Death but no taxes

[30ashopper]

Nope, wrong again.



Many types of assets have no taxes paid at all:

• Qualified retirement plans-exclusive of SS tax
• Annuities
• Cash value life insurance
• Unrealized capital gains

Again- last year a married couple could totally exclude up to 7M USD.

And again, under your scenario many heirs of mass affluent taxpayers who had no estate tax liabilty will face a capital gains liability.

This is keeping me from work. C-ya later

I wasn't making a statement, but that's ok. I have no problem with normal tax rates being applied to assets handed down. Capital gains should be paid on investement gains, tax deferred income should be taxed when drawn out, or closed out, etc.. I don't think real property should be taxed, because descendends may not have the money to pay the tax, forcing them into hardship or the selling of "the home they grew up in", things like that. But overall applying normal tax rates on assets makes sense. But the estate tax at it's core is a tax on assets beyond these standard taxes. I don't understand why people feel, after base taxes are paid, they are entitled to a slice of the pie of a dieing woman or man. That's just not right.

 

[Lynnie]

Interesting anecdote. A friend of mine in CA is direct heir to a mobile home park which is lucrative and cash flows nicely as there is no debt.

The heirs would love to do something else with the property, but won't be able to because of the capital gains tax. This property was purchased in 1927 and is worth eight figures today. They will be forced to sell to pay the capital gains. Yikes!

Real estate is particularly tough, unfortunately. My Daddy and his brothers were constantly selling their land to each other to help abate taxes, yet keep it in the family. Doing a title search on their tracts is mind-boggling. Not sure if you can do that today or not.

And, the IRS wants their money fast! Nine months to liquidate! Try that in this market.

 

[idlewind]

Nope, wrong again.


Many types of assets have no taxes paid at all:

• Qualified retirement plans-exclusive of SS tax
• Annuities
• Cash value life insurance
• Unrealized capital gains

Again- last year a married couple could totally exclude up to 7M USD.

And again, under your scenario many heirs of mass affluent taxpayers who had no estate tax liabilty will face a capital gains liability.

This is keeping me from work. C-ya later

What about the store owner who worked, saved, built his business and now has a business worth say 10 million. Every dime of what is invested has already been taxed and now his heirs owe death tax on 3 million. Sucks to be them huh?

 

[beachFool]

What about the store owner who worked, saved, built his business and now has a business worth say 10 million. Every dime of what is invested has already been taxed and now his heirs owe death tax on 3 million. Sucks to be them huh?

Well it depends, under some scenarios they could come out worse with estate tax eliminated.

2009 Worst case scenario they pay 45% on 3M and net 8.65M.

2010 Worst case scenarion they pay 15% cap gains or 28% AMT.

It depends on how much basis old dad has in the property. If it is very low basis property and if the AMT bite is high the results could be similar

Large cap gains trigger AMT. If 7M cap gains triggers 20% blended cap gains/AMT they net 8.6M

I am not a CPA and the calculation is very detailed. My point is that there will be a tax liability will be under either scenario.

Turning off the estate tax does not eliminate all tax liability.

We will give you partial credit here.

 

[Matt J]

What about the store owner who worked, saved, built his business and now has a business worth say 10 million. Every dime of what is invested has already been taxed and now his heirs owe death tax on 3 million. Sucks to be them huh?

While I'm not against the Estate Tax (that's what it's actually called folks), I'd have to say that those heirs were really lucky the deceased could build such a business while being D-U-M-B.

I had a friend inherit his mothers estate and with the help of an accountant before she passed he payed no estate taxes. Needless to say I would venture the majority of people paying estate taxes are those that inherit when a relative passes unexpectedly, kind of like the lottery.

 

[beachFool]

Interesting anecdote. A friend of mine in CA is direct heir to a mobile home park which is lucrative and cash flows nicely as there is no debt.

The heirs would love to do something else with the property, but won't be able to because of the capital gains tax. This property was purchased in 1927 and is worth eight figures today. They will be forced to sell to pay the capital gains. Yikes!

