High-Income & Asset Tax Strategies & Consulting
Written by H. Frederick Seigenfeld, Esq., C.P.A. (c), LL.M. (c) Tax & Estates.
LL.M conferral Dec. ’25. C.P.A. licensure Feb. ’26.
This is a general overview of our tax advisory services. For a more specific look into estate tax minimization click here.
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We provide counsel regarding Tax-Smart Wealth Strategies, structured to satisfy clients' pressing needs concerning asset investment, fiscal planning, and testamentary disposition via a comprehensive financial instrument.
I. Estate Planning Vulnerability Assessment
We employ an estate planning "Stress Test" explicitly engineered to identify latent vulnerabilities prior to the accrual of adverse outcomes for the devisees and legatees.
Trust Structure and Fiduciary Issues
We posit that several common deficiencies frequently manifest in estate instruments, falling under the purview of Title 26 of the United States Code (the Internal Revenue Code), Title 20 of the United States Code (Employee Retirement Income Security Act, or ERISA) concerning qualified retirement plans, and pertinent state probate and trust jurisprudence(such as the Uniform Trust Code (UTC)). These deficiencies encompass the outright conveyance of substantial assets to issue who lack the requisite financial acumen for effective management, thereby potentially necessitating the imposition of trusts to govern distributions pursuant to state trust statutes.
For intricate trust instruments, the Uniform Principal and Income Act (UPIA) is habitually examined to ensure the fiduciary effects a precise allocation of income and corpus between beneficiaries, thereby mitigating subsequent contention. A further common issue pertains to trust stipulations that have not been drafted to allow for the changing landscape of contemporary philanthropic or investment objectives, such as supporting entrepreneurial endeavors or environmental, social, and governance (ESG) mandates, thereby defeating the original grantor’s intent (IRC § 641 governs the taxation of trusts; IRC § 661 and 662 govern the Distributable Net Income (DNI) regime).
We also evaluate matters pertaining to the Rule Against Perpetuities (RAP)under state common law or statutory enactments, which restricts the temporal duration of specific trusts.
Gift Tax: Transfer Taxes and Exemptions
We assist clients in mitigating additional potential liabilities, specifically the underutilization of lifetime exclusions and exemptions essential for the minimization of federal and state transfer taxes. This advisory includes maximizing the annual exclusion for gifting under IRC § 2503(b) (which permits non-taxable inter vivos transfers up to the statutory limit per donee) and exercising the split gift election under IRC § 2513 for married individuals.
We prioritize leveraging the critical Generation-Skipping Transfer (GST) tax exemption (authorized by Internal Revenue Code (IRC) § 2631), the specific purpose of which is to circumvent the severe generation-skipping transfer tax imposed by IRC § 2601. This latter levy is typically triggered upon the transfer of assets that bypass a generation.
Valuation and Illiquid Assets
The determination of fair market value and subsequent conveyance of illiquid assets, such as closely held businesses, private equity interests, and real property, frequently culminates in unmanageable estate tax liabilities (IRC § 2001 imposes the federal estate tax) absent meticulous planning. We maintain strict adherenceto the fair market value definition articulated in Treas. Reg. § 20.2031-1(b) during the appraisal of estate assets.
Planning mechanisms we deploy may encompass the utilization of specialized valuation methodologies for qualified real property under IRC § 2032A (permitting a lower valuation based on actual agricultural or business use) or electing to pay the estate tax in installments over a 14-year period pursuant to IRC § 6166 for estates comprised of significant closely held business interests. Furthermore, we ascertain the applicability of fractionalization and minority interest discounts, such as the lack of marketability or lack of controldiscounts, which are permissible to reduce the taxable quantum of closely held business interests, notwithstanding the continuous regulatory scrutiny imposed by the IRS (Internal Revenue Service).
Non-Probate Assets and Retirement Accounts
Our due diligence includes a review of beneficiary designations to ensure conformance with testamentary documents, recognizing that non-probate assets governed by private contract often preempt the dispositive terms of a will or trust. Such assets comprise life insurance proceeds (IRC § 2042 governs their inclusion in the gross estate) and qualified retirement plans.
