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Sunday November 18, 2018

Washington News

Washington Hotline

California Wildfire Disaster Relief

In CA-2018-13, the IRS granted tax relief to three California counties devastated by wildfires. Residents of Butte, Los Angeles and Ventura counties have until April 30, 2019 to file most tax returns. Between November 8 and November 16, 2018, these three counties experienced major wildfires.

The Camp Fire in Butte County was devastating. Over 142,000 acres and 11,862 buildings burned. There are 63 confirmed fatalities and 631 missing people. Some of the missing individuals may be in refugee camps, but many are feared lost.

The entire town of Paradise was destroyed by the fire. At publication time, the Camp Fire was 45% contained and still threatens other northern California communities.

At a joint news conference, U.S. Interior Secretary Ryan Zinke and California Governor Jerry Brown agreed that both federal and state efforts were needed to protect residents. Zinke stated, "It is unsustainable to have this happen year after year or have a season like this where you have hundred-thousand-acre fires becoming routine."

Governor Brown explained the efforts to coordinate the federal and state first responders and other fire protection personnel. Brown agreed that there should be improvements in forest management. He stated, "We have got to get on the side of nature. We cannot just fight it."

The Woolsey Fire in southern California burned 98,362 acres in Los Angeles County and Ventura County. It destroyed 616 buildings and there are three confirmed fatalities. At publication time, it was 69% contained.

The IRS tax relief permits residents of Butte, Ventura and Los Angeles counties with filing dates from November 8, 2018 until April 30, 2019 to file on April 30, 2019. Nonprofits with a tax extension to November 15, 2018 are included in this relief.

Payroll deposits due between November 8, 2018 and November 23, 2018 will be timely if made by November 23, 2018.

Casualty losses in federally-declared disaster areas may be reported in the year of the fire or the prior year. See IRS Pub. 547 for more information.

Foundation Liable for $33 Million Tax Bill


In Diebold Foundation Inc. v. Commissioner; No. 17-3622 (2nd Cir. 2018), the Second Circuit held the Diebold Foundation liable as transferee and assessed a $33.5 million income tax bill.

In 1999, Double-D Ranch, a personal holding company, sold $300 million of assets. The tax on the built-in gain was approximately $81 million. Double-D executed a "Midco" transaction to avoid the potential capital gains tax. The Diebold Foundation (DF) subsequently received $33.5 million from one of the Midco entities.

The IRS audited and assessed a $97.3 million deficiency. Because Double-D no longer held the assets, in 2008 the IRS issued a "Notice of Transferee Liability" and sought to collect $33.5 million from DF.

DF claims that the Notice of Transferee Liability was invalid because it showed a tax year of July 1 to July 2, 1999, while the correct tax year was actually July 1, 1999 to June 30, 2000. The Second Circuit noted that there are specific requirements for a Notice of Transferee Liability. The Notice must "identify the taxpayer, indicate that the Commissioner has made a determination of deficiency and specify the taxable year and amount owed."

While the Notice may not always be technically perfect, the Court continued, "It is not the existence of a deficiency but the Commissioner's determination of a deficiency that provides a predicate for Tax Court Jurisdiction."

The Tax Court under Sec. 6214(b) may determine a deficiency for only the specific tax year. However, there is no requirement to state accurately the specific dates for that tax year. The requirement is to correctly "determine the amount of such deficiency, but in so doing shall have no jurisdiction to determine whether or not the tax for any other year has been overpaid or underpaid."

Because there is no requirement to state the specific dates for that tax year, the notice to DF that the reference tax year was July 1 to July 2, 1999 was sufficient to enable the Tax Court to have jurisdiction. Therefore, the $33.5 million IRS Notice of Transferee Liability is valid.

2019 Tax Table, Exemptions and Deductions


In Rev. Proc. 2018-57; 2018-49 IRB 1 (15 Nov 2018), the IRS published tax tables, exemptions and deduction limits for 2019. Due to a slowly increasing rate of inflation for the mid-2017 to mid-2018 base period, most changes are modest.

The standard deduction will be $24,400 for couples filing jointly and $12,200 for single filers. The head of household standard deduction is up to $18,350. All three standard deductions were nearly doubled by the Tax Cuts and Jobs Act (TCJA) for 2018.

The TCJA eliminated the reduction in itemized deductions for upper-income taxpayers. It also repealed the personal exemptions.

