This webinar features Professor Gagnon, the faculty director of the Online Master of Science in Taxation and a former partner at Coleman and Gagnon, providing an overview of the estate and gift taxation course. While many tax professionals understand the basics, this course delves further into the complexities.
Angela LaGamba: Welcome Northeastern University’s online Master of Science in Taxation Course Highlights webinar. My name is Angela and I will be your moderator for today. Before we begin I’d like to go over logistics for this presentation and address some commonly asked questions. All participants today will be in listen-only mode. If you’re listening through the phone line or through your computer speakers, we ask that you keep the background noise to a minimum. This will allow you to hear the presenters better. If you have any questions throughout the presentation we encourage you to use the chat box, which is located on the lower right-hand side of your screen. If you’re in full screen mode, the chat box is located at the top of your screen. You can just look for the bubble icon, and it might also have the words chat on that.
We’ll be taking those questions and addressing them in our dedicated questions and answer session at the end of the presentation. As we mentioned earlier, the event will be recorded, so you’re more than welcome to view this event at a future time by reaching out to your dedicated enrollment advisor for the length.
All right, with those logistics out of the way, let’s introduce you to your panelists for today. So you have two panelists. The first one is Professor Timothy Gagnon, who’s the faculty director of the online Master of Science in Taxation and a former partner at Coleman and Gagnon. Michelle Yan is the enrollment advisor on Northeastern University’s online Master of Science in Taxation and her roll is to help prospective students through the application and admissions process.
All right, what I’d like to do now is move into the first session for today’s webinar where we talk a little bit about the school and the program. I’m going to hand it over to our enrollment advisor, Michelle Yan, to get started. Go ahead, Michelle.
Michelle Yan: Thanks, Angela. So our MS in Taxation program is part of the D’Amore-McKim School of Business. It was established in 1922 and has a rich history, a strong reputation for scholarly research and teaching excellence. We are accredited by AACSB International, which is one of the highest business accreditations found worldwide.
Now the main campus is located in Boston, Massachusetts. We also do have satellite campuses in Charlotte, North Carolina as well as Seattle, Washington. Building on high academic achievement, wide-ranging work and consulting experience and our extensive ties. But the D’Amore-McKim School of Business faculty members are leaders in their fields and regularly receive worldwide recognition and awards for their contribution to theory of practice of management.
We do have a global network of over 200,000 Northeastern alumni spanning more than 15 countries, like China, Canada, India, England, Russia, and Australia, to name a few.
The online MS in Taxation program was designed with the working tax professional in mind. It will help tax professionals to increase technical tax knowledge, sharpen their research skills, keep up-to-date with tax laws and analyze complex regulations, related cases and rulings. It will give you the opportunity to interact with faculty members who are not only educators but practitioners in the field. So they do bring a lot of real life case studies to help you with your learning.
There are a variety of tax professionals coming into this program. So we do have students coming from public accounting arena, private industry, individuals coming from the IRS and, of course, the big four firms like Deloitte, KPMG as well. So it is a fantastic opportunity to collaborate on cases, trade ideas, learn from each other and also develop strong networking opportunities. Now, I would like to turn over at this point to Professor Tim Gagnon, who again, as Angela mentioned, is a faculty director of the online MS in Taxation program. Professor.
Tim Gagnon:Thank you. So I get the dubious task of trying to explain the program. Let me elaborate on one thing Michelle said when it comes to the different professors. We have 15 courses in the program. You have five required and then you have to take ten out of the 15. But we have five required and five that are elected from two different – we call them tracks, although you can take from any of them within int. But of that we have approximately 11 professors who are totally academic as well as practitioners. All of them are within their own firms, so they’re doing this day-in-day-out, as well as doing a lot of research and a lot of interaction on that.
So there’s a lot of hands-on that goes with the theory, which for my background, helps considerably, as you can see. As well as been a former partner, I do a lot of corporate and personal taxation, but I also do a lot of the estate planning administration. My focus in the program from a teaching standpoint hits a lot of the estate and gift area.
