In this webinar, Professor Timothy Gagnon talks about the Online Master of Science in Taxation program and more specifically the Generation Skipping Tax course. He covers the history, evolution, and current state of generation skipping tax practices and policies.
Angela LaGamba: Welcome to Northeastern University’s Online Master of Science and Taxation webinar. My name is Angela and I will be your moderator for today. Before we begin, I’d like to go through some logistics for this presentation and address some commonly asked questions. If you have questions throughout the presentation, you can type them into the Q&A box and questions will be addressed at our question and answer session at the end of the presentation. We are also recording this event as well for those that would like to view the webinar again in the future.
We’re also excited about our full house of panelists for today. Professor Timothy Gagnon is a Faculty Director for the Online Master of Science and Taxation and also a former partner at Coleman & Gagnon.
Michelle Yan is our Enrollment Advisor with Northeastern University’s Online Master of Science and Taxation and her role is to help prospective students through the application and admissions process. And as we go through the webinar, our panelists will also have the chance to further introduce them so you get to know them as well.
If you have any specific questions for the panelists themselves, just feel free to type their name beside your question so that we can direct it to the correct panelist. All right, let’s get started. We are going to be covering a number of different things today. We’re going to talk about Northeastern University and the D’Amore-McKim School of Business. Michelle will tell us a little bit more about the online Master of Science and Taxation. And then Professor Gagnon will provide us with insights into generation skipping tax.
I will hand it back to Michelle to tell us a bit more bout admissions requirements and tuition fees. And like I mentioned earlier, we’re also going to have that dedicated Q&A session for you. At this point, I’m going to hand it over to Michelle to tell us a little bit more about Northeastern University. Go ahead Michelle.
Michelle Yan: Our Master of Science 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. Building on high academic achievement, wide ranging work and consulting experience, rich diversity and our extensive corporate ties, D’Amore-McKim School of Business faculty members are leaders in their field and regularly receive worldwide recognition and awards for their contributions to theory and the practice of management.
Now, we do have a global network of over 200,000 Northeastern alumni spanning more than 15 countries. Like places in China, Canada, India, England, Germany and Australia to name a few. And almost 90% of our students pursuing graduate business degrees have work experience. So, our programs are very accommodating and flexible.
Now, we are accredited by the AACSB International, which is one of the highest business accreditations worldwide. And most recently, Northeastern University’s online graduate business programs was ranked no. 18 in the U.S. in 2016 by U.S. News & World Report. And this does also include the online MS and taxation program.
Now a little bit about the online MS and tax program. It was designed with the working tax professional in mind. The coursework itself is 100% online with no residency requirements. The program can be completed as little as 16-18 months. There are about 10 courses and they’re taken only one course at a time. Now, in this program, we do offer two specialty tracks if you want to have a focus, either taxation of entities or taxation of individuals. I’ve also had questions, students work with clients from the individual or sort of the business side, are they able to choose courses from both tracks? And yes, absolutely can do that as well.
And in this program, there are a variety of different tax professionals coming into this program. So we have students from public accounting firms, we do work with private industry folks, individuals coming from the IRS and, of course, the big four firms as well like Deloitte, KPMG. So, it is a fantastic opportunity to collaborate on cases, trade ideas, learn from each other and develop strong networking opportunities as well.
Angela LaGamba: Great, thank you very much Michelle for telling us more about the online Master of Science and Taxation. And now I’m going to hand it over to Professor Gagnon to walk us through generation skipping tax.
Timothy Gagnon: Generation skipping is that tax that nobody wants to talk about because it keeps coming and going, but before we go that deep on it, let me give sort of a background there. I’ve been at Northeastern eight years full-time after about 15 years on the edge on faculty. So, I’ve been around a long time, which I guess makes me old a gray, but it is an interesting program to work from. And it can be very enlightening because we get a lot of students and a lot of people and a lot of experience so that you get a lot of camaraderie between the students. So, you can also make some very good contacts when you have questions going forward which is always sort of helpful from my standpoint because some of these questions always get very difficult and it’s probably somebody that you can sort of ask the quick question. That being said, let’s deal with generation skip.