Each taxpayer must calculate both the regular and alternative minimum tax (AMT) amounts. The tax payable is the higher of the two numbers. The 2019 AMT exemptions are $111,700 for married couples and $71,700 for single filers. The AMT exemption is phased out for married couples with income over $1,020,600 or for single filers with income over $510,300. The AMT tax is 26% at the lower level and 28% over $194,800.

Cafeteria plans are available for medical reimbursement of qualified expenses. The flexible spending account (FSA) plan limit for 2019 is $2,700.

Charities are permitted to transfer token gift premiums to donors who make gifts above a specific level. In 2019, a donor who makes a gift over $55.50 may receive a premium gift with the logo or other identification of the nonprofit if valued at $11.10 or less. Donors who make larger gifts may receive a premium up to 2% of the value of the charitable gift, with a limit of $111.

The estate tax applicable exclusion amount increases from $11.18 million to $11.4 million. A couple in 2019 may have an estate of $22.8 million with no transfer tax.

Special use agricultural land under Sec. 2032A may qualify for $1.16 million of reduced value. If an estate qualifies for installment payment of the estate tax under Sec. 6166, the 2% interest amount is levied on $1,550,000.

Finally, the annual gift exclusion remains at to $15,000. This is a per donor-per donee exclusion. An individual or couple with a large family may make substantial tax-free transfers each year through the use of annual gift exclusions.

Applicable Federal Rate of 3.6% for December -- Rev. Rul. 2018-30; 2018-49 IRB 1 (16 November 2018)


The IRS has announced the Applicable Federal Rate (AFR) for December of 2018. The AFR under Section 7520 for the month of December is 3.6%. The rates for November of 3.6% or October of 3.4% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2018, pooled income funds in existence less than three tax years must use a 1.4% deemed rate of return.

Published November 16, 2018
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Shelby Harder, 2018
Dr. Irving Auld and Dorothy
Roher Auld Scholarship

"Many students take for granted what a university has to offer. However, I am thankful every single day for the opportunity to attend this prestigious school. At Lawrence, you have the ability to engage in Socratic debates about the world we live in at dinner, play recreational or NCAA sports, and talk one on one with brilliant professors. At Lawrence, you don't just 'learn' a subject, you are immersed in it. You dive into the liberal arts and these professors show you the beauty in it all, and how everything is tied together. I am a Biochemistry major with a soft spot for rocket science, philosophy, and evolution. Lawrence is my dream school, and it would have never been possible without the Dr. Irving Auld and Dorothy Roher Auld Scholarship. I am forever grateful for their generosity."

Juliana E. Olsen-Valdez, 2018
Carroll Family Scholarship

"Lawrence University is a great place for students looking to embrace their multi-interested approach to learning. As a Geology major, I have spent many long hours in laboratories. But, I have also had the opportunity to organize and lead students on outdoor backpacking trips, help build a stronger community for International students, participate in dialogues on campus initiatives, attend dozens of musical events, and study abroad in a field-based geology program, all while taking classes in a variety of academic spheres on campus. Lawrence, as an institution and student body, creates a collective of learners, listeners, and leaders who are continuously evolving their understanding of the world around them. I am fortunate to have the support of the Carroll Family Scholarship, so that I can say I am a part of this exceptional community too!"

Weiqi "Vicky" Liang, 2019
Marian H. Cuff Endowed Scholarship

"Lawrence is a special institution with nice people around the campus. I better myself by trying out different things and using new ways to think critically. Even though I am a Philosophy major, I have successfully taken classes in Anthropology, Biology, Economics, and Government. In addition, I still find many great extracurricular opportunities to explore, such as singing with Viking Chorale, even though I am not a music major. While having the great experience of volunteering at the elderly center last year, I became an elder advocacy coordinator at the Volunteer Community Service Center. At Lawrence, I've learned to handle difficult academic problems while looking forward to exploring possible opportunities. I am very grateful to be awarded the Marian H. Cuff Endowed Scholarship for every year I have been here, and appreciate that the scholarship has provided this wonderful Lawrence experience to me."

