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This page contains a single entry by Associate Editor - 2 published on October 25, 2012 2:47 PM.

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A Potpourri of Developments: Wandry Appeal Dismissed, Same-Sex Marriage Developments & 2013 Inflation Adjustments (Including $14,000 Annual Gift Tax Exclusion)

A Potpourri of Developments: Wandry Appeal Dismissed, Same-Sex Marriage Developments & 2013 Inflation Adjustments (Including $14,000 Annual Gift Tax Exclusion)

Managing Director & Head of Wealth Advisory 
Lazard Wealth Management LLC

Here are some of the latest developments in the estate planning world. 

Wandry Parties Agree to Dismiss Appeal to 10th Circuit with Prejudice

On March 26, 2012, the Tax Court issued what has been heralded as a ground breaking decision in Wandry v. Commissioner, T.C. Memo 2012-88. The Court upheld a stated dollar value defined value clause of gifts of LLC interests, in which no charity was involved in the formula allocation. A Notice of Appeal to the 10th Circuit was filed on August 28.

Pursuant to Stipulations to Dismiss dated October 16, the parties stipulated that the case be dismissed with prejudice, that each party bear its own appellate costs, and that an order of dismissal be entered by the Clerk of the Court.  The Order dismissing the appeal was filed on October 17.

Same-Sex Marriage Developments

On the heels of last Thursday's decision by the Second Circuit in Windsor v United States,  No. 12-2335 (2nd Circuit Oct. 18, 2012) that Section 3 of the Defense of Marriage Act is unconstitutional, I thought you would be interested in these developments on the same-sex marriage/union front.  

Rhode Island Allows Marital Deduction for Same-Sex Spouses and Civil Union Partners

On September 21, 2012, the Rhode Island Division of Taxation issued a declaratory ruling regarding the Rhode Island estate tax marital deduction.  Pursuant to the ruling, a Rhode Island estate tax marital deduction is allowable for property passing between partners of a Rhode Island civil union as well as same-sex couples lawfully married out of state, provided the requirements of IRC § 2056 are met.  Rhode Island civil union partners and same sex-spouses lawfully married out of state are also allowed to include in the gross estate of a decedent one-half the value of certain joint property interests, provided the interest meets the requirements of IRC § 2040(b)(2).  

New Jersey Introduces Bill Allowing Executor to File Joint Tax Returns With Surviving Same-Sex Partner 

New Jersey law currently authorizes a fiduciary to join with a surviving spouse, executor or administrator to (1) file a joint income tax return for any period prior to the decedent's death for which no return was filed or (2) file a gift tax return for gifts made by the surviving spouse, consent to gift-splitting for any period prior to the decedent's death and pay taxes chargeable to the decedent.  On October 11, identical bills were introduced in the Assembly and Senate to authorize a fiduciary to join with a partner in a civil union or a domestic partner (as well as a surviving spouse) to file such joint returns. 

But in that Regard, a Reminder....From the IRS 

In "Answers to Frequently Asked Questions for Same-Sex Couples," the IRS has posted questions and answers to provide information to same-sex partners whose marriage/union is recognized by state law.  The IRS reminds same-sex partners legally married for state law purposes that they cannot file using married status because federal law does not treat same-sex partners as married for federal purposes. 

Additionally, according to the FAQs: 

-  A taxpayer may not file as head-of-household if the taxpayer's only dependent is a same-sex partner; 
-  Either same-sex parent, but not both, may claim a child as dependent; 
-  A same-sex partner may itemize or claim the standard deduction regardless of whether the other partner claims the standard deduction or itemizes; and 
-  Each partner may claim the adoption credit for expenses paid or incurred by the partner during the adoption process, but both spouses cannot claim the credit for the same expenses. 

The IRS released a second set of FAQs, addressing same-sex filing issues in community property states.  According to the FAQs, registered domestic partners and same-sex  spouses who reside in community property states must each report half of the combined community income earned by the partners; all non-community income must be reported separately.

Registered domestic partners in California, Nevada and Washington who reported income on their pre-2010 returns without regard to community property laws, may, but are not required to, amend their returns to report half the community income of the partners.  

The FAQs also address the reporting requirements of domestic partners for social security benefits, schedule C income, wages and other income, and clarify which partner is entitled to credits for income tax withholding, estimated tax payments, and various other credits and deductions.

2013 Inflation/Cost of Living Adjustments

On October 18, the IRS announced (1) 2013 annual inflation adjustments for more than two dozen tax provisions and (2) 2013 cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items.

Among the highlights of the inflation adjustments:

•        Annual exclusion: The annual exclusion for gifts rises to $14,000 for 2013, up from $13,000 for 2012.

•        Gifts to Non-US Citizen Spouses: The annual exemption for gifts made to a non-US citizen spouse rises to $143,000 in 2013, up from $139,000 in 2012.

•        Notice of large gifts from foreign persons: IRC section 6039F authorizes the IRS to require recipients of gifts from certain foreign persons to report these gifts if the aggregate value of gifts received in the tax year exceeds $15,102 in 2013, up from $14,723 in 2012.

•        Kiddie tax: The amount used to reduce the net unearned income reported on a child's tax return subject to the "kiddie tax," is $1,000 in 2013, up from $950 for 2012.

Among the highlights of the cost of living adjustments:

•        401(k) Plan Contribution Limits: The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased from $17,000 to $17,500.

•        Traditional IRA Contribution Phase-Outs: The deduction for taxpayers making contributions to a traditional IRA who are covered by a workplace retirement plan is phased out for singles and heads of household who have modified adjusted gross income (AGI) between $59,000 and $69,000, up from between $58,000 and $68,000 in 2012.  For married couples filing jointly in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $95,000 to $115,000, up from $92,000 to $112,000 in 2012.  

•        Roth IRA Contribution Phase-Outs: The AGI phase-out range for taxpayers making contributions to a Roth IRA is $178,000 to $188,000 for married couples filing jointly, up from $173,000 to $183,000 in 2012.  For singles and heads of household, the income phase-out range is $112,000 to $127,000, up from $110,000 to $125,000 in 2012.  

Some pension plan limitations will remain unchanged for 2013 because the increase in the index did not meet the statutory thresholds that trigger their adjustment.

Details about the inflation adjusted items for 2013 are included in Revenue Procedure 2012-41 and details about the pension related cost of living adjustments for 2013 are included in IR-2012-77, which can be found at the following links:


Lazard Wealth Management is part of Lazard, one of the world's preeminent financial advisory and asset management firms. With origins dating back to 1848, Lazard operates from 42 cities across 27 countries in North America, Europe, Aia, Australia, Central and South America. Lazard Wealth Management takes an innovative and preservation-based approach to wealth management in servicing wealthy individuals, families and foundations. We provide a highly tailored suite of advisory and investment services, integrated across disciplines to deliver a breadth of solutions to clients' complex financial and strategic challenges. 

For more information on Lazard Wealth Management, please visit

Copyright @ 2012.  All rights reserved.

IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, please be advised that any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. 

This material is written by Lazard Wealth Management LLC for general informational purposes only and does not represent our legal advice as to any particular set of facts and does not convey legal, accounting, tax or other professional advice of any kind; nor does it represent any undertaking to keep recipients advised of all relevant legal and regulatory developments.  The application and impact of relevant laws will vary from jurisdiction to jurisdiction and should be based on information from professional advisors.  Information and opinions presented have been obtained or derived from sources believed by Lazard Wealth Management LLC to be reliable.  Lazard Wealth Management LLC makes no representation as to their accuracy or completeness.  All opinions expressed herein are as of the date of this presentation and are subject to change.