You’ll find that most of our professors are specialists, if we can use that word, within their certain areas. We’ve got people who are pension people; they actually own pension companies who teach our retirement plan course. We have people within it that they do a lot of corporate, they do partnerships, so they really focus on the areas that they’re teaching. So they bring a lot of world knowledge as well as a lot of practical as well as the theory that goes with it.
So I’ve found that when I was in practice – that’s 30-some years – that I always appreciated somebody who could actually talk to me about this is great, this is what the code says, but here’s what really happens and this is how you get there. And that’s the one thing that we tried to bring to the program is a lot of that practical knowledge. And we really asked the students to interact with us as professors to bring your practical and professional knowledge in so that we can sort of keep a discussion going and see if it has some application to going forward. So this is an opportunity to really hone the skills that will bring you forward, at the same time getting the actual theoretical knowledge that goes with it.
So let’s look at two courses that are within the program. I cheated and used two of them that I happen to teach so that it was easier for me. But if you look at it, we’ve got a tax research practice and ethics course on one side. This is one of the first two courses that you have to take. We have two courses that you take in your original because they sort of create a foundation to work forward from, but they also make sure that everybody’s on basically the same core level for moving in through it.
The tax research practice and ethics course is designed – will it make you the expert researcher? No. It’s designed to improve the skills you have. We do a lot of short exercises to expose you to all the primary sources, and if you’re not sure what the primary sources are, that’s one of the issues we go into in the course as opposed to the secondary source. But our whole idea is to expose you to all the different language out there, all the different sources out there in order to prove your case, in order to build from, in order to, in all honesty, keep your license clean because if you’re going to give opinions, if you’re going to make decisions, you’ve got to have the good backup to it. And if it’s not there, you sort of expose yourself. So we want to do that.
The second part of that is taking research and learning to apply it to the facts and develop a process that you use when I do research. Where do I go? How do I start? How do I improve or cut my time down to get to the answer I need to get to? So it’s really getting into that process and knowing it.
The secondary purpose of this is if you’re in an online program you’re going to find that a lot of your questions and a lot of your answers and a lot of your work involves researching the code, dealing with it because the different courses will have papers or research assignments in them and we really think that you need to have a grounding in that going forward because it’s a lot easier to get through the program if you’ve got an idea where the different sources are and how to get to them.
We also, while you’re in the program, have access to RIA through the Northeastern library. All you have to have is your NEU ID number and you can get into RIA, which again, we’re making sure that everybody has at least one core research database to work with in order to do your different assignments through time.
Now you take that course and you look further. You say, okay, I got through my research course. I got through my federal tax issues; the other required course. Now you jump off into an estate and gift course. This course for most people is an area that they haven’t delved a whole lot in. In most firms there’s one or two people who does the estate and gift tax work, everybody else sort of runs into it because it’s subchapter J.
It’s an area that doesn’t work like income tax. So the course is designed to expose the students to the two different systems.
Most of us are familiar with gift taxes, although, most of us usually run into that they make an annual gift, it’s under the $14,000, we have no 709 to file, off we go. But what if they go over? Need to know the system. What’s the interrelationship with the gift tax with the estate tax when somebody dies? Second part of that is what’s the interrelationship of the estate tax system with the income tax system for all those beneficiaries? There’s a need to know what happened, how it happened, and what the impact is. It’s also the core course for starting if you’re thinking about doing income tax or trusts and estates because you need to know how those two systems work to know what it does to the income tax side.
So really we spend a lot of time developing the whole idea and it seems kind of silly probably, but when is a gift complete? What makes it incomplete? What’s the effect if it’s incomplete? So we spend a lot of time just trying to dig out all the different situations that make a gift complete or incomplete and make it includable or excludable from the estate. So we’re really trying to create between the two systems how they interact, knowing when one’s in, one’s out, and what the impact is going to ____.
The second part of that is did you really have to get familiar with this because all of us who have ever done any income tax are constantly running into somebody inherited a stock or was given a stock, and then they go and sell it, and what’s are first question to them? Well, what’s your basis? And as they look at you like a deer in the headlights, they’re going, “I have no idea.” “Well, did you inherit it or did you get it as a gift?” “Oh, I inherited it.” Well, what was the fair market value date of death because that’s really what the basis sums up to. But we also have to look in there and say, okay, what year did you inherit it if it’s 2009, 2010, 2011, the difference on what the basis could be, and that’s what the course tries to pick up on, trying to find the nuances that go with it to give you a really good base going forward.