Generation skipping really came about because Congress really thought there was too much money moving between multiple generations that weren’t getting taxed. They thought they were missing out on estate tax. The two bigger trusts that made that come about if you think out there, the Rockefeller and the Kennedy Trust where the grandparents put it in trusts where basically it benefits the grandchildren and greatgrandchildren going forward. And since they moved it away from going to their kids first, Congress did really miss one because if the grandparents had given it to the kids, then the kids would have given it to the grandchildren, there would have been two estate taxes hit. And by putting it in a trust and skipping the children, jumping down to the grandchildren, they got the opportunity to move it and save an estate tax. It doesn’t seem like much except when you look back at the time you’re talking about a 50, 60 or 70% tax at best. So, if you’re looking at a $10 million trust, you’re looking at a potential between $5 and $7 million getting missed.
So Congress said this won’t work. We’re not going to allow this money to slip away from us, as they would put it. So, they said okay, let’s come up with a system that taxes that jump that basically gives us the tax today that we think we would have collected when the kid dies. That’s really what we’re looking for. What would we have gotten, so we’re going to get that tax early. We’re going to get it – if we’re looking at time, value and money, we’re getting it well before we would have ever collected should the kids die. And they can use some that there’s some money left when the kids die.
So if I bring the kids into the trust and then move down, we’re hoping that the kids don’t use it all up because I’ve now paid tax to go to that grandchildren’s generation. But, maybe the money won’t be there, who knows? Bad investment, poor investment, always a challenge. So, you’re pre-paying in today’s dollar the tax that might come up in 20-30 years. So, it does create a lot of questions in our mind of what’s the proper number, should we do it, should we jump, should we not jump when we pay the tax? Should we pay it immediately on direct? Do we wait for a termination or do we have pre-distribution and up go further into that?
So, it’s always a perception. And then, of course, you have an exemption. But the exemption is separate from the Gibson Estate Tax exemption. So, it gets used differently. So, you’ve always got to keep that in mind and you’ve got to track it separately, which is always the fun. So, we were going along in ’76 they tried to pass one, a GST tax, it didn’t work. They kept extending it extending its application. They finally said it just doesn’t work.
So in ’86 they restructured it, broadened the reach, increased the exemption, created a flat rate. It’s just a maximum federal estate tax rate, the GST rate. No going up to the charge, no going to marginal. It’s top rate. So, think about that if you receive what today is $5.4 million of GST, it’s going to be all at top rate, every dollar. But think about it, when you make a gift to GST, you’re using up the unified credits and the GST credit. So, you might save on the GST, but you might have used up your unified credit already. So, you got to pay the gift tax, but saving on the GST could go the other way. If you end up using both, you’re giving $6 million. Now you’re at top rate for both the gift tax and a generation skipping.
So, now you’re talking close to an 80% tax, which is what knowing about it and knowing how to plan around it becomes very valuable, because I don’t know about you but an 80% tax for every dollar I give is quite steep from the other hand if I do it during life, I got a dollar out, I got another 80 cents out because I paid the tax, I got $1.80 out of my estate. I’m not sure if my heirs are going to be appreciative that we took my estate down by $1.80 when they really wanted the money.
So we had it coming in. It stayed pretty consistent. So, the whole question comes down. It says that they’re skipping transfer tax, generation skipping. When does a skip occur? How do I know when a skip occurs? How will I look at a skip? What is a skip? Any ideas from your standpoint? When do you think a skip would occur? I’ll take any replies you like. It’s a quiz.
Angela LaGamba: Oh no, I was going to say to our audience, you’re more than welcome to send your questions through the question and answer box for Professor Gagnon. Go ahead professor.
Timothy Gagnon: A skip is when a transferor conveys property to the benefit of any individual more than one generation removed from the transferor. Greatest legal deal you’ll ever run into walking around in circles. Basically it means when you made the transfer, there was a generation below you that was still alive and you skipped them. If the generation below you are not alive, I have no skip because there isn’t an estate tax that the IRS would have gotten their hands on.
Think about that from the standpoint of if the grandparent is alive, the parent is dead and he gives money to the grandchildren. The IRS didn’t miss a tax because there was no child for it to go to be taxed. So, that’s not a skip. If the parents are alive, it’s a skip because it was that intermediate generation that they could have got an estate tax on if it was still there when they died. So, we have to always look at that. There’s a whole arrangement to how to count, when to know where you are. But is the generation in between alive? If they’re not alive, how can you skip them? And there’s where a lot of times we get hung up because they will list the grandchildren so they must be skipped. Are the parents alive? No. Because then there’s no skip because that’s a direct movement. As we like to say as you move up a generation, so there’s no skip.
