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Monthly Archives: December 2014

Prepare for Local Minimum Wage Increases in 2015 by Kenneth Strauss, CPA/PFS, CFP

Posted on December 31, 2014 by

With the close of 2014, employers should be prepared to address minimum wage increases in Florida and other states where they may employ workers during the year.


While the federal minimum wage for non-federal contract workers remains at $7.25 per hour, hourly wages in 23 states will increase in 2015.


For example, on January 1, Florida’s minimum wage rises $0.12 to $8.05 per hour. Businesses that employ workers who earn tips may receive a credit of $3.02 per hour when they provide those workers with an hourly wage of at least $5.03.


In New York, a wage increase of $8.75 per hour went into effect on Dec. 31, 2014. The following day, New Jersey’s minimum wage increased to $8.38 per hour while Connecticut’s rose to $9.15 per hour. Later in the year, Delaware will adopt an $8.25 minimum wage while Washington D.C.’s wages will climb to $10.50 per hour.


With these and other wage increases, businesses should take the time to ensure adjustments to their payrolls and compliance with other provisions of the federal Fair Labor Standards Act, which includes maintaining accurate records of employees’ work hours.


About the Author: Kenneth J. Strauss, CPA/PFS, CFP, is a director with Berkowitz Pollack Brant’s Tax Services practice. He can be reached in the CPA firm’s Fort Lauderdale, Fla., office at (954) 712-7000 or via email



Steps to Prevent and Detect Business Fraud by Steve Nouss, CPA

Posted on December 29, 2014 by Steve Nouss

Corporate fraud is an undiscriminating epidemic that occurs in large, multi-national companies equally as often as it does within small, entrepreneurial businesses. Unfortunately, there is no one magical solution businesses can employ to protect themselves from these schemes over the long term. However, there are opportunities for businesses of all sizes to plan ahead and put into place a series of internal controls to help mitigate their exposure to fraudulent activities and the financial and reputational losses that can result. It is through these systems that businesses can improve their efforts to deter, prevent and detect fraud and ultimately protect the long-term viability of their organizations.


Manage Enterprise Risk

Over time, frauds evolve and multiply as scammers become more creative and their schemes more sophisticated. While businesses cannot eliminate all of their exposure to potential fraud, they can manage their risks by identifying, assessing and addressing operational weaknesses that can make it easier for employees, vendors or management to commit these deceptions.


To that end, effective Enterprise Risk Management (ERM) programs identify potential threats and exploit operational deficiencies that may negatively affect a particular business today and into the future. It enables businesses to assess their exposure to risk and their abilities to absorb and recover from it with as few negative outcomes as possible.


Institute Policies and Internal Controls

Once a business identifies real and potential threats, it can then address its exposure to these risks by adopting a system of processes and internal controls to mitigate and manage them effectively.


For example, a business should consider drafting and sharing with employees a formal policy that defines fraud and misconduct in the workplace and outlines the steps the business will take to respond to these unacceptable behaviors. Additionally, by conducting regular internal audits, the business can monitor potential risks and ensure that controls implemented to deter those risks work as planned. Often, anti-fraud policies and knowledge about periodic audits are fraud deterrents, in and of themselves, when a business makes employees aware that it has a system of checks and balances in place.


Similarly, by adopting a system of internal controls and applying proven principles throughout all areas of its organization, a business can mitigate its risks of falling victim to fraud. Such controls also improve the business’s ability to deter and detect fraud more quickly and with less loss and costs to the business.


Segregate Duties

Opportunity and access are two factors that make it easier for fraudsters to commit their deceptive practices. Both are preventable when businesses separate the duties and responsibilities of business transactions to different people within the organization. For example, a business may assign payroll processing to a clerk while delineating responsibility for reviewing and approving payments to its CFO or controller. Similarly, a business may consider dividing the duties of managing receivables and handling cash payments to two different employees.


When breaking down the various transactions that occur during a typical business day, organizations should not overlook the seemingly mundane task of mail processing. Remember, correspondence via postal service often includes confidential information or payments for services. As a result, a business should consider assigning this task to the most appropriate employee who can manage such privileged information.


Monitor and Detect Risks

Because corporate risk is not 100 percent preventable, a business should take the time to monitor the controls it puts into place and conduct periodic audits to identify instances of fraud before they become so damaging that the business cannot recover.