So you start off in the research side because you’ll need it in gifts and estate because there’s a research project in there. You’ll get your federal tax issues so you’ll get a fundamental on the income tax side. Now you start moving because you’ll have your estate and gift, you’ll have your partnerships, your corporations, the five four courses that are in there before you can jump off. The whole concept being that you’re going to start with a fairly simple course, get yourself situated.
The other thing nice about the research course is it gets you familiar and in line with how the online program works and what the interaction is, and all those type things so that you can get your feet on the ground as you move forth into the upper level courses. We’re expecting that you know how the program works and that you’re comfortable with how the interaction is between you and going forward. So you’ve always got that going but don’t think that you’re totally in isolation because the professors, as you can probably guess, love to talk and they’re always happy to answer questions and have feedback back and forth because it’s the exciting area; for us we like feedback.
So let’s take this estate and gift tax course all right? Most people aren’t familiar with it or have limited exposure, but it’s an area that can bring a lot of financial reward for the preparer because in most areas it’s very limited so that you can get a real niche in it. Sounds like I’m trying to sell the estate and gift tax area, and if it does I apologize, but 30 years of working in it, it’s the most exciting area that I can find. It works differently than income tax, so it’s a whole new system to try to learn, but it’s also an understanding that if you receive it, it allows you to do a lot more income tax side with trusts and estates. Next slide if you would.
So, always being the professor, I came up with some questions that I need some answers to. If you want you can just put your answers or type your answers into the chat box and see how we can do with this. So one of the fundamentals that we run into in estate and gift tax is what is fair market value? Why is it problematic to the standard of value? So what is – does anybody know how to define fair market value or really what it is? Any ideas? Go ahead and give me some ideas because I’m always trying to find this. Because remember fair market value for an estate and gift tax is the value that the heirs inherit the asset at. It’s the number for their basis going forward. It’s the number that they’re going to pay capital gains on, so it’s a number that’s highly important to us when we prepare an estate return or even an income tax return on anything that’s been inherited or received – on the other hand, not very good for the gift tax return because it’s a carryover basis. Does anybody have any idea what fair market value is?
Angela LaGamba: We’re seeing some responses come in. So one of our audience members responded fair market value is the value of today’s price.
Tim Gagnon:Ah, the value of today’s price. Do we want to limit it down to today because that’s going to get us a question going forward. I agree it’s what the current, but what we might want to do is what date’s going to be the most important to us in valuation?
Angela LaGamba: We also had another audience response from Brandon saying the current value of the asset today or the value of the property on the date of transaction. And Bob also wanted to add it might be the amount of willing and able – so basically would be buyers willing and able to pay for fair market value.
Tim Gagnon:Somebody’ read rev proc 5960 – willing buyer/willing seller, arms-length transaction and neither of them having the onus or need to complete the transaction. You’re right, you’re on the right track. The key for us in estate and gifts is what was the value on the date of death? Doesn’t matter going forward; I need the exact value on the day that the person died. And you’re right, under rev proc 5960, willing buyer/willing seller.
Second part of that, though, is how do I find a willing buyer, a willing seller, and know what they would have paid, and were they all paid the same thing? So that’s where we get into a challenge. If you’ll skip to the next slide we’ll give you –
Angela LaGamba: We also had a few other responses that came in. So we had Jason that said fair market value is the date of inheritance. And Mackin said, fair market value is the following day of death of the owner.
Tim Gagnon:It will be the date of death of the owner, not the following. Date of inheritance, I agree with you, it’s the date of inheritance it immediately passed the second the person croaked because it isn’t when you received the item, it’s when the person dies. So if you’ve got an immediately inheritance at that point, I agree. If you’re using inheritance as when I get the property, no, we’re back to date of death. Date of death precedes purposes as the big marking point.