Qualified retirement plans are subject to stringent distribution mandates under IRC § 401(a)(9), specifically the Required Minimum Distribution (RMD) rules. Failure to comply with these statutory mandates results in the imposition of a substantial excise tax under IRC § 4974. The inclusion of annuities in the gross estate is governed by IRC § 2039.
Finally, we evaluate the potential incidence of out-of-state transfer taxes, including state estate taxes and state inheritance taxes, which operate in pari materiawith, yet independently of, federal law and often exhibit varied exemption parameters and tax schedules. We further analyze the effect of community property or elective share statutes enacted by state legislatures, which confer marital property rights irrespective of the testator's will.
II. Proactive Fiscal Planning and Legislative Awareness
Our professional publications disseminate the tenet that fiscal planning represents a persistent, perennialundertaking necessitating continuous joint effort between the taxpayer, their financial advisor, and a tax practitioner (who must adhere to professional standards such as those set forth in Treasury Department Circular No. 230 governing practice before the IRS). We observe that empirical data demonstrates a substantial cohort of the electorate, specifically 55% of individuals aged 65 years and older, express profound vicissitude with the continuous vicissitude of the Internal Revenue Code (the entirety of Title 26 U.S.C.).
This legislative instability mandates continuous review of the effective dates of all statutes and regulations issued by the Secretary of the Treasuryunder IRC § 7805 and judicial interpretations stemming from doctrines like the Chevron deference doctrine, which relates to agency interpretations of ambiguous statutes.
Furthermore, the practitioner must monitor Revenue Rulings, Revenue Procedures, and Private Letter Rulings (PLRs)issued by the IRS National Office which provide administrative guidance. The foundational authority for all deductions is based on the legislative grace doctrine, meaning that all deductions must be explicitly authorized by statute, per New Colonial Ice Co. v. Helvering.
Our instructional memoranda furnish efficacious strategies concerning the implementation of tax-advantaged measures related to capital accumulation, asset investment, and fund withdrawals, incorporating an essential exegesis of the anticipated impact of the One Big Beautiful Bill Act (OBBBA) amendments scheduled for fiscal year 2025. This preparation is critical given the principles of tax timing (the realization principle) and the potential for new or expiring provisions to affect marginal tax rates (IRC § 1).
We also scrutinize the potential for legislative changes to capital gains tax rates (IRC § 1(h)) and the Net Investment Income Tax (NIIT, IRC § 1411), and the Additional Medicare Taxon earned income (IRC § 3101 and IRC § 3121), to inform proactive investment decisions. The constitutional authority for the income tax is derived from the Sixteenth Amendment to the U.S. Constitution.
Furthermore, compliance with the requirements for claiming deductions and credits is paramount, as failure can lead to civil penalties under IRC § 6662 (accuracy-related penalties), including penalties for substantial understatement of income tax (IRC § 6662(d)), penalties for failure to file or pay under IRC § 6651, and potential criminal sanctions under IRC § 7201 (tax evasion) and IRC § 7206 (fraud and false statements). We specifically analyze the "ordinary and necessary" requirement of IRC § 162 (trade or business expenses) for deduction planning, the limitations on passive activity losses under IRC § 469, and the hobby loss rules under IRC § 183.
Ethical adherence is mandated by ABA Model Rules of Professional Conduct and AICPA Statements on Standards for Tax Services (SSTS). The determination of whether a taxpayer is a "material participant" in a business for IRC § 469 is guided by Treas. Reg. § 1.469-5T. We also consider the statute of limitations for assessment of taxes, typically three years from the date the return was filed, but extending to six years in cases of a substantial omission of gross income (IRC § 6501). This complex and interconnected body of law governs every aspect of the client's fiscal existence.
III. Comprehensive Tax Planning Strategies (General)
Strategic Income and Loss Timing
A critical element of fiscal planning we deploy is taxable event timing, which involves accelerating tax deductions into the current fiscal year (e.g., through early payment of deductible expenses under the cash method of accounting, governed by IRC § 446) or deferring the realization and recognition of gross income (IRC § 61) until a subsequent year to mitigate the immediate tax liability (IRC § 7701(a)(11) defines "tax liability"). This strategy must be balanced against the assignment of income doctrine(established in Lucas v. Earl), which prevents a taxpayer from shifting income to a lower-taxed individual.
