.  This means that even though same-sex unions are not recognized in Pennsylvania, a same-sex couple living in Pennsylvania can be deemed married by the IRS as long as they obtain their marriage in another state where same-sex unions are legally recognized.

This means that legally married same-sex couples will be able to file their 2013 federal income tax returns using either the married filing jointly or married filing separately designations. In addition, they will also be able to file amended returns for prior tax years choosing to be treated as married during those years, as long as those years follow the date of the legal marriage. This treatment will be applied to all federal taxes, including estate, gift and generation skipping taxes. …

Continue Reading IRS Treatment of Same Sex Marriage For The Modern Family

When my friends and colleagues find out that I am a huge fan of the television show Seinfeld, many ask which is my favorite episode.  While I don’t know if I can pinpoint just one (there are too many hilarious installments to choose from ), I can say that one of my favorites is the Soup Nazi episode.

For those of you not familiar with the show, the episode revolves around an irascible chef who runs a small, take-out restaurant in Manhattan that is renowned for its delicious soup. Nicknamed the "Soup Nazi", the chef is obsessed with forcing his customers to line up and follow his strict, no-nonsense ordering policy.  A customer’s failure to strictly obey provokes the Soup Nazi to shout "no soup for you!" and refuse service.  Nonetheless, the soup is so tasty that customers are lined up around the block.

Elaine Benes, a regular character on the show, unwisely flouts the Soup Nazi’s rules and he bans her from buying his soup for one year.  Through another regular character, Cosmo Kramer, the Soup Nazi gives away an armoire, not knowing that Elaine is the intended recipient.  Elaine later tries to thank the Soup Nazi, but he rebukes her, angrily declaring that if he knew the armoire was for her, he never would have given it away. A distraught Elaine returns home only to find a collection of the Soup Nazi’s recipes stashed away in the armoire. Elaine returns to the restaurant to flaunt her discovery and threaten to ruin his business by exposing the recipes. Feeling resigned to his fate, the Soup Nazi closes his restaurant for good.

As funny as the episode is, in real life Elaine could have subjected herself to a lot of grief in exchange for her plot for revenge. This is because those recipes would likely be deemed trade secrets, and Elaine could be accused of misappropriating or even stealing them.…

Continue Reading Lessons from “No Soup For You!” Was Elaine Benes Guilty of Stealing Trade Secrets?

The National Transportation Safety Board caused a stir recently when it recommended lowering the blood alcohol level for driving under the influence to .05 percent nationwide.  The legal limit in Pennsylvania, as well as in almost every other state, is currently .08 percent.  A recent article from the Pittsburgh Post-Gazette, and other online sources, made some interesting points related to the NTSB’s announcement.

The primary point of the Post -Gazette’s article is that even if the change is made, it would not likely be made soon and could perhaps take decades.  Even the Executive Director of the Pennsylvania DUI Association, which supports the lower BAC change, admits that making the change could take "awhile". 

You may remember that back in 2003 the Pennsylvania Legislature reduced the legal limit from .10 to .08.  Pennsylvania was one of the last states to lower its BAC to .08 and it did so only in response to the federal government’s announcement that if it did not do so, it would lose highway funds.  One of the more interesting aspects brought up by the article was that the reduction to .08 percent was the result of a two decade process.  One of the primary concerns back then was that the lower limit would target people having drinks with dinner instead of highly intoxicated drivers who cause the majority of DUI-related accidents. 

The Post-Gazette article also states that while Pennsylvania is reviewing the NTSB’s recommendation, there are no current plans to lower the standard to .05. Moreover, a recent piece by USA Today states that the Governor’s Highway Safety Association supports the current .08 alcohol threshold, citing that when the limit was at .10 it was very difficult to get it lowered to .08.  The Agency also does not expect any state to go to .05 percent.  …

Continue Reading Lowering Blood Alcohol Content Levels for DUI

One challenge many nonprofit organizations face is competing against for-profit businesses to attract key employees and administrators to run their operations. More often than not, nonprofits just do not have the funds to match their for-profit counterparts. Fortunately, there are plenty of qualified administrators out there who are willing to take a lower salary from a nonprofit because they believe in that organization’s mission. However, there is another incentive that most nonprofits have that is not available to for-profit businesses:  Section 457 Deferred Compensation Plans (“457 Plans”). 

As the name suggests, 457 Plans are authorized by Section 457 of the Internal Revenue Code. This section allows tax-exempt organizations and government agencies to establish a deferred compensation plan for key employees. Each year the nonprofit can divert a portion of the employee’s salary (up to $17,500 in 2013) into the 457 Plan instead of paying it directly to the employee. Because those funds go into the Plan the employee is not taxed at that time. Instead, taxes on the amount diverted into the Plan are postponed until the Plan is authorized to dispense funds from the 457 Plan to the employee.

The Plan then acts similarly to a pension or 401K plan in that the money accumulates from year to year in the Plan and generates income on investments. As a result, these Plans are extremely helpful in helping a nonprofit’s key employees plan and save for retirement. Another advantage of a 457 Plan is that the tax on the income on those investments is also postponed until the employee actually starts receiving benefits from the Plan.…

Continue Reading Nonprofits and Deferred Compensation Plans

In a previous post, Disclaimer Trusts – a Flexible Option in an Uncertain Estate Planning World, I discussed the uncertainty that the then looming “fiscal cliff” crisis created in the estate planning world.  Now that the “fiscal cliff” has been averted through the American Taxpayer Relief Act of 2012 (the “Act”), which was approved by Congress on January 1, 2013, such uncertainty has been eliminated.

Prior to the Act, in 2012 estates valued below $5,120,000 were shielded from the federal estate tax by the estate tax credit. If the Act had not been approved by Congress, beginning in 2013, the credit against the estate tax was scheduled to fall to only $1,000,000.  This created some confusion with clients who did not know if the estate tax would apply to them because their estate values fall somewhere between $1,000,000 and $5,120,000.

The Act did several things to clear up such uncertainty.  First, the Act has permanently set the credit against the federal estate tax at $5,000,000, indexed for inflation.  Thus, my clients whose estates are between the $1,000,000 and $5,000,000 values now know that the federal estate tax will not apply to them.

The Act also made the “portability” of the credit permanent.  The portability provisions essentially allow the estate of a decedent to make an election permitting his or her surviving spouse to transfer the unused portion of the decedent’s credit against the estate tax to the surviving spouse.  The surviving spouse can then use that additional credit against lifetime gifts and against the estate tax at his or her death. 

For example, if Bob passes and his estate uses only $2,000,000 of his credit, his estate can transfer his $3,000,000 unused credit to Betty, his surviving spouse.  Adding that amount to the $5,000,000 credit she already had, Betty now has an $8,000,000 credit that she can use against lifetime gifts or against the estate tax at her death.…

Continue Reading The Effect of Fiscal Cliff Legislation on Estate Planning