Now somebody out there’s going to say to me, “Yeah, but what about alternative valuation date? Six months later we can deal with that one, but the whole thing is that we’ve got that marking point in the sand. I just wanted to throw up here the quick and short of it, it’s the rev proc 5960, fair market value’s price which property would change hands, willing buyer/willing seller, neither under compulsion.
The challenges comes is the arms-length – how do you know if it’s arm’s-length? Is arm’s-length – can it occur between a brother and sister or would there be the assumption of a gift moving across? What if there’s fractional ownership, minority interest, goodwill, which the IRS just came out and said that goodwill didn’t exist in transfers from a father to a son of interest in a business. So goodwill causes a problem because maybe all you get on that transfer is the actual value of the truck and not of the business, which could create some real issues. I mean, how is the property used – zoning, ____, all these factors come into that willing buyer/willing seller.
All of these factors affect what the fair market value is and all of them have to be dealt with when you’re trying to value because on estate and gift when I do an estate – or you do an estate – form 706 requires you to put in the asset in a fair market value date of death, you’re producing it, you’re submitting it, you’re giving it to the IRS on your return, and if your estate’s large enough you may owe taxes, but the other side of that is there are preparer penalties for overstating or understating values, and you’re sort of certifying the values to the IRS on the returns saying these were the values, I got them from the executor. I understand but this return is prepared properly to my full knowledge. So how far out do I want to go on the limb that this value that we used is a good value? Or am I going to step back and say wait a minute, this doesn’t really seem to be proper and I’m not willing to sign a return with a substantial understatement or overstatement because now I’m into circular 230 and penalties that go with it. So, valuation becomes critical for us, all right? Shoot to the next one if you would.
One question couldn’t be enough, I had to have another. Explain the pros and cons of using the will versus a revocable trust. In your opinion, which one is most effective? And these are typical problems that would show up in a lot of the discussion parts of the program. Whenever all of our courses, most of us have designed them with weekly exercises and problems, but also discussion forums among the students, or blogs where there will be a question, you have to post answers to it or reply to them so that this is the type of question that would be put out there for everybody to comment on, and for each of you to comment on each other’s answers trying to refine them and prove them.
Also could be a question like this showing up in an exam because if we’ve gone in and talked about wills and revocable pros and cons – give me three – give me four between them. So these could be the type of questions you would see in an exam or discussion. or you might find a professor throwing in during their weekly chats just to try and get information and try to bring forth the issues so everybody can talk about them and that we can sort of try to give you direction upon those.
I mean, we try to use inventive type questions to try and get you to think about it, but also to get some discussion and to and fro going because it becomes highly critical that you get a nice interaction. I’m a strong believer from my side that you learn a lot from the comments of your fellow students and try to analyze them and work them through and think them through, it’s amazing what you come up with. And it’s hard and sometimes you learn some of this stuff in a vacuum. So the interaction with these type of questions really gets you going back and forth, it really makes you think. And sometimes you do better thinking a request then if you have to verbalize or have to put it down in writing because you really – I guess we get nervous that we might say the wrong thing, and I have to tell you in my chats you can never say the wrong thing because at
least if you say something we can try to make sure that you’re on the right track. So anybody got any pros and cons using a will versus a revocable trust?
Angela LaGamba: Professor, we actually are getting audience responses. Mary said a revocable trust allows for the assets not to go through probate and assets passing just through a will must go through probate.
Tim Gagnon:Very true. I mean, that is one of the reasons that people use revocable trusts in their planning if they’re trying to avoid probate. One of the discussions that comes up in the class is, is probate as devastating as everybody thinks or is it something that we can get by – but that’s true. That is definitely a pro to a revocable trust, you avoid probate.
Angela LaGamba: We also had another response from an audience member and they said, another con that you might find on a revocable trust is just the large amount of paperwork that might need to be completed as part of the process.
