This session of the Private Client West Coast Forum 2024 focused on recent developments, including income tax planning to support investment performance, executive compensation planning, private placement life insurance (PPLI), exchange-traded fund structures, and profits interests.
Session panelists included Katy Crafton Fluet and Patrick J. McCurry.
In Depth
Key takeaways included:
- The Internal Revenue Service (IRS) recently announced the selection of Jeffrey Erickson as Associate Chief Counsel to lead the newly created Passthroughs, Trusts and Estates office. The office will focus exclusively on partnerships, S corporations, trusts, and estates. This decision indicates the IRS’s heightened focus on wealth transfer and related tax planning.
- Lender planning is likely to remain relevant even after the sunset of the Tax Cuts and Jobs Act repeal of the Section 212 deduction, due to the 2% floor and the potential application of the alternative minimum tax.
- Tax-loss harvesting using long and short positions has significantly increased in popularity. However, caution is warranted regarding several income tax issues, including the economic substance doctrine, fee deductibility, and passive activity losses.
- PPLI can be an effective planning solution in the right circumstances. However, costs, complexity, and investor control are important planning considerations.
- Executive compensation planning has become a common practice to attract and retain talent in family office spaces. Planning considerations should include tax, valuation, and other contractual implications when employees exit the structure.
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