Some think that prenups are mainly for celebrities who marry, and one of them has a disproportionate amount of wealth. More and more people are getting prenups. Think of prenups like insurance, a financial safety net. After tying the knot, many couples decide to merge their finances together by setting up joint checking and savings accounts — where you automatically deposit the bulk of your income — for shared expenses such as your rent or mortgage payments, utilities, groceries and other living expenses.

Some couples also decide to keep their finances entirely separate. The choice is yours, but as you build your new life together, you may get tired of making two separate payments toward your monthly expenses or keeping track of who paid what.

Merging finances may help young couples align their financial goals and avoid scorekeeping. Just make sure you have an open discussion about how much you contribute, and where that money eventually goes. You probably already have an idea if your significant other is a spender or a saver. Is it a vacation to the beach, a new set of golf clubs, a luxury handbag, or something else?

Is a gym membership essential for your well-being? What about those high-end hair products and your daily vanilla soy latte? Could you buy hair products sold at a big box store instead of a salon? Could you get by with making coffee at home sometimes? Make a list and talk it over with your new spouse so you can agree on how much nonessential spending your new combined budget should allow.

What would you miss and not miss if you stopped buying it? Trimming some spending here and there can make a difference in the long run. Put it in your savings account or toward your honeymoon fund?

If you don't already work with a financial professional, consider it after the wedding. Marriage is a partnership. Or are you going to do it together? Luckily, there are many different budgeting apps that can make this easier and more convenient.

Talk to your friends or check out the app stores to see if any of them seem like a good fit. Missing loan or credit card payments can be a substantial ding on your credit history. Tax season occurs at the same time year after year, but it seems it has the ability to sneak up on us.

Are you comfortable to doing your own taxes, or do you want to get help from a professional? Finances can be a big part of making long-term life decisions. Talk about your goals and what you need to get there. However, the unexpected does happen — and the better prepared you are for it , the less stressed you will be if it does.

Once you know what it is your saving for, it becomes easier to do. Perhaps you want to buy your first house together, a new car, or a big vacation. Then, divide that amount by 24 so that you know how much you need to save each month to make your goal. This may depend on how old you are and what goals you want to accomplish before becoming parents.

Adding someone new to your family is a big decision and a significant financial commitment, so think it through carefully. It can happen earlier or later than you planned. Factors out of your control can sometimes delay parenthood, so give yourselves enough time.

It may be too early to know right now, unless parenthood is right on the horizon. Having one child in daycare may fit the budget, but if you want two or three children fairly close in age, this may not be something you can afford.

Some say 15 percent of your pre-tax income is a good rule of thumb. It all depends on your current age, the age you hope to retire, your cost of living, and more. This is where a financial professional can be really helpful, so consider finding someone to help you plan for the future.

But that day is sure to come, and you and your loved one will want to be ready for it. So talk about your hopes and dreams that are just around the corner, as well as far down the road.

And as you live your life together, what may have seemed to be important can change over time. Be sure to frequently re-assess what you and your spouse want to accomplish, talk through how things are going and make adjustments as you need to.

White, Alexandria. Updated March 30, Segarra, Marielle, " Prenups aren't just for the rich and famous. Here's when to consider one ", NPR, August 31, Frost, Alexander, " The case for buying less — and how to actually do it ", Vox, November 22, Adkuloo, Neelabja, " How Much Childcare Costs by State in the USA in ", Illumine, January This information is a general discussion of the relevant federal tax laws provided to promote ideas that may benefit a taxpayer.

It is not intended for, nor can it be used by any taxpayer for the purpose of avoiding federal tax penalties. Taxpayers should seek the advice of their own advisors regarding any tax and legal issues specific to their situation.

This is a general communication for informational and educational purposes. It should not be considered investment advice, nor does it constitute a recommendation that anyone engage in or refrain from a particular course of action. If you are seeking investment advice or recommendations, please contact your financial professional.

The website you are being directed to is not created by Securian Financial Group, Inc. or any of its subsidiaries. The new website may be subject to privacy policies, security policies and terms and conditions different from those at Securian Financial Group, Inc.

Skip to main content. The step - transaction doctrine was held not to apply to an otherwise qualifying Sec. In that case, the Tax Court held that a taxpayer's form will be respected when each step has "permanent economic consequences," notwithstanding that reduction of taxes is a significant factor in structuring the transaction.

The court rejected the IRS's attempt to apply the step - transaction doctrine to recast the transactions at issue, even though the transaction could have been accomplished differently. justify application of the step - transaction doctrine.

The IRS generally cannot reorder the steps actually taken or invent new steps just to create an additional tax liability.