According to the Association of Certified Fraud Examiner’s (ACFE) 2014 Report to the Nation on Occupational Fraud and Abuse, tips, most often from a business’s own employees, are the most common method of fraud detection. For this reason, businesses should implement an anonymous hotline or whistleblower policy to enable employees to report suspicions of fraud without threat of negative repercussions.


For most business, fraud is unavoidable. However, by establishing an environment of oversight, control and accountability, businesses can do their part to deter misconduct and mitigate their risk of unmanageable losses. The professionals with Berkowitz Pollack Brant’s Consulting practice have years of experience helping organizations of all sizes identify and address their vulnerabilities and establish sound policies and processes for monitoring, investigate and responding to potential fraud.


About the Author: Steve Nouss, CPA, is chief consulting officer with Berkowitz Pollack Brant. For more information, call (954)712-7000 or email


Sale of Litigation Rights in Real Estate Transaction is Capital Gain by Arthur Lieberman

Posted on December 23, 2014 by Arthur Lieberman

In overturning a Tax Court decision, the Court of Appeals for the 11th Circuit recently held that a real estate developer who sold his rights as a plaintiff in a suit against a party who backed out of a contract to sell land to the developer had capital gains from the sale.


In its decision, the Appeals Court ruled that the plaintiff did not sell the land on which he initially planned to build a luxury high-rise condominium in Downtown Ft. Lauderdale but rather his contractual right to purchase the land, which, if not sold in the ordinary course of plaintiff’s trade or business, is considered a capital asset. While the developer changed his initial plan and later intended to sell the property to another developer to finish construction, the Court found that the profit the developer would receive from selling his development rights was not a substitute for what he would have received in periodic receipts had he completed the project and sold the finished condo units himself.  According to established judicial doctrine, selling a right to earn future undetermined income, as opposed to selling a right to earned income, is a critical feature of a capital asset. The fact that the income earned from developing the project would otherwise be considered ordinary income was immaterial, according to the court.


The advisors and accountants with Berkowitz Pollack Brant have extensive experience working with real estate developers and contractors to manage tax issues relating to business transactions and personal estate planning activities and navigating through rapidly changing interpretations in tax laws.


About the Author: Arthur Lieberman is a director in Berkowitz Pollack Brant’s Real Estate Tax practice.  He can be reached in the CPA firm’s Miami office at (305) 379-7000 or via email at



Deadline Looms for Retirement Plans to Comply with Same-Sex Marriage by Edward N. Cooper, CPA

Posted on December 19, 2014 by Edward Cooper

Qualified retirement plans have until Dec. 31, 2014, to recognize the legal marriage of same-sex couples covered under those plans and comply with the Supreme Court’s decision to strike down section 3 of the Defense of Marriage Act.


According to the IRS, same-sex couples who are legally married under state or foreign law shall be treated as married for federal tax purposes, even when these couples reside in states that do not recognize same-sex marriages.


The advisors and accountants with Berkowitz Pollack Brant work closely with employers and retirement plan sponsors to comply with a range of tax and Employee Retirement Income Security Act (ERISA) regulations.


About the Author: Edward N. Cooper, CPA, is a director in Berkowitz Pollack Brant’s Tax Services and LGBT Businesses and Families practices. He can be reached in the CPA firm’s Miami office at (305) 379-7000 or via e-mail

Congress Extends Expired Tax Provisions for 2014 by Karen A. Lake, CPA

Posted on December 17, 2014 by Karen Lake

On December 16, Congress approved an extension of the tax provisions that expired at the end of 2013. These tax extenders provide individuals and businesses with 54 tax incentives that they may apply to their 2014 tax returns. Following are some of the provisions of the Tax Increase Prevention Act of 2014 (HR 5771):


For Individuals

  • Deduction for higher-education tuition and fees
  • Deduction for state and local sales tax in lieu of state and local income taxes
  • Deduction for mortgage insurance premiums
  • Credit for energy-efficient home appliances and improvements
  • Tax-free distributions of IRA funds for charitable purposes


For Businesses

  • Credit for research and development expenses
  • Credit for employers who hire veterans (Work Opportunity Tax Credit)
  • Credit for investment in businesses or economic development projects located in distressed communities (New Markets Tax Credit)
  • Deduction of the full price of qualifying new or used equipment or software (that falls within an increased expensing limit) that a business purchased, financed or leased during the 2014 tax year


The passage of the tax extenders bill is good news for individuals and businesses, who should consider consulting with their advisors and accountants before the end of the year to identify last-minute tax-saving opportunities.