Real estate is particularly tough, unfortunately. My Daddy and his brothers were constantly selling their land to each other to help abate taxes, yet keep it in the family. Doing a title search on their tracts is mind-boggling. Not sure if you can do that today or not.

And, the IRS wants their money fast! Nine months to liquidate! Try that in this market.

You must mean estate tax.

Your friend is likely overstating their case. Interesting and misleading.

The IRS does NOT require 9 mos to sell the property.

Without a Will, My Kids Will Lose the Family Farm (or Business)
?The family farm?or family business?that Mom and Dad hoped to hand down from generation to generation will need to be sold to pay the ?death tax.? ? Not true, for several reasons.

First, remember the first $2 million is tax free ($4 million with a family trust). That increases to $3,500,000 (and $7 million) in 2009. Some family businesses, or farms, may be worth more than that. Most aren?t. Therefore, no tax. The family will inherit the business tax free, and your children can continue to run the family business.

Second, even if you are fortunate enough to own a family business worth more than $7 million, the tax code actually has special provisions to protect your family business?and even more special provisions to save the family farm. If your estate is greater than $7 million and the family business accounts for more than 35 percent of the value, any taxes due on your estate can be the paid over 14 years.

If that isn?t help enough, your children can pay interest only for the first five years, at interest rates in the 1 percent or 2 percent range, and then pay off the balance over the next nine years at an interest rate of about 4 percent. Even when the Federal Reserve Discount rate was below 1 percent in the year 2004, you couldn?t get that low an interest rate on a first mortgage on your house!

The 7 Most Common Estate-Planning Myths - Entrepreneur.com

 

[Lynnie]

You must mean estate tax.

Your friend is likely overstating their case. Interesting and misleading.

The IRS does NOT require 9 mos to sell the property.

Without a Will, My Kids Will Lose the Family Farm (or Business)
“The family farm—or family business—that Mom and Dad hoped to hand down from generation to generation will need to be sold to pay the ‘death tax.’ ” Not true, for several reasons.

First, remember the first $2 million is tax free ($4 million with a family trust). That increases to $3,500,000 (and $7 million) in 2009. Some family businesses, or farms, may be worth more than that. Most aren’t. Therefore, no tax. The family will inherit the business tax free, and your children can continue to run the family business.

Second, even if you are fortunate enough to own a family business worth more than $7 million, the tax code actually has special provisions to protect your family business—and even more special provisions to save the family farm. If your estate is greater than $7 million and the family business accounts for more than 35 percent of the value, any taxes due on your estate can be the paid over 14 years.

If that isn’t help enough, your children can pay interest only for the first five years, at interest rates in the 1 percent or 2 percent range, and then pay off the balance over the next nine years at an interest rate of about 4 percent. Even when the Federal Reserve Discount rate was below 1 percent in the year 2004, you couldn’t get that low an interest rate on a first mortgage on your house!

The 7 Most Common Estate-Planning Myths - Entrepreneur.com

Not nine mos. to sell the property, although it's semantics because it's nine mos. for the tax due. In this case, it means sell the property because they don't have this kind of cash lying around to pay Uncle Sam in nine months. Property is in San Francisco - it's worth eight figures. And, today it's moot because it hasn't been passed on due to death. There was one death and it passed to spouse.

Another good article, BTW.

 

[Lynnie]

Most Americans would be paying more with a flat tax.

And, most if not ALL non-Americans, as well. It is estimated that converting our system to the fair tax would generate more than $7TR/year by capturing: those who cheat on their tax returns; and, illegal aliens alone.

I am officially for the Fair Tax.

 

[ugabuga]

Steinbrenner will pay no Death Tax

George Steinbrenner, the billionaire Yankees owner, could end up owing no federal estate tax -- because there is no federal estate tax this year.

PostPartisan - George Steinbrenner and estate tax insanity

 

[scooterbug44]

So how much roughly will this dumbarse decision by Congress to let it lapse for a year cost us?