Tim Gagnon:Oh, as a lawyer that hurts so deeply. A large amount of paperwork, you’re right, but we just love writing these things. But, yes, there is the documentation, the writing of it, and the cost of doing that. The second part of that is following the revocable trust during your life and having to go through the formalities. Now it doesn’t get a separate ID number but it does require you to rename accounts, re-title them and to process them and keep running them under the trust because if you don’t keep them under the name of the trust, they’re back into the probate, back into the will. So that’s certainly a con to the trust, although it has a pro of probate. If you go to the next slide I’ll give you a few of my thoughts.
Angela LaGamba: We also had another response from one of our audience members saying a will – one of the pros is that it’s open to the public while a trust is not open to the public.
Tim Gagnon:I’ll agree with you in the majority of the jurisdictions although there are some jurisdictions that require a revocable trust to be published at the probate if the will pours into the trust, but for about 98 percent of them, yes, that is true. Although, if you sort of look at trusts themselves, when we talk about a revocable trust we’re talking about a separate and distinct instrument as opposed to a trust under the will, which is totally subject to probate control. So I agree, it does give you a privacy that you can’t get otherwise. So we normally say to clients that the will is simple, touchable, maintain control, can be altered any way you want, any time you want.
Biggest con probably, as what you picked up, is that probate is a real challenge. Trusts, fairly flexible, avoids probate. You can control after death. The big one that I find with many people when I talk to them is that the revocable trust allows you to control the assets after death. Somebody once told me you can’t rule from the grave until I showed them a revocable trust that keeps going and going and going, a dynasty trust that started revocable becomes irrevocable? At the time of death I have to admit we don’t change the name. So call it revocable and if you ever come back from the dead, you can change the trust. But you’re the only one, as the creator of it, who can change it. So a revocable trust sort of becomes irrevocable at death, but it can continue through multiple generations. In certain states there’s no rule against perpetuities, so it can go forever. Other states say 21 years after measuring life – measuring life being anybody alive at the time the document was created.
So, I mean, you can be control in the next two to three generations down and when did they get the money, how did they get the money, and what it’s used for. Very valuable if there are children involved because there’s the opportunity if somebody goes young that the money can be managed and controlled for the benefit of the children through their lives and up through their school and have it left at the other end because remember with a will if you give something outright to someone, it’s theirs to control. It also means it’s going into their estate.
The other part of the revocable trust to keep in mind is many revocable trusts, as the assets grow, have tax planning in them in that they’re capturing the unified credits or applicable amounts, that each state or federal has so that we carve out assets to keep them from going through the estate tax system more than once. A trust can do that, a will can’t. A will basically shoots it back into whoever inherited it.
So if you have a married couple, here’s the opportunity to capture both the unified credits with a trust saving a lot of estate tax if their estates have grown large. Now you’re all going to tell me, yeah, but it was 5.35 million dollar unified credit on the federal side. Boy, most of my clients don’t have more than $5 – or $10 million. And I would agree with you in most cases, but never forget that there are 51 jurisdictions out there that also have some kind of estate tax or inheritance tax or gift tax or they may not have any, but you have to look at all of them because not all of them are in line with the federal government. I mean,
Massachusetts has a million dollars, Rhode Island has an $800.
So if you look through all the different states, you’ve got some lower limits before you could end up with a double taxation. So you can’t just say, well, it’s a 5.35 million, we don’t have any tax issues. Well, what did the state do? They got a million. We do have a tax issue if we’ve got a $2 million estate for the state purposes, but not for federal. So, again, as another way of revocable trust because it’s flexibility and because of its control during life or after death can set up to be some really great tax planning.
I have to admit, you guys are doing really well. So now I’m going to have to worry when you get to my course that I’m not going to have a whole lot to teach you; just kidding. But it’s all of these type of questions that really start a lot of discussion and really start to give you a lot of things to work from, but also of a practical nature because a lot of times students will tell me, “I didn’t think a lot about that but, you know what, I’ve got to go now and think about my own and my parents and say, wait a minute, should they have a trust, should they have a will, should they be in control, where should it go?”
In the course we move a little further down, of course, going from the revocables to the irrevocables, and the different kinds of trusts that are out there because all of them have an impact on the planning and on the preparation. Luckily, in your revocable trust during your life doesn’t have a separate tax return, but we do have to deal with at the time of your death, what about a tax return? What about doing a 645 election to have the estate and trust do the same return for the next period and those types of things.