About the Author: Karen A. Lake, CPA, is associate director of Tax Services with Berkowitz Pollack Brant. She can be reached at the Miami CPA firm’s office at (305) 379-7000 or via email

Required Retirement Plan Distributions Deadline Approaching for Taxpayers over 70 ½ by Jack Winter CPA/PFS, CFP

Posted on December 16, 2014 by Jack Winter

Taxpayers born before July 1, 1944, must take the annual required minimum distributions (RMD) from their traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k), 403 (b) and 457(b) retirement plans by December 31, 2014, or risk a penalty of 50 percent of the undistributed amount.


The RMD obligation also applies to beneficiaries of eligible retirement accounts in the year of the owner’s death. For subsequent years, the RMD will be dependent on the named beneficiary.   For example, spouses of deceased account owners may treat the plan as their own, base RMDs on their current age or the age of the original owner at time of death or withdraw the entire account balance at the end of the fifth year following the account owner’s death when the owner died before the age of 70 ½.


Taxpayers who turned 70 ½ in 2014 have the option to wait until April 1, 2015, to take their first RMD. In addition, workers who are still employed may wait until April 1 of the year following their retirement to begin taking RMDs, if their plans allow for this provision.


About the Author: Jack Winter, CPA/PFS, CFP, is an associate director of Berkowitz Pollack Brant’s Tax Services practice. He can be reached in the CPA firm’s Ft. Lauderdale office at (954) 712-7000 or via email



Last-Minute Tax Tips for Charitable Giving by Adam Cohen, CPA

Posted on December 12, 2014 by Adam Cohen

With just weeks left until the end of the year, taxpayers have one last opportunity to reduce their 2014 tax bill while helping others. Making charitable donations now to qualified non-profit organizations will allow some taxpayers to deduct those donations dollar for dollar on their income tax returns in April, subject to limitations. The tax savings apply to taxpayers whose total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction based. For others, claiming a standard deduction may be preferable.

During this season of giving, the IRS offers the following tips to help taxpayers plan their charitable donations appropriately.

Give to Qualified Charities. To reap tax savings, individuals should ensure that they donate to eligible tax-exempt organizations, which they can search and find on the IRS’s online tool, Exempt Organizations Select Check or at or In addition, taxpayers should note that churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations while donations made to political organizations are not tax deductible.

Take Tax Deductions in the Year of the Contribution. Donations made in 2014, including those charged on a credit card or mailed by Dec. 31, 2014, are deductible on taxpayers’ 2014 returns, even when the organization does not deposit the donation until the following year. Taxpayers who wait until the last minute may take advantage of online giving opportunities on most organizations’ websites, as long as they make their donations before midnight on Dec. 31.

Record Donations. In order to deduct charitable donations, taxpayers must receive and keep receipts or written statements from the qualifying organizations detailing the following:

  • Name of the charity
  • Date of the donation
  • Amount of cash contribution or other monetary gift
  • Descriptions of donated items
  • Fair-market value of donated property at the time of the donation and the method used to determine that value when contribution exceeds $250
  • Appraisal for property exceeding $500 in value

Gift Appreciated Assets. Taxpayers may be able to avoid capital gains taxes and receive a full tax deduction when they donate stock or land that has appreciated in the last 12 months. In addition, such a move can also reduce the adjusted gross income of taxpayers who are subject to the Alternative Minimum Tax (AMT).

Keep Track of Mileage. Taxpayers who give of their time may deduct the miles they travel for volunteer activities ($0.14 per mile) plus the cost for parking.

During this season of giving, taxpayers may consider donating money, time and resources to help non-profit organizations achieve their missions. Not only will they enjoy the gift of giving, they may also receive a tax gift in return.

About the Author: Adam Cohen, CPA, is an associate director in the Tax Services practice of Berkowitz Pollack Brant. He can be reached at the CPA firm’s Ft. Lauderdale office at (954) 712-7000 or via e-mail

Tax Extenders Await Senate Vote by Karen A. Lake, CPA

Posted on December 10, 2014 by Karen Lake

On December 3  the House approved the Tax Increase Prevention Act of 2014 (HR 5771), which provides a one-year extension on a set of tax incentives that expired in 2013. Included in the bill are deductions for higher education tuition and state and local sales tax as well as tax credits for research and production. If approved by the Senate, these tax extenders would be retroactive to Jan. 1, 2014.

