Fiduciary tax planner. (Estates & Trusts) (Column)by Diers, Dan A.
It Began as Tinkering . . .
Necessity being the well-known mother of invention, I began to tinker with a Lotus 1-2-3 spreadsheet. Slowly, the spreadsheet began to take shape as the solution to my problems. At first, I just wanted to compute 2% of adjusted gross income. I formulated the columns to match the IRS instructions in computing the 2% of AGI floor. Since it's a circular computation (to do it manually would involve simultaneous equations), the need for the power of the spreadsheet was obvious. From there, I branched out to compute taxable income for a simple trust. Estates and complex trusts soon followed. After the first few tries it became apparent that a calculation of accounting income was necessary to properly compute the income distribution deduction to determine taxable income.
With taxable income perfected, the logical progression was to incorporate a calculation of income tax. Both 1990 and 1991 income tax schedules were incorporated into the spreadsheet. I could now quickly check and review not only the reconciliation completed by the tax return preparer, but also, I could verify the accuracy of the printed return after it came back from the service bureau. Unfortunately, I found that in many instances the service bureau calculated 2% of adjusted gross income incorrectly. The difference in taxable income was too small to justify correcting the returns either by hand or using override commands on the service bureau computer.
. . . And Then Became Obsession
By this time, making improvements to the planner became an obsession. Every day I would tinker with it. New York State and City taxable income and income tax calculations were added, as well as a limited computation of the income adjustment for a resident beneficiary. I would have kept on going, but other demands on my time took priority.
So, what I developed is not the complete system it might be. The planner doesn't work on final year entities, and it assumes only one resident beneficiary for the New York calculation. These enhancements might at first seem simple to incorporate, but, they will take a little time. Those of you who are familiar with Lotus 1-2-3 shouldn't have too much difficulty adding these and other enhancements if you want them.
The Template, and How it was
The template, as this type of program is called, is user-friendly. Once you've called up the file, just enter data into the cells at the top of the spreadsheet in the area called the Input Screen (Exhibit 1). As you input, the spreadsheet copies the entries to the appropriate locations in the planner portion and runs all the calculations automatically. The only input that is necessary in the planner portion is for additions and/or subtractions to New York income other than whatis automatically calculated.
The planner was made using version 2.3 of Lotus with WYSIWYG, an acronym for What You See Is What You Get. Version 2.3 and WYSIWYG update and replace version 2.2 and Allways. Conversions between the two presents no problem. The beauty of the WYSIWYG and Allways features is that you can squeeze a huge spreadsheet onto an 8 1/2" x 11" piece of paper. But, the best part is the presentation you get when you print using a laser printer. Although the planner doesn't have a print macro feature, it is set up to print both pages with just three keystrokes, : P G. Once these keys are pressed, the planner portion will print on two letter size pages. Sections of the final printout are presented in Exhibit 2.
I'll Send You the Template
This planner spreadsheet can become a valuable tool to use in your fiduciary practice. I'll be happy to send you a copy of the template, but, I must ask for $5 to cover the costs of copying the file, diskette, mailer, and postage. Please send a check, payable to Rashba & Pokart, P.C., 463 Seventh Avenue, New York, NY 10018-7604.
When you get the diskette and read the file you'll notice that the data that is in the Input Screen matches the amounts used in the IRS instructions to calculate the 2% AGI limitation. Inputting new amounts in the cells will erase these amounts. Be sure to give each file a new name when using the save command to protect the original file and to have a record of each client's projection. The spreadsheet is protected from accidental erasure and other mishaps. This protection can be turned off by an experienced user.
Editor's Note: The CPA Journal has not tested the template and therefore takes no responsibility for its accuracy or its ability to perform the calculations discussed and presented herein.
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