HK® Bobby Pen & The Pen Pals® - New York's Pied-à-Terre Tax

New York’s “Pied-à-Terre” Tax

Enacted as part of New York State’s fiscal year 2027 budget, the “pied-à-terre” tax in New York is officially known as “City Surcharge on Property That Does Not Serve as a Primary Residence.” The burden is on the property owner to establish a “primary residence” exception from New York’s “pied-à-terre” tax by submitting certain evidence to the New York City Department of Finance. The deadline to submit a claim for exemption from New York’s “pied-à-terre” tax is September 18, 2026.

Transferring Your Asset Protection Structure to the Next Generation

While we may not expressly consider asset protection for our children, transferring an asset protection structure to your children is consistent with the objective of estate planning. This concept of transferring your asset protection structure to the next generation derives from the view that an established asset protection structure has value. If you transfer your asset protection structure to the next generation, you continue this “investment” to provide value for the next generation. You save your children the legal fee and filing fee costs that they would otherwise need to incur to create their own asset protection structure.

Bayer Decision – Litigation Possibly Can Achieve A Better Result Than Settlement

There is a tendency for many businesses to want to settle disputes short of litigation. The cost of pursuing a lawsuit with an uncertain result is often too prohibitive for many businesses. It has been estimated that over 90% of legal disputes are settled before ever reaching a courtroom. However, for businesses who are willing to engage in litigation, the possibility exists that a better result can be reached than would be offered by any settlement.

July 10, 2026 – A Critical Date to Claim Tax Refunds of Interest and Penalties

The Kwong decision may have provided taxpayers with an opportunity to claim tax refunds of interest and penalties. Meanwhile, the government has recently filed an appeal of the Kwong decision. Because of the government’s appeal, it cannot be stated that the Kwong decision is settled law. This uncertainty creates a problem for taxpayers considering filing a claim for tax refund of interest and penalties under the Kwong decision. Internal Revenue Code Section 6511(a) is considered the general statutory authority to determine the deadline to file an administrative claim for refund of taxes, interest, and penalties.

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United States v. Huckaby – Domestic Asset Protection Trusts and Real Estate

At its root, the Huckaby case concerns what state law should be applied to real estate owned in a trust – the law where the real estate is located or the law by which the trust is to be administered. If you are trying to implement asset protection for real estate located in a “non-DAPT” or otherwise “non-asset protection favorable” state, you should consider the possible benefit from a “real estate – personal property” conversion approach.

Tariff Constitutionality and Tariff Refunds

While the Learning Resources case provides important, but probably not the final, authority concerning tariff constitutionality, it definitely has clear implications on another issue – tariff refunds. The concept is that if persons paid moneys pursuant to unconstitutional tariffs, these persons should be entitled to receive refunds of their tariff payments.

The New “Senior” Deduction

The White House has at times used the phrase, “No Tax on Social Security”, in generally describing the new “senior” deduction. Such description is not correct. Social Security benefits remain taxable under current law. In addition, the eligibility requirements for Social Security do not match up with the eligibility requirements for the “senior” deduction. For example, you can start collecting Social Security benefits as early as age 62, but cannot claim the “senior” deduction until age 65.

Limited Liability Companies – Actions Speak Louder Than Words

Because of its asset protection and tax advantages, the limited liability company has become a popular choice for form of entity. While it is relatively easy to form a limited liability company, it is important to note that various “post-formation” action is necessary to derive the intended benefits from the limited liability company. If you want to maximize the asset protection from your limited liability company, the Orix case suggests that California is not a favorable jurisdiction to use; other states, such as Delaware and Nevada, offer a better alternative on the “charging order/foreclosure” issue.

Internal Revenue Service Clarifies “Qualified Tips” Deduction

The “qualified tips” deduction is often incorrectly described as a “no tax on tips” provision. On September 19, 2025, the Internal Revenue Service issued proposed regulations under Code Section 224 (the “Code Section 224 Proposed Regulations”). Perhaps the key topic addressed by the Code Section 224 Proposed Regulations is the meaning of the phrase, “an occupation which customarily and regularly received tips on or before December 31, 2024”. Qualified tips must be paid without compulsion. Thus, service charges, automatic gratuities and any other mandatory amounts automatically added to a customer’s bill by the vendor or establishment are not qualified tips, even if the amounts are subsequently distributed to employees. “Table 1” in the Code Section 224 Proposed Regulations lists 68 “occupations” as “Occupations that Customarily and Regularly Received Tips on or Before December 31, 2024” – the 68 listed below.

“Relevant” Under the Economic Substance Doctrine – The Case of Patel v. Commissioner

One of the basic principles of tax law is the economic substance doctrine. As recognized for many years in case law, under the economic substance doctrine, courts would generally examine both whether a transaction had economic substance beyond tax benefits and whether there was a nontax business purpose for entering the transaction; transactions that could not meet the economic substance doctrine could be disregarded or disallowed for tax purposes. The Tax Court in the Patel case concluded that (1) the taxpayer’s captive insurance company transactions did not have economic substance under the two-part “economic substance doctrine” test.

In the Matter of the CES 2007 Trust – A Victory for the Delaware Domestic Asset Protection Trust

Among the many tools available for persons seeking asset protection is the “domestic asset protection trust” (the “DAPT”). Broadly speaking, DAPTs are U.S. domestic trusts established by a grantor, who generally retains certain rights over the trust, but wants the assets of the trust to be protected from creditors.

Estate of Rowland – An Important Federal Estate Tax Case Concerning Portability

Given that asset values tend to increase over time, and Federal estate tax liability tends to arise more on the death of a “second-to die” spouse than on the death of a “first-to-die” spouse, portability can be a critical concept to minimize Federal estate tax liability. Additionally, Revenue Procedure 2025-28 is relevant for taxpayers seeking to amend their tax returns for taxable years 2022 through 2024 and claim a 100% full deduction of their “domestic research or experimental expenditures” in those taxable years.

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