But all of this has to be looked at throughout our time so that we get a really good feel for what’s the estate, what’s the gift, what’s the impact, and what are the tax ramifications? Do we owe an estate tax, do we not? Do we owe inheritance tax? Do we have a generation skipping tax, or we’re all set but what’s the impact on the income tax for the beneficiaries, for the trust, for the estate? What income tax do we have to pay, how do we have to pay it, and what’s included and what’s not included? Any questions that have arisen from there or anybody want to comment further on my answers?
Angela LaGamba: We do have an audience member who responded going, “The trust may also include the disability trust or the charitable trust, for example.”
Tim Gagnon:Yes, you could have charitable remainder trust, the GRITS, the GRUTs. One little thing you find in tax, we love acronyms – GRITs, GRUTs, FLAPs, FLIPs, all these types things, but, yes, it will include the charitable trusts, which are highly tax related planning, and will include the disability trust and the special needs trust. Again, those are more of a sophisticated nature and may or may not be revocable. They may be irrevocable, especially the charitables. But even the special needs and the disability may be an irrevocable or revocable but you’re correct.
When anybody says trust, you have to get them to narrow down to what kind they’re talking about and what they’re thinking it’s going to do because there are so many different kinds, and so many specialized purposes, but it’s all going to boil down for us to what’s the taxability? Is it included in the estate, is it not included? Does it have a step-up, does it not have a step-up? What was the basis going in? And what’s the tax on it? Do we have to pay the tax getting it in because it’s a gift? Do we have to pay a tax when you died because it’s in the estate? What’s our basis? Do we have an income tax? All that runs the gamut going along. Other comments that I missed.
Angela LaGamba: We did have another comment in regards to your earlier question in regards to the values. So he mentioned that, “Generally, the value for the will is having, again, a willing buyer and that willing seller who are mutually looking to transact at that point in time.”
Tim Gagnon:With no compulsion to complete. Yes. And that’s the hardest part of valuation is who’s a willing buyer, who’s a willing seller, and their arms-length, and they have no compulsion, nobody twisting their arm. And what number would they agree on?
Because remember, we’re coming up with a valuation under that situation. We’re talking about willing buyer/willing seller means been around since 1959 when the rev proc came out and hasn’t been really changed. But who’s the willing buyer, who’s the willing seller, and how do I know what that is when I’m just going out to value the asset to put it in the estate? I’m going out to create a value. So how do I determine what a willing buyer and willing seller would pay?
I mean, think about it for yourself. Is the price – if I had to include a stereo system in the estate, is the value what I might find it at Macy’s? Is it the value I might find it at Price Rite? Is it the value I might find it on Craigslist? How do I determine the value if it’s the same stereo system? Who’s the willing buyer, who’s the willing seller, and what’s the number because they’ve all three got different numbers? And that’s our problem from a valuation standpoint. We’re sitting somewhat in an isolated box saying, okay, what’s the price? If I go out and look, there’s three different prices. The next thing what’s the willing buyer/willing seller? If I go to eBay, what would they pay? So I agree, it’s the willing buyer/willing seller.
Our challenge is trying to determine what number they would come up with to include that value in because I’m guessing, and it’s totally a guess, that the price it would be on Craigslist will be probably less than it’s at Price Rite, which would be less than it’s at Macy’s because different buyers, different sellers, different analysis.
The other issues that we run into a lot is, is there a deduction or a reduction for built in cap gains? Should that make the value less because whoever gets it is going to pay humungous capital gains, and the IRS has said in the past there is no deduction or reduction or discount for built in gains. Although, there’ve been cases lately where they’ve given it a discount for built in cap gains, but that certainly would be a factor if I was figuring out a willing buyer/willing seller and this was – they were suddenly – you were inheriting this and it had a $2 million cap gain, would that affect what the value would be that you’d be willing to pay for it? Would it affect the value if you were buying – I think Carl Icon owned ten percent of the Family Dollar stores or one of them that just went into a merger? Would you pay the same amount to buy a share in that stock if you were going to be a one-share owner as opposed to owning ten percent or have a control over it? Would that affect the value?