So let’s look at that. It comes to section 2601. It’s a supplement to the estate tax and it provides that any taxable gift will be increased by the amount of any GST tax on the transfer for a direct skip. What does that mean? Think of it this way. One the only thing that a GST tax applies to is a taxable gift. We all know that there’s an annual exclusion out there of $14,000 that is not taxable, not subject to gift tax. Therefore, it’s not subject to GST tax either because GST says you have to be a taxable gift subject to the gift tax system, or the estate tax system to be subject to GST.
So first thing you got to figure out is this skip subject to your estate tax. If it is, then I got to look and say okay any taxable gift is increased by the amount of GST tax. So the pain of the GST is an additional transfer to two generations below and subject to GST tax. Doesn’t that get confusing after a while?
So I said okay, I got to figure out skip. So, I got to look at the three, there are three types of skips. There’s a direct skip, there’s a taxable termination and there’s a taxable distribution. Probably the easiest one is the direct skip. But I got to figure out first who’s the transferor and that’s the person who is most recently subject to a stated year tax with respect to the property. Think of that real closely. The transferor is whoever it would be includable in their estate currently that moves it. If it’s a taxable transfer under your will, it’s the decedent. If it’s a gift, it’s the donor. If it’s a general power of appointment person, it’s the power holder that could exercise or lapse the power.
That’s a very tricky area when you get into it because a power holder, general power, is not a special, but a general power means I have the ability to appoint your assets to my creditors, to myself, to my estate or my estate’s creditors. Therefore, if I had that power and I didn’t exercise it and two generations below are going to benefit from my ability to exercise, I, as the power holder, have just gone a generation skipping transfer and am subject to tax. Think about that, I could be subject to a GST tax using my exemption on assets that I never really took control of because I let the general power lapse. I didn’t exercise it. The general power can create a GST event, even though you don’t have the assets, which is kind of scary from our standpoint.
So once I figured out if there’s a skip, I figured out if there’s a generation below, I figured out whether I really have moved and cheated the IRS out of one more look out of the value of the asset moving down. Because 2613 says a skipped person is anyone who is two or more generations below. The generation of the grant, either by blood or by age. And that becomes an interesting issue. Blood is easier to figure out, but if we don’t have a blood relationship, we start looking at age. We start saying okay how much younger are they? And when I’m 10 generations, I go to the grandparents and count my way down.
If they’re assigned to more than one generation, or even not related, adopted person, considered full family, but you can’t move up a generation to adoption. That becomes an interesting argument. The spouse is the same generations of transfer. Think about that. If I have an 80-year old woman who marries a 22-year old guy, he just joined her generation. So, if he had kids, they just moved up to be the 80-year old woman – they just became at her kids level, even though they’re probably about 70 years younger than her.
So I started looking around. I say okay, who’s in what generation? I have to basically create a chart and say okay pick the generation you’re in. Because with that, I’m going to get to see whether I have a skip that’s taxable or not. So, I’m going to find out where they’re going to be and that becomes very critical to me. If an estate trust partnership or corporation’s the beneficiary, the assignments based on who owns the beneficial interest. So, now they’ve got to go through the entity looking at the beneficial owners and looking what generation they’re in. This is why when you got something on a trust or a partnership or something, I got to look who the beneficial owners are and say what generation would they be? Are they more than 12 ½ years? Are they more than 37 ½ years? How much younger are they than my donor? They’re my decedent. So, I’m looking my way very closely through there. I’m trying to find out, okay where am I? How am I?
I then move from there and say okay is this a direct skip? Because the direct skip is going to be subject to GST tax immediately. The second I move the money, I have to pay the tax by applying my exemption to it and use it up. The directed is out by transfer device or request. Or it’s a transfer to a trust that the only beneficiaries of are skipped individuals. And I say that because if I create a trust for my grandchildren and my children have no rights in that trust, then I have a direct skip immediately because only skipped people are beneficiaries of it. So, I immediately have a tax due. As opposed to if I had transferred to a trust and gave my kids a life interest in the income, I don’t have a direct skip at that point because there’s somebody who’s not a skip person who has a right to the trust.
When my kids die is going to get subject to GST because it’s going to get either on a taxable termination or taxable distribution if we turn it out during the lifetime. So, I got to look at the underlying trust and say okay who are the beneficiaries? Are they all skip people? Are they direct skip? I owe the tax immediately. Is there somebody in there that’s not a skip person, then I don’t have to pay my GST tax yet. I’ll pay it later when the skip people go away because until then there’s somebody who’s a non-skip who’s getting the benefit, then I don’t yet – we don’t know how much has gone to skip people.