We proffer counsel on Tax-loss harvesting, a mechanism for the disposition of capital assets (IRC § 1221) in taxable accounts for a loss to offset recognized capital gains (IRC § 1211(b)). If capital losses exceed capital gains in a given taxable year, a taxpayer (other than a corporation) may deduct the excess loss against ordinary income, subject to a statutory ceiling of $3,000 annually (IRC § 1211(b)), or $1,500 for a married individual filing separately. Any residual losses may be carried forward indefinitely (IRC § 1212(b) and Treas. Reg. § 1.1212-1) to offset future gains or ordinary income, subject to the annual limit. This strategy must be implemented while complying with the Wash Sale Rule (IRC § 1091), which disallows losses on the sale of stock or securities if substantially identical property is acquired within 30 days before or after the sale. Violations result in the adjustment of the basis of the newly acquired stock (IRC § 1091(d)). We also consider the net operating loss (NOL) deduction under IRC § 172 for business losses, noting its current limitation to 80% of taxable income.
Capital Gains and Itemized Deductions
For investment assets, maintaining a holding period exceeding one year establishes a long-term capital gains holding period (IRC § 1222(3)). Long-term capital gainsare accorded preferential tax treatment at statutory rates of 0%, 15%, or 20% (IRC § 1(h)), depending on the taxpayer's taxable income (IRC § 63), with specific income thresholds dictated by the applicable tax year. This rate structure is substantially more favorable than that applied to short-term capital gains (assets held one year or less, as defined by IRC § 1222(1)), which are subjected to ordinary income tax rates, reaching up to 37%. We note special rates for unrecaptured § 1250 gain (maximum 25% rate) and gains from collectibles and some Qualified Small Business Stock (QSBS) (IRC § 1202), taxed at a maximum 28% rate.
For itemized deductions (IRC § 63(d)), we advise clients on bunching deductions, which involves consolidating multiple fiscal years' worth of charitable contributions (IRC § 170) and other permissible itemized deductions into a single taxable year to ensure the aggregate amount surpasses the standard deductionthreshold (IRC § 63(c)). Charitable contribution deductions are generally subject to limitations based on a percentage of the taxpayer's Adjusted Gross Income (AGI), such as the 60% limitation for cash gifts to public charities (IRC § 170(b)(1)(G)). Furthermore, the contribution of appreciated long-term capital gain property is generally deductible at Fair Market Value (FMV), but may be limited to 30% of AGI (IRC § 170(b)(1)(C)).
Tax-Advantaged Savings Vehicles
We emphasize that tax-advantaged accounts are an essential component of the overall fiscal strategy. This category includes accounts receiving tax-deferred or tax-deductiblecontributions, such as qualified retirement plans (IRC § 401(k)) and Individual Retirement Arrangements (IRAs) (IRC § 408), with contribution limits prescribed by statute (IRC § 219) and subject to the deduction phase-out rules under IRC § 219(g).
We illuminate Roth accounts (Roth IRAs and Roth 401(k)s), being they offer tax-free qualified distributions (IRC § 408A(d)(2)), provided the distribution satisfies both the age/disability/death contingency and the five-taxable-year period requirement (IRC § 408A(d)(2)(B)), because contributions are made with after-tax funds (IRC § 408A(c)(1)). Early distributions from IRAs generally incur a 10% penalty tax under IRC § 72(t), unless an exception applies (e.g., first-time homebuyer expenses under IRC § 72(t)(2)(F).)
Other specialized vehicles we advocate for include 529 college savings accounts (IRC § 529), which facilitate tax-free growth and distributions for qualified education expenses (IRC § 529(e)(3) defines qualified expenses). Distributions not used for qualified expenses are subject to ordinary income tax plus a 10% penalty. ABLE accounts (IRC § 529A) also allow tax-free growth and qualified withdrawals for individuals with disabilities, subject to a 2024 contribution limit of $18,000, with the beneficiary being the owner of the account.
