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Experiencing an investment loss is bad enough, but that situation is even worse when those losses cannot be used to reduce tax liability. Rothstein Kass explores the recent Garnett decision by the U.S. Tax Court, which broadened the rules used to determine whether participation in a business activity can be considered passive activity. This designation makes it more difficult to use a loss from the business to reduce taxable income.

The federal estate tax is scheduled for repeal in 2010, with a less generous version expected to go into effect in 2011. This has Congress considering proposals that could change estate and gift tax laws. This paper from U.S. Trust, Bank of America Private Wealth Management explores six of these proposals – including limits on the generation-skipping exemption, valuation discounts and GRATs – and their potential impact on taxpayers.

With estate tax repeal less likely, grantor trusts are gaining attention as a way to optimize existing tax exemptions. Because grantor trusts offer income tax and estate tax benefits, they also can be a powerful tool for removing assets from a taxable estate. This article from Atlantic Trust Private Wealth Management explains the types of trusts, how to set up a trust and how to name beneficiaries.

Changes in tax law on estates and gifts provide lower valuations, which makes this a good time to focus on estate planning. An advisory from Rothstein Kass offers suggestions on beginning the process as well as pointers on taking advantage of current and proposed tax laws so that families can transfer as large an estate as possible to future generations.

The new administration has turned 2009 into a year of changes in state, gift and income tax laws – and more changes are expected before the year ends. Credit Suisse Securities (USA) provides an update on the extension of the IRA charitable rollover as well as changes to the gift tax annual exclusion, the generation-skipping transfer tax, and family partnerships and valuation discounts.

The Internal Revenue Service has increased its scrutiny of multinational corporations and ultra-wealthy investors who try to minimize their taxes inappropriately through foreign investments. PricewaterhouseCoopers offers a checklist that U.S. investors can use to make sure they comply with international tax-reporting requirements.

If they are to weather future market changes, trusts need to be revised or developed using more candid projections of economic conditions. A report from U.S. Trust offers suggestions to improve the effectiveness of trusts, such as assessing portfolio potential more frequently, including probable tax increases in projections and setting distribution methods that balance client needs and trust viability.

All offshore trust companies with any UK nexus should consider their UK exposure and the position of their trusteeships given the extremely detrimental tax effects that can arise through a determination of UK fiscal residency. The guidance also is very relevant, Withers says, in the context of private trust companies with UK resident directors.