If you think about it, if I have a non-skip person in there and I’m paying to them and they live for 40 years, how much and what will the trust be worth when there’s no longer a non-skip person? That’s when I know the value is to GST purposes. Because at that point I know how much is moving to the generation two below.
Now, you can’t move up in a trust. Remember I said previously that if the grandparents are alive, the kids were dead and that meant the grandchildren moved up so there was no skip. If the parents died after the trust was created, the grandchildren don’t move up in the trust, they’re still skipped. So, when we make the determination skip or non-skip, we make it the instant the trust is created, and then we know who the skip people are with the non-skip. When the non-skip is gone, we now have a GST event. Is that making sense or am I totally confusing everyone? Just give me a yay, nay or whoa.
Well nobody screamed. I mentioned taxable termination. Once the person was a non-skip is no longer in the entity and I use trust but any trust type arrangement. Once that person goes away, the whole trust, whatever the value is at that point, is now subject to GST because now I have only skip people. So that means at that point that that non-skip person goes away, I have to now pay the GST tax. And the trust pays. The trust is liable for because that is the one sitting with the money.
Because the trust is sitting with the money, it pays the bill. So if you think about it, skip people are going to get less inheritance, less beneficial interest because the trust’s paying the bill. Okay, not a problem, I can get by that one. No problem going along. But the value involved in the termination is less the expenses, but it’s the value at the time of the non-skip person’s death. Think about that. I had a trust that was growing over time. I’ve got a bigger number being subject to GST tax on the desk. If I have a trust that runs for 20 years while the child’s alive, this gives them income and their principal grows or doubles, I now have a potential that my GST is going to be applied to a trust twice as large, doubling the GST tax.
Now I’ll mention towards the end though sometimes how we try to get around that is called the inclusion for using your exemption against it when you put it in so you can take it out of the GST system. But if I don’t, I’ve got a large GST tax just building up through the years and that could get very, very expensive. Because when you get to a GST that’s in 40-50% at a rate that would mean almost half the trust now gets paid out to the government, so really that growth didn’t do us a lot of good. Which is why I just mentioned in passing the inclusion ratio and the whole idea of applying your GST to the trust at the time you create it to try to take it out of the GST system because then the growth doesn’t matter.
And you’re probably all familiar with that when you make a gift to a trust such as this; you have to file the 709, the gift tax returns. And in there, there is a GST section and that’s where you can apply your GST credit towards the amount you put in to take it out of the system. But again, that’s something you have to do at the time the trust is created. You can’t do it later or you do it at the time somebody dies so that when you transfer the money, you get the GST exemption against it.
Because if you don’t, we’re just going to have a growing tax liability and really going to get hit badly along the termination. So, if I didn’t get a direct skip, if I didn’t get a taxable termination, I’ll get taxed on the distributions. Any time that trust distributes to a grandchild, I have a taxable distribution, I have a GST to assign to it.
So in a way we call it a catch all category. If it doesn’t get a direct and it doesn’t get a determination, than any of the money that would just get first was a distribution. If you get it in the first, you’re going to get it in the third. We’re going to get the money, GST, if it gets to a person two generations below. But, here’s the key, paying the GST tax on that distribution is considered a secondary distribution subject to GST tax. Think about this, every time I pay the tax from the trust level, it’s another gift to you that’s subject to GST so I owe more GST tax. I pay that, now it’s another gift, now I know – so you can start getting to that spiral that can just sort of eat you all up.
A lot of times the way we get around this is we talk to the skip person and say we wanna give you $100,000, but we’re going to give you $150,000 and you pay the GST tax so I don’t have a second distribution. I don’t have a second $50,000 distribution, something the GST is like oh another $20,000. I’ll give it to you Ms. Skip. From there, think about this, it’s the value of the property received, less tax related expenses, which is just the expenses necessary to close something down or to get the distribution distributed. So, in many cases, there are not a lot of expenses going out. And since the trust is paying it, it’s considered ahead of the cash so we’ve got this sitting there.
Now I alluded to the inclusion ratio. That’s the ratio when we look at the trust of how much of it was covered by the GST exemption when it was put in and how much it wasn’t covered. So, when I look at that standpoint, I look and I say okay when they put it in and we did the GST, did we $4 million and we allocated $4 million of the GST exemption to it. Therefore, I’ve already covered. So, that trust no longer has any GST tax applied to it. It’s covered. The exemption took care of it. Anything coming out of there, I don’t have to pay GST tax.