In Esmark ,the Tax Court refused to apply the step - transaction doctrine because it would require the addition of steps to the transaction that did not occur. The interdependence test asks whether "the steps were so interdependent that the legal relations created by one transaction would have been fruitless without a completion of the series.

Thus, courts have held that even when two or more transactions are intended, and each transaction is planned before the first is consummated, the transaction may not be integrated if each transaction has substance by itself and has its own separate business purpose.

The interdependence test looks at the relationship between the steps and whether one step would have occurred without the other steps. For example, in Associated Wholesale Grocers , 28 the court applied the interdependence test to integrate two purportedly independent transactions — a sale of a subsidiary's assets, followed by a repurchase by the parent of all those assets except the stock of a second - tier subsidiary — and denied the loss claimed on the asset sale, because the two agreements were, by their terms, dependent on each other.

To avoid application of the step - transaction doctrine based on the interdependence test, each step in the transaction should have "reasoned economic justification standing alone.

The interdependence test is generally applied where the transactions occur between related parties. For example, in Kuper , 30 shareholders of a realty - owning corporation contributed all their shares to an automobile dealership corporation owned by the same shareholders, which, in turn, made a cash capital contribution on the same day to the realty corporation.

On the following day, the automobile corporation exchanged the realty corporation's shares for one stockholder's one - third ownership of the automobile corporation. The Fifth Circuit found that it was unlikely any one of these steps would have been undertaken except in contemplation of the others and were done to disguise a stock - for - stock transaction at the shareholder level.

Therefore, the court treated the steps as a taxable exchange of stock. The binding - commitment test, set out by the Supreme Court in Gordon , 32 is seldom applied by the courts. In the foremost case applying the test, McDonald's Restaurants , 36 the court noted that the test was intended to deal with transactions that span several tax years and could have remained "not only indeterminable but unfixed for an indefinite and unlimited period in the future, awaiting events that might or might not happen.

Taxpayers can have an overall plan in carrying out a series of transactions without running afoul of the step - transaction doctrine, but taxpayers should take actions to make sure that the doctrine cannot be successfully invoked by the IRS.

To strengthen the position of transactions as independent transactions and withstand an IRS attack using the step - transaction doctrine, taxpayers should:.

Taxpayers who know and understand the IRS's transaction challenge approach using the step - transaction doctrine should be more effective and efficient in their tax planning for transactions and whether to defend or settle upon a challenge of transactions. Only then can they feel comfortable in their tax planning that a series of transactions will withstand an IRS challenge.

at ; American Bantam Car Co. at at , Zachry Co. at , quoting Gordon , U. Business meal deductions after the TCJA. This article discusses the history of the deduction of business meal expenses and the new rules under the TCJA and the regulations and provides a framework for documenting and substantiating the deduction.

AICPA Resources: AICPA-CIMA. com Tax Section Store. Toggle search Toggle navigation. All articles Estate Tax Gift Tax Tax Computation Types of Trusts Latest Stories. A walk through the step-transaction doctrine By Ray A.

Knight, Ph. TOPICS C Corporation Income Taxation Tax Planning; Tax Minimization. EXECUTIVE SUMMARY The IRS may apply the step-transaction doctrine, a rule of substance over form, in a variety of taxpayer circumstances to deny tax benefits derived from a series of transactions that should more properly be treated as a single transaction.

The courts have developed three tests to analyze whether the step-transaction doctrine applies to a series of transactions: the end-result test, the interdependence test, and the binding-commitment test.

Under the end-result test, if the separate transactions were component parts of a single transaction intended from the outset to produce the ultimate result, the step-transaction doctrine would apply. Under the interdependence test, the step-transaction doctrine applies if a series of transactions are so interdependent that, without completion of all the transactions, the individual transactions would have been fruitless on their own.

Under the binding-commitment test, which is seldom invoked, the doctrine applies if, at the time of the first transaction, there is a binding commitment to complete all the transactions.

Because many transactions that are valid for tax purposes may be accomplished in stages, taxpayers should be aware of limits on the step-transaction doctrine and ensure that each step has economic significance independent of the others.

Thus, the transfer of the stock, cash, and notes was found to be a distribution of a dividend in the amount of the cash and notes rather than a sale of the stock, cash, and notes. To strengthen the position of transactions as independent transactions and withstand an IRS attack using the step - transaction doctrine, taxpayers should: Design each transaction so that it has substance by itself and has its own separate business purpose.

Not have an agreement or understanding with other parties to the transaction to cause the actual result of the transaction in a prearranged plan. Not intentionally design the form of the transaction to reach a particular result. Not make a binding commitment at the time of the first transaction to complete the other transactions.

Ensure there is economic motivation, significance, and risk for each transaction.