About the Author: Karen A. Lake, CPA, is associate director of Tax Services with Berkowitz Pollack Brant. She can be reached at the Miami CPA firm’s office at (305) 379-7000 or via email

Can You Spot Fraud in Your Business? by Richard S. Fechter, JD, CAMS

Posted on December 09, 2014 by Richard Fechter

Occupational fraud is on the rise. According to the Association of Certified Fraud Examiner’s (ACFE) 2014 Report to the Nation on Occupational Fraud and Abuse, the average business loses more than 5 percent of revenue each year to fraudulent activities. Moreover, the longer these deceptive practices go undetected, the greater the loss the business suffers in terms of unrecoverable profits and damage to reputation.


Identifying instances of occupational fraud is difficult. Perpetrators often go to extreme lengths to hide efforts they take to use their positions within a company to deliberately misuse or misappropriate the business’s resources or assets for their own personal enrichment. It takes a keen eye to spot the warning signs and to make distinctions between careless errors and intentionally deceptive transactions.


Currently, the most common threats challenging businesses are internal fraud, identity theft and cybercrime. Internal fraud can include corruption, financial statement fraud and asset misappropriation, which represents the majority of fraudulent activities worldwide.


Like most crimes, asset misappropriation requires opportunity and intent. A business’s employees often have the easiest opening to leverage their knowledge of a business’s operations and get away with deceptive schemes that provide them with ill-gotten, unearned gains. Background checks prior to one’s hiring is not a sufficient safeguard, especially when considering that first-time offenders commit the majority of internal frauds. Additionally, according to the ACFE, more than half of the employees who commit occupational fraud have been with their companies for more than five years.


The first step in preventing fraud is recognizing some of the most common forms it may take.


Theft of Cash and Cash Receipts. “Skimming” is the process of intercepting and stealing incoming cash receipts from a business before recording them on a business’s books, if they enter them into the business’s accounting system at all. To conceal their actions, skimmers often “cook the books” by understating sales and adjusting account receivable balances through customer credits or write-offs.


Fraudulent Disbursements. Unlike thefts of cash receipts, fraudulent disbursements occur on a company’s books when perpetrators steal money from the business and cover up their actions by creating false billing statements, recording false payments and accounting for these false payments as voids or returns, or by creating fictitious vendors (owned by the fraud perpetrators) to accept payments from the company. Fraudulent disbursements may also include check tampering, expense reimbursement and payroll schemes through the creation of ghost employees and falsifications of wages.


Misappropriation of Inventory and Other Assets. When dealing with fraud, cash is not always king. Businesses can fall victim to asset requisitions and transfers of false sales, purchases, shipments and receivables.


According to the ACFE, frauds caught by reactive measures last longer and are more harmful to businesses than those identified through proactive, protective measures. As a result, it behooves businesses to become educated, increase vigilance and implement appropriate internal controls to lower their exposure to and protect themselves against frauds in the workplace.


Be Aware of Red Flag Behaviors. Employee actions – both within and outside the office – can point to potentially fraudulent activities. According to the ACFE, the most common indicators of a coworker’s participation in a potential fraud include living beyond one’s means, having financial difficulties, maintaining an unusually close relationship with a vendor or customer and unwilling to share duties or relinquish control. Yet, these signs, in and of themselves, are not sufficient evidence of fraud. Rather, one must analyze these signs within a realm of other facts and analyze the information based on the totality of the circumstances.


Establish Methods for Reporting Fraudulent Activities. A business’s employees may be the best source for identifying occupational fraud among the ranks. Tip hotlines or suggestion boxes allow employees to share information anonymously and alert management to fraudulent activities without fear of retaliation.


Monitor, Monitor, Monitor. Getting too comfortable with the status quo or taking a “it won’t happen to us” approach is perhaps the most dangerous thing a business can do. Denial is never a good offense strategy. Perception is the key. If employees believe that the company is being proactive and is likely to uncover fraudulent behavior, then employees will be less likely to engage in such behavior.


Establish a Strong Offense. Businesses should focus on fraud prevention activities, such as investing in anti-fraud internal controls, rather than loss recovery, to reduce their vulnerabilities to fraudulent activities.


Because there is no one-size-fits-all solution to building a defense against fraud, businesses may seek the counsel of third parties, such as accountants and lawyers, who can lend their expertise to develop custom anti-fraud controls or help in identifying the forms of fraud that businesses regularly face.