But if I put in then I apply five of the exemption, I have five that’s not covered. So, now 50% of the trust is subject to GST tax and 50% of the trust is not subject to GST tax. So, now every time I make a distribution, I have to figure out half the distribution GST tax, I owe tax, half of it’s not, so I keep going’ back and forth.
So here in the profession they talk about one and a zero. One subject to GST tax, zero not subject to it. And you will see in a lot of documents with trusts it says that if I have the situation, you are to create two sub trusts, one with a one per GST and one with a zero per GST so that when I distribute, I know whether they’ve got to pay GST tax or not because if I keep them all combined, now I got to keep doing ratios, now I got to keep running along. And you guys are probably better at ratios than I am, I really don’t like to have to keep recalculating. I really wanna know is it or isn’t it? Because that way, I’ll know good or bad. But that’s the concept we run into.
And I mention moving up. Again, you can move up, but you can’t move up within a trust. Once the trust is created, the move ups are over. We’re done. You cannot move up any more. So that being said, if there are any questions, please come forth with them or hold them towards the end and I’m happy to answer them, but that’s the genesis of GST. Now I will warn you that when you join the program and you take these and we get into GST, there are a lot more little things going to get thrown at you because there are a lot more little quirks. But that’s the overview of the system itself of a generation skipping tax system.
And it’s a secondary ancillary system to the gift tax from the estate tax. It’s separate and distinct with its own rules, its own credit, and its own analysis. So, you have to sort of lay that over your normal gift tax, estate tax system, your normal analysis from a client standpoint. You have to throw that in because you’ve got to say, okay do I have a gift? Do I have a skip? Who’s the skip? Who’s the grantor? Where does it apply? Do they have an exemption? Did we apply the exemption? Did we not apply? Did we file the gift tax return and not apply the exemption thing equal? They use it all up during their life so the kids will spend it all out. But if they don’t, I now suddenly have a GST.
Did I use my GST exemption and the kids spend it all? So is it wasted it? So these are all those balancing requirements, but the challenges, trying to figure out to use it or not to use it 40 years before it comes up because they put it in trust and the kids live for 40 years, I don’t know. Hardest part on GST is how good’s your crystal ball? Is it cloudy, is it not cloudy? Because you’re trying to guess whether you’re going to need it or not from a long-term.
I’ll leave it at that because I’ll give it back to Michelle to talk about admission requirements, but I’m happy to take questions towards the end if there’s anything I can clarify.
Michelle Yan: Now in regards to the admission requirements, we do require an undergraduate degree from an accredited institution. Typically, we’re looking for about a 3.25 GPA or higher on a 4.0 scale. We do look for an undergraduate or a graduate course in taxation with a grade of 3.0 or higher on a 4.0 scale. And typically, we’re also looking for individuals coming in with a minimum of two years of tax experience, including one busy season or hold the following credentials: a JD, CPA, TFT or enrolled agent.
When we’re looking at application requirements, these are some of the different documents that we look for admissions. The first thing we look at is a current resume. We do look for a current resume, up to date resume. We do look for a minimum of two letters of professional recommendation. We’re looking for an application essay or what we call a statement of purpose. There is a non-refundable $100 application fee. We also do look for transcripts. So, this includes any type of undergraduate or graduate work. Any transfer classes, so we do require again all official transcripts.
And for students who are coming into the program who have a bachelor’s degree from an in international school, outside of the U.S., we will also ask for credential evaluation. If you have any questions regarding that, you’re more than welcome to reach out to myself and we can certainly speak more regarding credential evaluations. And then finally candidates who don’t have an undergraduate in the U.S. as well may be subject to a TOFEL.
Now, when it comes to tuition and scholarship, there is an application fee like I mentioned before of $100. The course tuition is $1,476 per credit hour. There are a total of 30 credit hours and the tuition, you’re looking at 44,280. Now any additional type of books or course material, I would probably allocate another I would say $150-$200 per course and again that’s times 10 courses.
Now, Northeastern University you do have a couple of funding options and scholarships that we do offer. So, Northeastern is committed to supporting our veterans and the online program has recently become part of the yellow ribbon program. If you do fall under this program, than it means most, if not all of your tuition will be covered by the government and Northeastern University. So, for more information please visit the website listed on this slide.
