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No First-Time Homebuyer Credit For Purchase From Parents. A Wisconsin man who purchased a home from his parents could not claim the $8,000 tax credit for first-time home buyers, which was in effect in 2008 and 2009, the Tax Court ruled. Cary Nievinski purchased the Milwaukee house for $115,725, and claimed the credit on his 2008 tax return. Neither the Internal Revenue Service Form 5405 that his accountant prepared to take the credit, nor IRS Publication 4819 dealing with the first-time buyer credit, mentioned that the tax code specifically disallowed the credit for purchases from certain family members, including parents. But the Tax Court ruled that this was irrelevant. The law was clear even if the IRS materials were not, and the IRS correctly followed the law in disallowing the credit, said Tax Court Judge Stephen J. Swift. Cary Allen Nievinski v. Commissioner, T.C. Summ. Op. 2011-10.

Illinois Brings Back Its Estate Tax. Legislation to close an estimated $15 billion state budget gap has put Illinois’ estate tax back on the books after a one-year hiatus. The Illinois levy applies at rates up to 16 percent to estates over $2 million. The federal estate tax, which also returned in 2011, has a maximum rate of 35 percent, but only applies to estates greater than $5 million in 2011 and 2012; beginning in 2013 the federal tax would reach 55 percent on estates greater than $1 million. The variations between the state and federal thresholds will complicate estate planning for Illinois residents as well as non-residents who own property in Illinois. The Illinois estate tax is expected to raise $182 million in fiscal 2012 and $243 million annually thereafter. 2011 STT 16-11.

Connecticut Looks To Tax Increases To Close Budget Gap. Bucking a national trend to close state budget holes with little or no increase in taxes, Connecticut’s newly elected Gov. Dan Malloy called on the state’s General Assembly to boost a broad range of tax levies. Malloy, a Democrat, proposed raising income taxes for middle-and upper-income taxpayers, ending a $500 state tax credit for local property taxes paid on homes and motor vehicles, raising the higher general sales tax, and hiking other taxes on luxury goods, rental cars, hotel rooms and cigarettes. The higher taxes are supposed to raise an additional $1.5 billion in fiscal 2012, which is a bit less than half of the estimated $3.2 billion budget shortfall. Malloy called for concessions from state employees’ unions to make up most of the difference. The General Assembly is expected to enact a budget sometime this spring. Malloy’s Democrats control both the state House of Representatives and the state Senate by comfortable majorities. 2011 STT 33-8.

If you enjoyed this article, be sure to check out Palisades Hudson’s books, The High Achiever’s Guide To Wealth and Looking Ahead: Life, Family, Wealth and Business After 55. Both are available in paperback and as e-books.