Applicable Federal Rates - December 2019

To view a PDF table and diagram of the current rates, click here.

Interestingly, the mid-term rate has moved back up above the short-term rate. Thus, the yield curve inversion (a recession predictor) shows sign of ending.

Transfer Tax Inflation Adjustments

The IRS has announced for 2020:

A. The basic estate and gift tax exclusion amount (and the GST exemption) will be $11,580,000;

B. The gift tax annual exclusion will remain $15,000; and

C. The gift tax annual exclusion for gifts to a non-U.S. citizen spouse will be $157,000.

I have updated my historic table of exclusion amounts for the new year. You can download a copy here.

Section 385 Documentation Requirements Eliminated

In 2016, the IRS issued regulations under Section 385 that, among other things, imposed various documentary requirements that would need to be met before certain related party indebtedness would be respected as debt and not equity. These regulations caused much consternation regarding costs and burdens of compliance.

The IRS postponed the effective date until 2019. However, under President Trump’s initiative to reduce regulatory burdens, these reporting requirements were targeted for review.

In welcome news to taxpayers, the IRS has now acted to revoke the documentation requirements by eliminating Treas.Reg. Section 1.382-2. It also announced that such documentation requirements may return in the future, albeit with streamlining and simplification.

In a separate announcement, the IRS indicating that future proposed regulations will be forthcoming that will address other aspects of the proposed Section 382 regulations, including the distribution requirements included in those regulations.

Treasury Decision 9880; Preamble to Prop Reg REG-123112-19

Florida Underpayment/Overpayment Interest Rate

Florida adjusts its interest rate on underpayments, late payments, and overpayments, twice a year. The Florida interest rate on underpayments and overpayments remains 9% for the period January 1, 2020 through June 30, 2020.