And as part of our commitment to our alums, beginning fall of last year, 2015, the D’Amore-McKim School of Business will now also offer something called the Double Husky Scholarship to all Northeastern alums who have completed a degree at one of our colleges. So, this does offer a 25% discount on tuition. In addition, the $100 application fee will be waived as well. And again, for more information please visit our website listed on this slide.
And finally, Northeastern University also offers something called lifetime learning membership. And it is available to families of currently enrolled full-time students. And these family members are able to take advantage of the 25% discount on tuition. And again if you have any additional questions, that site listed below you can get more information from that website as well.
Angela LaGamba: Great, thank you very much professor for walking us through generation skipping tax and Michelle for walking us through the admissions requirements and tuition fees. We now officially open our Q&A session to our audience. Thank you for sending in the questions throughout the presentation. You can continue to send in those questions using the Q&A box and we will be addressing those now. Professor, we’re going to start with you. The first question that we have is in regards to the generation skipping tax presentation that you gave and the question is does GST apply to irrevocable trust?
Timothy Gagnon: Until the trust is irrevocable, either you died or you made it irrevocable at the time, that’s when the GST tends to apply. If I’m in a revocable trust and the grantor is still alive, you haven’t made a transfer because the grantor can still take the money back or spend it all. The second the grantor can no longer take the money back, usually they died, or you created an irrevocable trust that the transfer can’t the money back, that’s when the GST is going to apply. Because until I don’t have the ability as the creator to spend the money that hasn’t been gifted. There’s a saying, the dominion and control hasn’t changed over. Once that occurs, now my GST comes up.
So yes, it does apply to irrevocable, but it also applies to revocables when the grantor is no longer able to revoke or change the trust, which is usually – guess, unfortunately. Hopefully that answers it.
Angela LaGamba: And to our audience, if you have a follow up questions, feel free to send it in and we’ll ask professor Gagnon. Professor, the next question we have for you is can a U.S. citizen use their $5.43 million in exemptions for a gift to a non-U.S., for example a British spouse or GST to a British grandchild. Go ahead professor.
Timothy Gagnon: Boy, now you’ve got into the tricky because yes I can because we use a worldwide concept in that if you’re a U.S. citizen, you’re making gifts, they’re subject to the gift tax of the GST. If you’re asking me because a non-U.S. citizen spouse have the same exemptions? No. There’s no marital with that and no they don’t. This is where we really get somewhat because you have to deal with a U.S. resident and a U.S. citizen as opposed to a non-U.S. resident even though they’re here.
But yes, I can use my exemption for giving money to others. I don’t have a marital on a non-U.S. citizen spouse. So, therefore I really am using a gift tax and there is the ability to do $60,000 a year to my spouse and sort of quasi-marital deduction. But yes, I am going to use that and if I give to the kids or to a spouse, I am making it because it’s a transfer out of the U.S. citizen’s estate and that’s where we measure the gift and the reduction of the estate. So, that’s where it gets its measures, so yes, you were subject to it and you can use it to go to a non-resident or a non-U.S. citizen. Does that answer the question Joseph or do we need to expand more?
Angela LaGamba: Great. So, Joseph if you have a follow up, feel free to send that through the Q&A and we’ll let the professor know. While we’re waiting for the follow up, the next question that we have is for you Michelle. One of our audience members wanted to know if one were able to do the course full-time online, how long would it take to finish the online Master of Science and Taxation?
Michelle Yan: So, the online MS Tax program is actually considered a part-time program. So, part-time online program, so it’s not full-time. So, essentially, it is designed for working tax professionals who do work full-time and wanna do this program online on a part-time basis. So, the quickest time that you can complete this online MS tax program, it’s about 16 months.
So there are 10 courses, they’re taken one course at a time and each course is about five weeks. So, you’re kind of doing five weeks on. Typically you have about a one-week break in between the courses, then five weeks on again, one week break, five weeks on. So, if you were to do back to back courses, again the quickest time you can complete is about 16-months.
Timothy Gagnon: Somewhere that’s going to be what courses you’re looking to take based on offerings. Because some of them come in a series and you have to have some of the basic before you can take it, so you have to sort of coordinate that. So, depending on what courses you want to take as part of your program that will slightly vary how long it takes to get through.
Michelle Yan: Most of the initial core courses, they may be offered multiple times per year. But sometimes the elective courses are only offered once or twice. So, when you do enroll into the program, we also do recommend that you speak with our student service advisors so they can help you put together your customized schedule. You’ll have a better idea at that point in terms of how long it’ll take you to complete.
