Presented By: Suzanne Weber, C.P.A, M.S.T, T.E.PDavid Spence, Attorney at Law

• Tax is imposed on the transferor, not the recipient.

• Tax is based on the fair market value of assets.

• In calculating the tax, deductions are generally allowed for:• Decedent’s Debts and Expenses of Estate Administration.• Amounts Passing to a U.S. Citizen Spouse.• Amounts Passing to a U.S. Charity.

Year

Gift TaxLifetime

Exemption

Gift Tax Annual

Exclusion

Gift and Estate Tax

RateEstate Tax Exemption

Highest MarginalEstate Tax

Rate2010 $1,000,000 $13,000 35% Unlimited 35%

2011 $5,000,000 $13,000 35% $5,000,000* 35%2012 $5,120,000 $13,000 35% $5,120,000* 35%

2013 ?? $1,000,000 $13,000 55% $1,000,000 55%

For Citizen or Resident Individuals:

* Note: The Deceased Spouse’s Unused Exemption Amount (DSUEA) also carries forward to the surviving spouse.

Year

LifetimeEstate & Gift Tax Exemption Amount

AnnualGift TaxExclusionregardless of donee identity or citizenship

Annual Gifts or Testamentary Bequests toU.S. Citizen Spouse

Annual ExclusionGift toNon-citizen Spouse

2011 $5,000,000 $13,000 Unlimited $136,000

2012 $5,120,000 $13,000 Unlimited $139,000

2013 ?? $1,000,000 $13,000 Unlimited $139,000

Applicable to U.S. Citizens or Residents:

Year

Lifetime Gift Tax

Exemption

AnnualGift Tax Exemption

Annual Exclusion Gift toNon-U.S.Spouse

Exemption for Gifts or Bequests to a U.S. Citizen or Resident Spouse

Estate Tax Exemption

Applicable Gift & Estate Tax Rates

2011 $0 $13,000 $136,000 Unlimited $60,000 18-35%2012 $0 $13,000 $139,000 Unlimited $60,000 18-35%

2013 ?? $0 $13,000 $139,000 Unlimited $60,000 18-55%

Applicable to U.S. Situs Property

But, what about bequests to anon-citizen spouse?

The Good: Allows testamentary bequests to non-citizen spouse to qualify for the unlimited estate tax marital deduction. Requires all income to be paid annually to spouse for life. No person has power to distribute to anyone other than surviving spouse.

The Bad: Must have a U.S. person as trustee. If QDOT assets exceed $2 million FMV then trustee/co-trustee must be a domestic corporation (in other words, a bank).

The Ugly: Distributions from the QDOT in excess of annual income are subject to withholding of estate tax at the highest marginal rate.

Estate Duty or Gift Tax None

Income Tax Indian SourcedWealth Tax 1% Nonproductive Assets in excess of

Rs. 2,50,000/1,50,000 of Ind/HUFRepatriation $1 million per year limit on capital

Now:

From April 1, 2012- Direct Taxes Code:

NRI Residence Test • 60 current days + 365 in Previous 4 years

Corporate Residence Test Effective Management TestWealth Tax Expanded to Discretionary Trusts, limit

change to in excess of Rs. 50 crore

Estate/ Gift Tax on Inheritance None

Income Tax Foreign Tax Credit offset Income Tax

Tax:

Reporting Requirements:

Inheritance/ Gift over $100,000 Form 3520 w/ Tax Return

Financial Foreign Accounts• Over $10,000 maximum value

Form TD F 90-22.1 FBAR• Due June 30th

Specified Foreign Financial Assets:• Max value $75,000/$150,000 S/J• Year end value $50,000/$100,000 S/J

Form 8938 due annually with tax return

For 2011: Specified Individuals U.S. Citizen Resident Alien Non Resident (NR) Electing to be Resident Resident alien electing under treaty to be NR

For 2012: Specified Domestic Entities Is closely held by specified person Hold specified foreign financial assets over $75k at anytime during the

year or $100k at year end. Either:

50% of gross income or assets are passive 10% of gross income or assets are passive and was formed to

avoid reporting.

1) Financial Accounts maintained by a Foreign Financial Institute (FFI). FFIs include: Mutual Funds, Foreign Private Equity

Fund, etc…2) Other Specified Foreign Financial Assets (not

held in a FFI, if held for investment) Stock issued by a foreign corporation Capital or private interest in a foreign partnership Note bond, or other indebtedness issues by a

foreign person An interest in a foreign trust or estate.

Form Basic Compliances90.22-1 •Over $10k at any point in time

•Signature authority- both individual & company

5471 •Controlled Foreign Corporation at least 30 days •Passive officer when a 10% stock change

926 Transfers to Controlled Foreign Corp. (CFC)

5472 25% or more Foreign Ownership, Sent separately

8621 Passive Foreign Investment Company

8858 Foreign Disregarded Entity/ Form 8832

1120F Permanent Establishment/ Trade or business in U.S.