Key Tax Credits
We assist taxpayers in pursuing refundable tax credits (which may exceed tax liability, resulting in a refund), such as the Earned Income Tax Credit (EITC) (IRC § 32) (with a maximum of up to $7,830 for families with three qualifying children in tax year 2024), the Child Tax Credit (CTC) (IRC § 24), the American Opportunity Tax Credit (AOTC) (IRC § 25A), and the Child and Dependent Care Tax Credit (CDCTC) (IRC § 21). The availability and magnitude of these credits are subject to AGI phase-out thresholds, as defined in their respective IRC §s. We also consider the Lifetime Learning Credit (LLC) under IRC § 25A for post-secondary education, noting that the AOTC and LLC cannot be claimed for the same student in the same year. Furthermore, the Credit for the Elderly and the Permanently and Totally Disabled(IRC § 22) provides tax relief for certain individuals.
IV. Tax Law Changes and Projections (KPMG)
We utilize a fiscal planning treatise that addresses the U.S. federal tax landscape, noting that fiscal year 2025 is a period of potential tax volatility due to the scheduled expiration of major statutory provisionsfrom the Tax Cuts and Jobs Act (TCJA) of 2017 (P.L. 115-97). This legislative uncertainty mandates continuous monitoring, as underscored by the principle in Helvering v. Northwood Park Co.that tax laws must be clear.
The following key statutory amendments are currently scheduled to become effective on January 1, 2026:
Individual Income Tax Rates: Marginal rates are set to revert to the pre-TCJA structure, replacing the current top marginal rate of 37 percent with a 39.6 percent top rate (IRC § 1(j) would revert to the prior IRC § 1 tables).
Gift and Estate Tax Exemption: The temporary increase in the unified credit for the lifetime gift, estate, and Generation-Skipping Transfer (GST) tax exemptions will expire, as governed by IRC § 2010(c). This action will cause the Basic Exclusion Amount (BEA) (which is $13,990,000 per person in 2025) to revert to a statutory baseline of $5 million (adjusted for inflation, projected to be approximately $7 million per person). To mitigate adverse effects from prior large gifts. Treas. Reg. § 20.2010-1(c) provides a special anti-clawback rule, allowing the estate to compute its credit using the higher BEA applicable to gifts made during the temporary high exemption period. The maximum estate tax rate remains at 40% (IRC § 2001(c)).
Qualified Business Income (QBI) Deduction: The 20 percent deduction for an individual's domestic Qualified Business Income (QBI), specifically authorized by IRC § 199A, derived from flow-through entities(such as partnerships and S corporations), is set to expire.
SALT Deduction: The current $10,000 limitation on the deductibility of State and Local Taxes (SALT), permanently mandated for the TCJA sunset period by IRC § 164(b)(6), will expire, reverting to unlimited deductibility of state property and income (or sales) taxes, subject to the "ordinary and necessary" requirements established in Haverty v. Commissioner.
Alternative Minimum Tax (AMT): Modifications under the TCJA, including increased exemption amounts and higher phase-out thresholds, are likely to expire, resulting in the AMT (IRC §s 55-59) applying to a broader range of taxpayers, thus restoring the complexity the TCJA sought to reduce.
Home Mortgage Interest Deduction: The current statutory limitation on the deductibility of interest on acquisition indebtedness for a qualified residence will increase from the current generally applicable cap of $750,000 to $1 million (IRC § 163(h)(3)(B)).
Other Itemized Deductions: Rules governing the standard deduction (IRC § 63(c)), the elimination of the personal exemption (IRC § 151 was set to zero), and the overall limitation on itemized deductions, known as the Pease limitation(suspended by the TCJA), will revert to the statutory scheme in place before the TCJA's enactment. This reversion will reintroduce the complexity of IRC § 68.