Angela LaGamba: What is the likelihood that the GST would affect the middle class income tax payers?
Timothy Gagnon: Probably fairly low because you got to have $5.4 million to give away two generations below before you go over it. And if you’re a married couple it’s 10.8. So, most of the middle class, middle size estates will not have that problem. But at the same time I say that, right now it’s a $5.4 million exemption. Congress can change that number at any time. If you look at some of the proposals out in the political environment right now, there’s talk about maybe kicking the 5.4 back to 1.5, back to 3, dealing with portability, GST is in affordability, even though it won’t affect the middle class as we know it today, it’s something you have to keep track of with the clients because we don’t really know in the end, until they die, and we don’t know what the number will be when they die. So, that’s sort of opting out all the way around. But for the most part, the most middle class client, a little bit of planning, and they can afford the estate tax and the GST tax.
Angela LaGamba: Adrian just sent a note saying thank you for the response. Our next question is for Michelle and the question is what does the tuition cost include? Does it include research material like CCH or CNA?
Michelle Yan: The tuition typically is for the course. So, basically it’s taking the course. Anything on top of that would be textbooks, course material. And I mentioned that additional costs beyond the tuition. So, beyond the fee credit, $1,476 per credit hour, you’re looking at books and course material and that would probably allocate another maybe $150-$200. Now research material like CCH or BNA, I believe that the courses will allow you to have access to these research materials if I’m correct, is that right professor?
Timothy Gagnon: We have RIA available through the NEU library online for all students all the time that they’re in the program. So, we have RIA available. Research into America for all tax research.
Michelle Yan: Okay, and then the access is included in the tuition.
Timothy Gagnon: Right. As long as you have an NEU number, you can access the RIA through the library.
Angela LaGamba: Great, thank you both very much. The next question is a follow up for you Michelle from Joseph as well and the question is courses offered to be a YouTube or webinar. Is Blackboard used? Go ahead Michelle.
Michelle Yan: Yes. So, the way we run our online MS and Taxation program, that’s exactly where we use Blackboard. It’s Blackboard to be able to access all of the course material, course information. That’s where you post your discussions, submit assignments, do exams. So, everything is run through Blackboard, correct.
Angela LaGamba: Thank you very much Michelle. The next question that we have is for you Professor. One of our audience members wants to know do you provide study for Canadian taxation in the master’s program? Go ahead Professor.
Timothy Gagnon: We don’t do Canadian taxation directly. We have two international tax courses, but they’re from the U.S. tax standpoint. I don’t really have any adjuncts who are Canadian tax experts. So, we do international from the standpoint of a U.S. IRS code and how it deal with international transactions. So, Canadian tax directly? No.
Angela LaGamba: Great, thank you Professor. The next question is for you Michelle. The question is does a prospective student need to have an accounting background? Go ahead Michelle.
Michelle Yan: Typically, I mean in terms of our minimum requirements, we want students coming in to have a tax background. So, that’s why we are asking that they’re just coming in with a minimum of two-years of professional tax experience. Now, we do have a lot of individuals who do come in with the bachelors of accounting and that will give students a good base in terms of coming in to the accounting world and moving into more focused tax programs. I have students coming into the program that may not necessarily have accounting bachelors and they may come from bachelors from liberal arts or something a little bit, you know, not very accountant focused. But as long as you have that – you understand a brief understanding of the tax code and worked within tax before, that’s what we’re more interested in. And perhaps Professor if you have any other highlights regarding that question as well.
Timothy Gagnon: I think you have to have a rudimentary knowledge somewhat of what a balance sheet is and how they’re created and what an income statement is because we’re not going to go deep needed. Do you need to have four years of accounting? No, but you should have an idea of where those documents come from, what they represent and sort of how to put them together because if you do in a corporate or partnership return, you have to include a balance sheet with the return. So you have to have an idea of how it’s produced and what it means. You don’t have to go deep, but you have to be able to deal through those.
So, I would think it would be helpful if you had a basic accounting course or at least gotten some knowledge and you can get that during practice, just sort of I would say the two years, that you certainly understand what the relationship between the accounting books and the tax books are. But also exactly what it represents from that standpoint. I hope that helped.
Angela LaGamba: Great, thank you very much Professor. Michelle, the next question is for you. One of our audience members wanted to know will each course have a pre-recorded lecture on video and/or audio?