Form Penalty Statute of Limitations (SOL)

90.22-1 •Non-willful: $10,000•Willful: Greater of $100,000 or 50% balance•Criminal: up to $500,000/ 5 yrs

6 years

8938 $10,000 each •6 yrs after filing if < $5,000 omitted•Entire return open for 3 yrs after filing return with form

3520 (Gift) 5% of Gift a month up to 25% 3/6 yrs after filed

3520 (Trust) 35% of transfer received 3/6 years after filed

8621 No direct penalties Entire return open for 3 years after filing return with form

5471 $10,000 Each Entire return open for 3 years after filing return with form

5472 $10,000 Each Entire return open for 3 years after filing return with form

8858 $10,000 Each Entire return open for 3 years after filing return with form

Name YearOff Shore Voluntary Disclosure Initiative (OVDI)

2009

Off Shore Voluntary Disclosure Initiative (OVDI)

2011

Off Shore Voluntary Disclosure Initiative (OVDI)

Current

Foreign Account Tax Compliance (FATCA)

2013

Intangible Assets Stocks, LLC & LP interests, patents, copyrights, etc. General rule—intangibles are located where the giver is

located.

Tangible Assets Real estate, equipment, automobiles, jewelry, artwork, etc. General Rule—tangible assets have “situs” where they are

physically located.

But, what about cash, currency, bank accounts, etc.?

Tax

Personal U. S. Bank Accounts

U.S. Business Bank Accounts

ForeignBank Accounts

U.S. Company Stock and Other U.S. Intangibles

U.S. Real Estate

Non-U.S. Real Estate

US Gift Tax Taxable Taxable

Non-taxable(Sometimes)

Non-taxable(generally) Taxable Non-taxable

US Estate Tax

Non-taxable Taxable Non-taxable

Taxable (generally) Taxable Non-taxable

Owned by a Non-resident, Non-citizen

BEWARE!The above table reflects general rules. Actual determination

of taxability can be heavily fact-specific.PLEASE CONSULT YOUR LEGAL COUNSEL OR CPA!

Cash Transfers from India Indian restrictions on the ability of families to transfer cash out

of India can create U.S. tax planning problems. What about U.S. stock?

Foreign Trustees When selecting a successor trustee/executor, a U.S. person is

preferable for a number of reasons: U.S. income tax issues. U.S. reporting issues Logistics

Foreign Charities

The U.S. Estate and Gift Tax Can Apply in Situations One Would Not Expect.

Cross-border Families and Cross-border Wealth Create a Myriad of Tax Traps but also Opportunities!

When you have a tax situation in one country, you have to look at how it affects tax in the other country.

In today’s environment, you should over comply and elect protective compliances.

Admitted To Practice:Supreme Court of California

United States Tax CourtUnited States District Court for the Northern District of California

Affiliations:State Bar of California

• Tax Section• Estate and Trust Section

• Business Law SectionPalo Alto Area Bar Association

Society of Trust & Estate Practitioners

Education:B.S. (Accounting), Brigham Young UniversityM. Acc. (Taxation), Brigham Young University 

J.D., Brigham Young University

David Spence heads the Estate, Trust, and Wealth Strategies practice for the Royse Law Firm. David’s practice focuses in the areas oftaxation, estates, trusts and other private wealth structures used in the efficient management, protection, and transfer of wealth tosucceeding generations. David’s clients are international and domestic individuals, families, family businesses and charitable organizations.Over the last twenty‐five years, David has practiced with prominent law firms, international accounting firms, and financial institutions inSilicon Valley and San Francisco.

David has counseled some of the largest and most complex estates in the world. David has represented clients before various courts andadministrative agencies of the federal and state government, including the United States Tax Court and the Internal Revenue Service.Currently, David is also an adjunct professor with the Master of Science in Taxation (MST) program in the Lucas Graduate School of Businessat San Jose State University, where he teaches Taxation of Estates and Trusts.

For more information about Royse Law Firm, PC or David Spence, please email: dspence@rroyselaw.com

ATTORNEY AT LAWOFFICE PHONE (650) 813‐9700 EXT. 211dspence@rroyselaw.com

Affiliations:California CPA Society

Society of Trust & Estate Practitioners

Education:BS San Jose State UniversityMST Golden Gate University

Graduate MST Golden Gate University

Susan Weber is a principal of Weber and Company, Inc. a Certified Public Accounting and business consulting firm. Susan has over 25 yearsof experience in public accounting. She was previously with Armstrong, Bastow and Potter which merged with KPMG. Susan also previouslyfounded the public accounting firm Weber, Sanford and Company. Her area of professional concentration is International Tax, involvingplanning and compliance for businesses, individuals, estate and trust. She also has many years experience in the Real Estate and high techindustry.

Susan has successfully represented clients with IRS controversy including international tax issues involving entity classification, transferpricing, passive foreign investment companies and the 2009 and 2011 offshore amnesty. Susan’s clients range from entrepreneurs, tomultinational companies, from Silicon Valley to around the world.

For more information about Weber and Company, Inc. or Suzanne Weber, please email: sweber@weberandcompanycpa.com

CERTIFIED PUBLIC ACCOUNTANTOFFICE PHONE (408) 931‐6201SWEBER@WEBERANDCOMPANYCPA.COM