About the Author: Richard S. Fechter, JD, CAMS, is associate director of Berkowitz Pollack Brant’s Forensic and Business Valuation Services practice.  He can be reached in the firm’s Miami CPA office at (305) 379-7000 or via email at


IRS Increases Retirement Plan Contribution Limits in 2015 by Kenneth J. Strauss, CPA/PFS, CFP

Posted on December 05, 2014 by

Due to an increase in the cost-of-living index, the IRS is raising many retirement plan contribution limits in 2015, thereby providing taxpayers with opportunities to save more money for the future. Contribution limits to Individual Retirement Plans (IRAs), however, remain unchanged at $5,500 in 2015.

Plan Type  2015  2014
401(k), 403(b) and Profit Sharing Elective Deferrals $18,000 $17,500
401(k), 403(b) and Profit Sharing Catch Up Contributions for Employees age 50 and Up 6,000 5,000
401(k), 403(b) and Profit Sharing Defined Contribution Limits 53,000 52,000
SEP IRA Maximum Contribution 53,000 52,000
SIMPLE IRA Maximum Contribution 12,500 12,000


The Fall Benefits Open Enrollment period is an ideal time for employees to review their companies’ retirement programs, ensure their contributions qualify for employer matches and make elections to change their investment mix, as needed.


The Tax Services and Estate Planning advisors with Berkowitz Pollack Brant have 35 years of experience helping individuals assess retirement options and develop tax-efficient plans that meet each person’s unique long-term financial needs and goals.


About the Author: Kenneth J. Strauss, CPA/PFS, CFP, is a director of Berkowitz Pollack Brant’s Tax Services practice. He can be reached in the CPA firm’s Fort Lauderdale, Fla., office at (954) 712-7000 or via email


College Tax Credits Can Ease Costs of Higher Education by Jack Winter, CPA/PFS, CFP

Posted on December 03, 2014 by Jack Winter

A college education is a significant expense. To help reduce the financial burden of paying for higher education, college students and their families may qualify for one of a variety of tax credits and other tax-advantaged savings programs offered through public and private sources.

The American Opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) provides full- and part-time undergrad students with a maximum annual credit of $2,500 for qualifying education expenses totaling $4,000 or more during a tax year. The credit equals 100 percent of the first $2,000 and 25 percent of the next $2,000 paid for each student’s eligible expenses, which can include tuition, activity fees, books and other supplies students require to complete coursework. Moreover, because 40 percent of the AOTC is refundable, individuals who do not owe taxes in a given year can receive an annual refund of $1,000 per student.

To qualify for the credit, modified adjusted gross income must not exceed $90,000 for individuals and $180,000 for joint tax filers. Claiming the credit requires IRS Form 1098-T Tuition Statement, which colleges and universities make available to students by January 31.

Lifetime Learning Credit

The Lifetime Learning Credit provides full-time undergrad and graduate students with a credit of up to $2,000. The credit, which equals 20 percent of eligible expenses totaling $10,000 or more, is available even to those individuals enrolled in education programs to maintain or improve their job skills.

Unlike the AOTC, the Lifetime Learning Credit does not benefit individuals who owe no taxes. However, it does offer lower income limit qualifications. Specifically, MAGI must be $63,000 or less for individuals and $127,000 for married couples filing jointly.

One important caveat to the Lifetime Learning Credit and the AOTC is that taxpayers may claim only one of the two benefits per student per expenses. Double-dipping is not allowed.

Tax Benefits of Scholarships, Loans and College Savings Programs

Scholarships and grants that pay for tuition, enrollment fees, books and other required course materials are tax-free, unlike those programs that pay for room and board, which are taxable. Students who take out loans to pay for qualified education expenses may deduct loan interest up to $2,500.

Finally, saving or prepaying for college through a state- or college-sponsored 529 plan allows contributions to grow tax-free. Distributions to pay for qualifying expenses, including room and board, are also tax-free to students. However, contributions to 529 plans may not exceed the amount necessary to provide for the beneficiary’s qualified education expenses.

Understanding the various tax credits, deduction and savings plans and their limitations can make higher education more affordable. The Tax Services professionals with Berkowitz Pollack Brant work with individuals and families to develop efficient tax-planning strategies that identify tax-savings opportunities and meet each family’s unique financial needs.