So that’s why we find valuation and estate and gifts so tricky is trying to play with all the factors and the code having a willing buyer/willing seller, arms-length, no compulsion but that’s an ideal world and where do we find it? Sort of a long-winded answer, I know, but yes, I agree. It’s the willing buyer/willing seller but the challenge is finding out who they are, and we’ve got a lot of procedures and theory and practical and decisions around it, but it’s just trying to find exactly where that number comes in at. Any other comments that I can answer?
Angela LaGamba: There are a few other comments that have come in. What I’d like to do at this point is hand it over to Michelle to talk a little bit about the program, and then we’ll go directly into our dedicated question and answer session. So I encourage our audience to continue sending in those comments and those questions and we’ll be getting to it in about a minute or so. So, Michelle, I want to bring you back on the line to talk a little bit about the program and the tuition. Go ahead.
Michelle Yan: Thanks, Angela. So we have one more start date coming up for 2014 and that begins on September 29th. There is still time, so for individuals who are looking to come in for this last start date, we are still taking applications and there’s still time to apply.
Now the current tuition for the online MS in Taxation program, it’s broken down, as you see on the slide, $1,433 per credit hour. There are a total of 30 credits, and so overall tuition you’re looking at about $42,990 or about $43,000 overall.
Now, a lot of times we do have – I think some of the questions might come up regarding funding options or in terms of paying. I’ve been talking to a lot of my students that many companies may offer some form of tuition reimbursement. Student most of the time can do a combination. If you have tuition reimbursement, if you have a little bit of self-funding yourself, some students may look into financial aid. So this is a great combination to be able to fund your tuition.
Some companies may say, well, I have a percentage that I’m going to give for the tuition reimbursement. Some companies may say well, there’s a capped dollar amount per year. So it’s actually very advantageous for students in situations where their companies say, well, okay, here’s $5,000 or $8,000, here’s $10,000 calendar year, right? So in order to take advantage of that why not start sometime this year so you can take advantage of that tuition reimbursement and then in 2015 you have a new amount to work with.
Angela LaGamba: Thanks, Michelle. Let’s move directly into our question and answer session. So we do have a number of questions that have come in and for our audience to continue to use the chat box and we will be addressing those directly to the panelists. So the first question that we have, Professor, is around the two questions that you had put up earlier. One of our audience members wanted to ask is it safe to say that a trust or estate will be terminated after a complete distribution? Go ahead, Professor.
Tim Gagnon:It’s safe to say that an estate will normally be terminated after total distribution. A trust total distribution is a question of when it occurs. But, yes, once there’s no assets left the entities go out because they have nothing to manage or to maintain. Most estates last the IRS says after two years, please give an explanation why it’s still open, while trusts will go until there’s nothing left. And to be technical, even though you’ve closed the trust there may be a cleanup period while you’re still trying to get the assets out. But, yes, they are over when the assets are distributed, if that answers it.
Angela LaGamba: And to our audience member, if you have any follow up questions please feel free to type that into the chat box. The next question that we have, again, for you Professor, is which taxation courses can provide broader knowledge in the investment area, like private equity funds and hedge funds?
Tim Gagnon:Well, we have a – we’re going to be dealing just from the tax standpoint but we have a financial instruments course that deals with a lot of the different areas out there. You’re going to see some of the hedge funds and like that are run as partnerships, so the partnership course and the advanced partnership course will have a little bit more exposure to those types of hybrids. I mean, they’re all going to have the basic stuff, but we do not have a specific hedge fund course. But we have courses that are going to give you the fundamentals to work with them and a lot of the inter play with them, if that helps.
I mean, when we set this up we sort of in our minds saw a corporate track that gets into partnerships, corporations, advanced partnerships, S-corps, those type things, and then we had what we call the personal tracker, it’s more the individual track that gets into estate and gift, income tax of trusts and estates. It gets into retirement plans, financial instruments, insurance and all those type areas that have a tax basis. So we sort of try to keep those going forward and even in there we have an estate planning course that tries to take and now apply the estate and gift rules to try and figure out how planning goes forward. So if you stayed within the corporate side you’d get a lot of the fundamentals to deal with those type areas. Does that help?
