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I have a question on tuition reimbursement taxability. My employer
reimburses me for tuition upon successful completion of each class. All courses improve
skills for my current position but do not qualify me for a new trade or business. My
employer believes that reimbursements may be treated as non-taxable up to a $5,250
maximum.
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 I've written about this on my webpage. Also, check out Publication 17 from the
IRS (Linked from my FAQ section). My understanding is that your employer may provide you
with tuition assistance up to the limit you describe. If your employer pays more than this
amount, it becomes non-deductible compensation to you. Also, if you pay for tuition and
education expenses and are not reimbursed, you may claim this amount (provided you meet
the education requirements) as an itemized miscellaneous deduction.
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An Employee is granted 30,000 options @ 10 cents/share.
Employee exercises at $25/share and picks up AMT income of $747,000 (30,000 X $25-10
cents). In a later year, the employee sells the shares at $5/share. What happens?
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Your
basis in the asset is $747,000 and when the asset is sold in the future, there is a basis
adjustment that eliminates the regular tax on the asset. Once this occurs,
you'll have an AMT credit as to the balance. The calculations are very complex
and I'm not a CPA so I do not have the software to determine the exact amount of the credit. Part of the
calculation includes reconfiguring your capital gains and losses on Schedule D. Capital
losses for both AMT and regular tax purposes are limited to $3,000 per year. This
indirectly affects the amount of the AMT credit you can use, because the spread between
the regular tax and AMT will be smaller because of this limitation.
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I read your article
about the 'adjusted basis' of my home, but it only talked about home improvements. May I
also include realtor commissions?
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If you are selling your home, the costs of sale
decrease the "amount realized" from the sale, i.e. the amount you receive. If
you purchase a home, then the purchase price includes costs associated with the purchase
that were not deducted, such as commissions, closing costs, and your share of escrow fees
and, therefore, increases the adjusted basis.
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An
asset-protection attorney claims that a foreign grantor trust, with foreign trustees, but
with a U.S. settlor and U.S. beneficiaries is considered a "grantor trust" in
which case, no Forms 3520 or 3520A (related to foreign trusts) would be filed. Is this
true?
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The asset-protection attorney is wrong. A U.S. person who is considered the owner
of a foreign trust under any of the grantor trust rules is the one responsible for the
requirement that the foreign trust file an annual return (Form 3520-A). The trust must
provide an accurate accounting of all trust activities, trust operations and other
relevant information required by the Treasury. See IRC Sec. §6048(b)(1). In addition U.S.
beneficiaries of a foreign trust who receive trust distributions, either directly or
indirectly, are required to file Form 3520, reporting the distributions on Part III of
that form. The reporting requirement is limited to U.S. beneficiaries who know or have
reason to know that the trust is foreign.
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