About the Author: Jack Winter, CPA/PFS, CFP, is an associate director of Berkowitz Pollack Brant’s Tax Services practice. For more information, call (954) 712-7000 or email



Managing the Tax Risks and Opportunities of Foreign Trusts for U.S. Beneficiaries by Tony Gutierrez, CPA

Posted on December 01, 2014 by Anthony Gutierrez

Foreign trusts allow high-net-worth individuals in foreign countries to grow and protect their assets with the intent of transferring wealth onto future generations who may be residing in the U.S. Typically, the income generated by foreign trusts is not subject to U.S. income tax unless it is U.S.-source income, which is derived from a U.S. trade / business, investment, or until the grantor passes away and distributions are made to the U.S. beneficiaries of the trust. When either one of these events takes place, the U.S. beneficiaries may be subject to significant income taxes and potentially an interest charge in the years following the grantor’s death. While one cannot avoid this slippery slope, there are planning opportunities available to assist individuals in minimizing the potential tax consequences in the U.S. and in their home countries.


Under current U.S. tax law, there are two types of foreign trusts, both of which are governed exclusively under the jurisdiction of a court outside the U.S. or controlled by someone who is not a U.S. citizen. Foreign grantor trusts assume that the grantors, or persons establishing and contributing to the trusts, are the owners of all assets held in trust and therefore liable for reporting all trust income and related deductions on their returns in the taxing jurisdiction where they reside. Once the grantor passes away, the trust becomes a foreign non-grantor trust, and a different, more complicated set of tax rules will apply.

U.S. beneficiaries must report and pay U.S. income tax on distributions of current distributable net income (DNI) and accumulated undistributed net income (UNI) received from foreign non-grantor trusts. U.S. beneficiaries receiving distributions of DNI must report the income and deductions accordingly. For instance, the distributions of DNI must be broken down to their components (i.e. ordinary income, qualified dividends, short-term or long-term capital gain, etc.) in order to ensure proper tax treatment when reported on the U.S. beneficiary’s income tax return. When a foreign non-grantor trust distributes an amount less than the current-year DNI, the remaining undistributed amount is considered “undistributed net income” (UNI) and accumulates with UNI in future years until distributed. A U.S. beneficiary reports UNI as income when the distribution amount exceeds the trust’s DNI for the current year. Distributions of UNI are generally subject to the throwback rules. When applying the throwback rules, income from distributions of UNI is treated as ordinary income. Unlike income from DNI distributions for which the character of the income (i.e., qualified dividends and capital gains) is preserved, distributions of UNI is treated as ordinary income and is taxed at ordinary rates, plus interest. There is an interest charge on the deferral of tax that would have been paid on the UNI, and it is compounded over the period or years that the UNI has accumulated. As a result, the longer UNI stays in the trust, the greater the interest charge will be when the UNI is distributed and reported as income.


Planning Opportunities

There are several tax-planning strategies available to help U.S. beneficiaries of foreign trusts preserve favorable tax treatment. The first step is to ensure one addresses the potential tax pitfalls by drafting the appropriate trust documents with the aid of experienced legal counsel and tax advisors. Additionally, individuals should take special care during the first year after creation of foreign trusts to ensure compliance with U.S. reporting requirements and to take advantage of certain tax elections. Actions taken in the first year will set the tone for proper tax treatment and efficiencies down the road.


With regard to distributions from foreign grantor trusts, U.S. beneficiaries may receive as non-taxable gifts distributions totaling less than $100,000 for the year. U.S. beneficiaries receiving distributions from foreign non-grantor trusts should consider making the “65-day rule election” in order to treat distributions of DNI received within 65 days after the end of a taxable year as income in the prior year. This planning technique commonly is used to ensure that all DNI is distributed and accumulation of UNI in future years is minimized.


Additional planning opportunities include the use of a foreign grantor trust to purchase an offshore variable life insurance policy that exempts investment income from U.S. taxation during the insured’s life. These instruments may pass to beneficiaries free of U.S. income taxes at the time of the insured’s death.


Foreign trusts are both powerful and complicated asset protection vehicles that require sound understanding of both U.S. and foreign tax principles. Moreover, implementing the proper tax planning strategies can help to preserve accumulations of wealth and tax efficiencies for both grantors and beneficiaries.


About the Author: Tony Gutierrez, CPA, is an associate director in Berkowitz Pollack Brant’s Tax Services practice. He can be reached in the Miami CPA firm’s offices at 305-379-7000 or via email at


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