Michelle Yan: Typically the course material itself, there’s quite a bit of slides, for text reading. Sometimes there will be short videos that each of the professors have recorded. But they’re relatively short. So, couple of minutes, 5-10 minutes. So, there’s no sort of long recorded webinars or lectures as we are sort of going through right now. Now, every week, however, there are two optional live sessions with your professors and with the instructors. And during these times, they’re usually held in the evenings for about an hour. And it’s a very interactive session. Where the professor, they have a headset. I can utilize a webcam. And so, you are able to communicate with your professors and fellow classmates as well, ask them direct questions.
So, it can be a very interactive session as well. So, if you are able to attend these live sessions, and I definitely recommend students to do so. However if you cannot make them due to whether it be family or work obligations, these live sessions will also be recorded and you can view these recordings at a later time. And so, again, they’re two hours every week, one hour each. So, two evening live sessions.
Angela LaGamba: Thank you Michelle. The next question that we have is for you Professor in regards to the generation skipping tax. Adrian wanted to know even though the GST is in the Internal Revenue Code, are they highly audited for compliance or pretty much rely on ethical application by tax professionals for taxpayers? Go ahead Professor.
Timothy Gagnon: Are they heavily audited? No, because there are so many exemptions out of it. But every 706, estate tax return, is manually looked at and that’s where a lot of the GST comes up and there’s a form within it, dealing with GST. And there are gift tax return – if you have GST, you note it on it and that usually triggers it to be looked at. But when you say heavily audited, every estate return is looked at by human because there’s no machine to do it. Do they go deep into it? No. Typically, they get looked at by a couple of paralegals in Kentucky who handle a lot of the first passes.
If it’s a more complicated return, it will get sent to the tax council in the region who tends to be an attorney who has more knowledge and can dig deeper into them. But again, because most of them we can keep applying the exemption, until you’ve really gone through the exemption, they don’t get a lot of attention because finding another $10 of gift with an exemption still out there doesn’t create any tax. And as you’re probably aware, they get measured a lot, or at least a lot of their purpose is to find additional tax to collect. So, if I have a lot of exemption out there, it doesn’t get a lot of attention because finding it isn’t going to get us any more money. Now hopefully nobody’s working for the IRS who’s now going to start looking heavily at this and get me in trouble.
Angela LaGamba: Great thanks Professor. I wanted to see Professor if you had any final thoughts before we wrap up today’s webinar.
Timothy Gagnon: From my standpoint, doing the online is very dependent on the student because it does require you to be very proactive, which some of you don’t understand. For the most part, most of the lead and the instructors are very willing to take emails and even arrange phone calls if there’s areas that you’re not understanding that we need more clarification for or come up with more materials that help you going along. I mean our goal is to get you through as much knowledge as possible, but you have to be the proactive telling us what you’re not getting or where you need more help because we can’t really tell that. And because it’s a five-week program, it moves fairly quickly.
So, you really have to stay up on things and you really have to sort of inquiry where you need more explanation. I know with myself, my chat every week starts with a script of things that I want to highlight, but I really appreciate if people take me off-script, give me their question, to give me their comments to see if we can’t clarify, because I’m not sure what they need clarification on. They’ve got to tell me, but I will try to highlight the things that I think are important. I’m also very willing to take emails during the week to clarify or find other ways to try to make sure you learn it. So, it can be a very proactive system. It doesn’t have to be totally static, just looking at the videos and doing the reading. It’s as interactive as you want to be using the lead and the instructors to help you get the information down pat. And from my standpoint it’s fun, but remember I’m a tax professor, so when I think its fun, it’s a little strange.
Angela LaGamba: Thank you Professor. I’m also going to hand it over to Michelle for final thoughts.
Michelle Yan: Yes, so I just wanted to direct everyone’s attention to the screen. So, there’s my contact information, email, phone number. If any of you have any additional questions or would like to know more regarding the application process, feel free, don’t hesitate to contact me. There are a couple of important dates on the board as well, so our very next start date coming up begins actually on June 13. So, that’s our last summer start for summer. And then our fall one begins on September 5th. So, these are the next two start dates coming up. Again, if you have any questions, concerns, application questions as well, don’t hesitate. My contact information is on the slide.
Angela LaGamba: Great, thank you very much Michelle and Professor, thank you once again to both of you for taking the last hour to walk us through the program and also generation skipping tax. If you do have any follow up questions, we’ve put Michelle’s contact information on the slide. You can also schedule an appointment or by phone. That is all the time we have for today and have a wonderful day everyone.
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