In the case of Clark v. Rameker, Trustee, Justice Sotomayer penned an unanimous opinion finding that inherited IRAs are not afforded protection under the Bankruptcy Code against creditors. The Court found that inherited IRAs are not "retirement funds" within the meaning of Section 522(b)(3)(C) of the Bankruptcy Code. There were three primary factors that lead the Court to this conclusion that inherited IRAs are not "retirement funds" within its ordinary meaning. (1) the holder of an inherited IRA may never invest additional money into the fund; (2) the holder must make withdrawals from the IRA no matter how close to retirement; and (3) the holder can withdraw the whole amount at any time.
In light of this decision, a person may wish to carefully weigh the benefit of holding assets in an inherited IRA from a tax benefit perspective and an asset protection point of view. This determination will be heavily driven by a person's risk profile.
Showing posts with label Supreme Court. Show all posts
Showing posts with label Supreme Court. Show all posts
Tuesday, June 17, 2014
Wednesday, April 9, 2014
No Taxpayer Refunds: Supreme Court Rules that Severance Payments Are Subject to FICA
If you have followed this blog, we have been writing on the closely watched Quality Stores case involving the taxability of severance payments (United States v. Quality Stores Inc. (In re Quality Stores Inc.), 6th Cir., No. 10-1563, petition for rehearing filed 10/18/12). The Sixth Circuit held that payments a company made to employees as part of the company's severance program were not subject to tax under the Federal Insurance Contributions Act (FICA) . This decision was appealed, and the Supreme Court decided to resolve the issue because of the Circuit split.
Unfortunately, on March 25, 2014, the Supreme Court ruled that severance payments (or SUB payments) were subject to FICA tax and withholding. Even the Supreme Court did not take pity on those who were, are or will be severed from their employment.
If you have followed this blog, we have been writing on the closely watched Quality Stores case involving the taxability of severance payments (United States v. Quality Stores Inc. (In re Quality Stores Inc.), 6th Cir., No. 10-1563, petition for rehearing filed 10/18/12). The Sixth Circuit held that payments a company made to employees as part of the company's severance program were not subject to tax under the Federal Insurance Contributions Act (FICA) . This decision was appealed, and the Supreme Court decided to resolve the issue because of the Circuit split.
Unfortunately, on March 25, 2014, the Supreme Court ruled that severance payments (or SUB payments) were subject to FICA tax and withholding. Even the Supreme Court did not take pity on those who were, are or will be severed from their employment.
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