Anthony Cardella, 2018
Ansorge Family Scholarship

"I am so excited that I am able to attend Lawrence University. I know that I will make great progress studying piano with Dr. Michael Mizrahi. Since being at Lawrence I've already made a lot of progress and I really love it here. I am so grateful for the Ansorge Family Scholarship that made it possible for me to come to Lawrence because without it, I might not have been able to afford the cost of attending a school that is a great fit for me and a place where I will learn so much and go so far."

Milwaukee-Downer Scholarships and Professorships

Some of the many recipients of Milwaukee-Downer scholarships gather for a photo with Carolyn King Stephens M-D'62 and Marlene Crupi-Widen M-D'55 in January 2014 at the annual scholarship luncheon.

Rosamund Victoria Bille Adler Scholarship
Dr. Charles E. Albright Scholarship
Helen Daniels Bader Scholarship
James G. and Ethel M. Barber Scholarship
Catharine Beecher Endowed Fund for Downer Women
Bessie A. Bell Scholarship
Berk Scholarship
Frederick C. Best Scholarship
Beta Study Club Scholarship
Lynde Bradley Scholarship
Lucia R. Briggs-Alumnae Scholarship
Edith Lange Brooks Scholarship
Anne Barman Caldwell Scholarship
Alice Miller Chester Scholarship
City of Milwaukee Student Funds Scholarship
Milwaukee-Downer Class of 1940 Fund
Milwaukee-Downer Class of 1942 Fund
College Endowment Association Scholarship
Janet Cope Crawford Scholarship
Jessie Mabbott Daniels Scholarship
F. T. Day Scholarship
Rufus Dodge Scholarship
Julia P. Ely and Hannah R. Vedder Memorial Scholarship
General Endowed Scholarship - M-D College
Dr. Alfred W. and Mrs. Ada F. Gray Scholarship
Berenice E. Hess Scholarship Endowment
Lucille Ray Hibbard Scholarship
Belle Austin Jacobs Scholarship
Helen McDermott Jurack and Ronald J. Mason Scholarship
Marjorie S. Logan Scholarship
Nellie Maxwell Scholarship
S. Annabelle & Paul McGuire Scholarship
Memorial Scholarship Fund - Milwaukee-Downer
Milwaukee-Downer Class of 1953 Scholarship
Milwaukee-Downer Class of 1955 Scholarship
Milwaukee-Downer Class of 1956 Scholarship
Milwaukee-Downer Class of 1957 Scholarship
Milwaukee-Downer Class of 1958 and 1959 50th Reunion Scholarship
Milwaukee-Downer Club Scholarship
Milwaukee-Downer/Lawrence College Consolidation 50th Anniversary Scholarship
Francis Evelyn Kelley Morgan Memorial Scholarship
O'Neill-Anderson Family Scholarship Endowment
Elizabeth A. Olson Scholarship
Gilbert Haven Peirce, Sr. and Emma Elizabeth Manor Peirce Milwaukee-Downer Scholarship
Aleida J. Pieters Scholarship
Matilda Siefert Puelicher Scholarship
Elizabeth Ann Richardson Scholarship
William M. Ross Memorial Scholarship
Elizabeth Rossberg Scholarship
Charles Frederic Sammond Scholarship
Mildred L. Schroeder Scholarship
Sivyer Educational Fund for Women
Marion Merrill Smith Scholarship
Dr. Elizabeth A. Steffen Scholarship
W. Mead and Elizabeth McKone Stillman Scholarship
Strzelczyk Family Scholarship
Clare Scherf Sweetman Scholarship
Raymond H. and Jane K. Taylor Scholarship
Jerline E. Walfoort Memorial Scholarship
Barbara E. Wehr Fund
Harmony Weissbach Scholarship
Martha and Frances Wheelock Scholarship
James G. and Ethel M. Barber Professorship of Theatre and Drama
T. A. Chapman Professorship in Music
Alice G. Chapman Professorship in Physics
Alice G. Chapman Librarianship
Milwaukee-Downer College and College Endowment Association Professorship

Angela Small Fry Intia, 2019
Maurine Campbell Scholarship

"Thanks to the Maurine Campbell scholarship, I have been able to attend the amazing school that is Lawrence University. With the help from this scholarship, I have been able to pursue my dream career in chemistry working with the outstanding and extremely helpful faculty here. Even outside of chemistry I take the time for exploration into my interests and want to give back through my work as a resident life advisor, stock room assistant, and student supervisor at Bon Appetit. Everything I have learned here, academically or not has forever molded the person I am today."

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