Angela LaGamba: Thanks, Professor. The next question that we have from our audience member, they’re looking to find out are we or will we be getting into the non-profit and private foundation for the program?
Tim Gagnon:We don’t currently get into non-profits or private foundations as a separate course. That’s a very specialized area; it’s a fun area. But we don’t have a course that’s specifically on those, and from that standpoint, no.
Angela LaGamba: The next question that we have – by the way, Jason, our audience member commented that absolutely it is fun to delve into the non-profit and private foundation area.
Tim Gagnon:It’s loads of fun but it’s a very specialized and limited area. I’d have to see if I could find a professor who’s knowledgeable about that and willing to teach about that.
Angela LaGamba: The next question that we have is if a trust is used for legitimate business, therefore who will the tax go on the income? Is it safe to say that the beneficiary will pay for it?
Tim Gagnon:A revocable trust, which is normally treated as grantor trust for tax purposes, the underlining beneficiaries will carry the tax every year because it’s 100 percent distribution coming down. If it’s not a grantor and it’s a typical or a revocable trust that does not require that all income be distributed each year, this is getting technical, the DNI or the distributable net income will determine who pays. If the trust holds the income in and doesn’t distribute, then the trust will pay the taxes that come through the business. If they distribute any money out of property out to the underlying beneficiaries, then the beneficiaries will carry the tax up to the amount of the distributable net income determined for the year under the trust.
And there’s a lot of technical in there, and I apologize, but basically up to the amount of the amount of the income if distributed will go to the beneficiaries to pay. Anything not distributed that comes from the current income will be paid by the trust. But that’s a complex trust as opposed to a simple trust. A simple trust distributes everything. That’s things we get to talk about on the income tax of trusts and estates.
Angela LaGamba: But it’s also an exciting topic and I can see our audience has a few questions on that area. The next question we have from our audience member, Michelle, this is for you. The question is what is the maximum number of courses that can be taken online in one semester?
Michelle Yan: In one semester, so we – our full semester for the online program, we run, first of all, course all year round, January to December. Every semester or term it’s four months. So usually our spring term begins from January to sometime April. Summer term begins sometime end of April until August, and then our fall term begins sometime around mid-August to December.
So, three terms, each term about four months. So within the four months you are able to take – some terms will offer a maximum of three courses. So each of the courses are five weeks in length and typically you get about a one-week break in between two courses. So if students had wanted to – so for example, for fall, the students that come into our fall one, the August 18th start date, which has closed already, but there will be a class starting fall one, August 18th. If they wanted to take courses back to back in fall, they would be able to take three courses back to back basically.
Tim Gagnon:One thing we should comment on, in any five week period you can only take one course. You’re only allowed to have one course every five weeks. It’s a little too onerous to try and take multiple in the five week period.
Michelle Yan: Correct, yes. Presently, we mentioned – so you are only taking one class at a time or one course at a time. No more than one course at a time.
Angela LaGamba: Thank you both. So that is all the time that we have for today. I just wanted to hand it back to the Professor to see if he had any additional thoughts or comments. Go ahead.
Tim Gagnon:No, not additional thoughts, but I look forward to – I say seeing you all. I know that seems kind of strange, but we do use an online chat, which we do use cameras and mic and we do really feel like you should also use them so that we can get let’s say facetime or at least get in asynchronous discussions going during our chat periods so that you really can see. And I’d love to see you guys in the coming months, and we enjoy the challenge of trying to widen our knowledge – even for us as professors, widening our knowledge because all of you bring a lot to the table and a lot of information that we can all learn from each other.
Angela LaGamba: Thank you, Professor, and also thank you to Michelle for taking the time to talk about the program and answering all of our questions. A couple of closing thoughts for our audience, a recording of the session will be available in the next few weeks. Feel free to reach out to Michelle if you have any questions about that. You can also speak to her directly if you have any additional questions about the program. Thank you to everyone for participating in Northeastern University’s online Master of Science in Taxation Course Highlights webinar.