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18 Prac. Tax Law. 3 (2003-2004)

handle is hein.ali/practax0018 and id is 1 raw text is: THE PRACTICAL TAX LAWYER FALL 2003 VOLUME 18/NUMBER 1 Published by The American Law Institute-American Bar Association Committee on Continuing Professional Education with the cooperation of the Section of Taxation, American Bar Association Are Attorney Contingency Fees Included in a Client's Gross Taxable Income? Robert S. Schwartz 7 Whether the attorney contingency fee portion of a recovery fund ought to be included or excluded from a client's Federal gross income is still a developing area of the law, although many cases go against tax- payers. This article suggests tax-friendly terms for con- tingency fee agreements and discusses how a client's tax reporting of gross income exclusion, if any, should be done in light of the no fault substantial under- payment tax penalty that applies once an individual client's unreported taxes exceed the greater of $5,000 or 10 percent of the correct amount of taxes. Tax Aspects of Crummey Withdrawal Rights Sebastian V Grassi, Jr. 21 The need for Crummey withdrawal right trusts has not been diminished by the Economic Growth and Tax Relief Reconciliation Act of 2001. In fact, the un- certainty surrounding the permanency of the repeal of federal estate taxes and generation-skipping transfer (GST) taxes underscores the need for clients with estates greater than $1 million to consider the use of irrevocable gift trusts as a means of transferring appre- ciating property or life insurance to the grantor's de- scendants and removing it from inclusion in the grantor's gross estate. The Crummey trust with its cor- responding right of withdrawal granted to the benefi- ciaries will serve as a useful tool when the grantor wants to preserve his or her $1 million gift tax appli- cable exclusion amount. This article discusses various common tax issues that an attorney may encounter or want to consider when drafting a Crummey trust. Advising a Client on the Best Form in Which To Conduct a Business Paul E. Treusch 35 Very different treatment, both in tax and in nontax respects, may flow simply from the choice of form in which a business venture is conducted. First of all, a venture choosing to operate in corporate form, or from a particular type of corporate form, must generally expect quite different treatment for both tax and non- tax purposes from deciding to operate in noncorporate form, whether as a general or limited partnership, or as an LLP or LLC. The different treatment is even more pronounced when comparing the corporate form to the trust or sole proprietorship model. Here are the pros and cons you must consider before advising a client to select one form over another. Ethics Rules for Estate Planners Frank S. Berall 55 Ethics rules to be observed in practice before the IRS are governed by Circular 230. Circular 230 also gov- erns the work of those estate planning attorneys who advise on complex gray area tax plans or are involved in the administration of estates and trusts. Conse- quently, it is crucial that estate planners (as well as tax lawyers generally) understand Circular 230. For exam- ple, among other things, Circular 230 requires due dili- gence on the part of the attorney in preparation of the return. But what happens when the attorney discovers unreported items after the return is filed? Taxing Decisions ALI-ABA and ABA Section of Taxation CLE Calendars 6 Programs, Publications, and Playbacks

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