V. Real Estate Tax Planning Strategies (Specific)
Capital Gains Deferral Mechanisms
We analyze strategies for managing capital gains from investment real property, highlighting the significant changes introduced by the One Big Beautiful Bill Act (OBBBA), which was enacted in July 2025. The OBBBA notably expands and extends the benefits associated with Opportunity Zones (OZs) and permanently reinstates 100 percent bonus depreciation for qualified property acquired and placed in service after January 19, 2025 (IRC § 168(k)).
We outline several options for Clients seeking to defer capital gains tax:
The IRC § 1031 Like-Kind Exchange (IRC § 1031) permits the deferral of capital gains tax on the exchange of real property held for productive use in a trade or business or for investment, subject to specific identification and receipt periods (IRC § 1031(a)(3)).
This strategy requires the mandatory use of a Qualified Intermediary (QI), as defined under Treas. Reg. § 1.1031(k)-1(g)(4), and adherence to strict deadlines: 45 days for property identification and 180 days for acquisition. The QI must acquire both the relinquished and replacement properties and must not be a disqualified person (Treas. Reg. § 1.1031(k)-1(k), a key safe harbor rule). The basis of the replacement property is governed by IRC § 1031(d).
The Qualified Opportunity Zone Fund (QOF) offers potent tax incentives (as originally established under IRC § 1400Z-2). The OBBBA extends the capital gains tax deferral for a fixed period of five years from the investment date and provides for a tax-free exit via a step-up in basis to fair market value (IRC § 1400Z-2(c)) for investments held for a minimum of ten years. To qualify as a QOF, the entity must hold at least 90 percent of its assets in Qualified Opportunity Zone Property (IRC § 1400Z-2(d)(1)). The property must also be "substantially improved" within 30 months, per Treas. Reg. § 1.1400Z2(d)-1(b)(4).
We counsel clients regarding the use of Statutory Trusts, which is a legal entity utilized to facilitate passive real estate investment, portfolio diversification, and qualify as a replacement property under IRC § 1031, provided it meets the "undivided fractional interest" criteria articulated in Revenue Ruling 2002-22and Revenue Procedure 2002-22.
Real Estate Deductions, Compliance, and Primary Residence
We assist rental property ownersin reducing their taxable income by leveraging deductions for ordinary and necessary business expenses (IRC § 162), such as maintenance costs, legal and accounting fees, property management costs, property taxes and insurance(IRC § 164), and advertising costs. The deductibility of these expenses is subject to the general rules established in IRC § 263A (uniform capitalization rules) and the capitalization principles articulated by the Supreme Court in INDOPCO, Inc. v. Commissioner, which requires capitalization for expenditures that create significant long-term future benefits.
We advise homeowners that they may use the § 121 exclusion (IRC § 121) to exempt up to $250,000 of gain (or $500,000 for married individuals filing jointly) on the sale of a principal residence, provided the ownership and use residency tests are met for at least two of the five years prior to the sale. This exclusion is a powerful tool to shield capital gains (IRC § 1222) from the sale of an appreciating personal asset.
Alternative strategies we cover include borrowing against equity through a cash-out refinance to access funds without triggering capital gains tax, and utilizing the depreciation deduction (IRC § 167), specifically the Modified Accelerated Cost Recovery System (MACRS) under IRC § 168, to lower taxable income over the asset's useful life. This deduction, however, is subject to depreciation recapture tax upon a profitable sale, as governed by IRC § 1250 (which recaptures accumulated straight-line depreciation at a maximum rate of 25%).
Tax compliance for rental property involves reporting rental income and loss on Schedule E of Form 1040, and potentially filing Form 4562 (Depreciation and Amortization) for depreciation. Additionally, property owners must contend with the passive activity loss limitations under IRC § 469, where losses from rental activities are generally considered passive unless the taxpayer qualifies as a real estate professional under IRC § 469(c)(7)(requiring 750 hours and more than half of personal services to be in real property trades or businesses). Otherwise, deductions are limited to passive income, with suspended losses carried forward. Furthermore, the material participation standard for real estate is defined by the seven tests in Treas. Reg. § 1.469-5T.
VI. Complimentary Consultation
We will devise a new or amended strategy engineered to save substantially. The initial consult is complementary.