Buz, you just said two words I NEVER thought I would hear you say! Just had to give you a hard time about it. (What a game!) 
OMG! I really earn more than $250K?.....
- Thread starter happy2Bme
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I usually pull for SEC teams.
Especially after Tennesee got waxed.
Since there are no games on here is my answer to a question from yesterday.
Are you referring to the one year hiatus of the 50% death tax? If so, how is that a middle class tax increase?
(I do appreciate having someone knowledgeable in tax law here commenting Buz.. looking forward to your response.)
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First I know enough about tax law to know what I don't know is more than what I know.
Second, a public internet bullentin board is not the best place to get tax advice (it may adtually be the worst). If one needs tax advice they should meet wth a professional. This is even more critical if you have an estate tax liability.
Third, I really, really, don't want to deal with partisan straw man arguements that are prevalent on internet bullentin boards.
Beginning in mid 1970s, heirs could establish a "step up in basis" on the value of inherited assets. With the temporary repeal of the estate tax the step up in basis was eliminated.
In 2009, a married couple could pass to their heirs up to $7,000,000 ($3.5M each) with no estate tax liability. Futhermore the heirs could turn right around and sell $7,000,000 worth of assets and have zero capital gains tax liability since their basis would have been "stepped up" to $7,000,000.
This year, worst case scenario, same heir inherits low basis assets and has no estate tax liability but will have a capital gains liability. Large capital gains liabilities often trigger AMT liability-wfich is definitely a middle class tax that the tax cuts of 2001 & 2003 failed to address.
The repeal of the estate tax includes a cumbersome (to me) type of basis carryover with some type of credit that I do not understand. It appears - from my cursory view-that some estates would benefit from this. The fly in this ointment is that taxpayers could be faced with justifying the decedent's orginal cost basis. With real estate this will not be so bad. However for mutual funds with decades of reinvested dividends, stock splits, mergers, individuals often do not know their basis of stocks/mutual funds.
The step up in basis is simply much easier to understand and to implement.
To further complicate (my opinion) things is the tax cut of 2001 has a mechanism that lowers the $3.5M indvidual estate tax exclusion (2009) to $1M in 2011.
Unless Congress makes some changes the estate tax will go away for one year and then kicks back in with a vengence in 2011 since the individual exclusion drops to 1M with a 50% tax rate.
Congress appears to be inclined to keep the 3.5M exclusion(indvidual) with a lower tax rate (45% maybe). Plus there appears to be a strong interest in reinstating the step up in basis.
To me, a tax bill that has an estate tax exclusion of 3.5M in 2011 and adjusted for inflation is preferable to the current one that has no estate tax liability for one year but has a much lower exclusion (1M) in subsequent years. I thnk continuing the step up in basis is preferable also.
If you have an estate tax liability there are a host of options available to minimize or to eliminate the burden.
This is broad overview and should not be taken as tax, financial or legal advice.
Whew....I knew I should have kept my mouth shut.
Time to listen to Marketplace Money on NPR.
Especially after Tennesee got waxed.
Since there are no games on here is my answer to a question from yesterday.
Are you referring to the one year hiatus of the 50% death tax? If so, how is that a middle class tax increase?
(I do appreciate having someone knowledgeable in tax law here commenting Buz.. looking forward to your response.)
------------------------------------------------------------------------------------------------------------------
First I know enough about tax law to know what I don't know is more than what I know.
Second, a public internet bullentin board is not the best place to get tax advice (it may adtually be the worst). If one needs tax advice they should meet wth a professional. This is even more critical if you have an estate tax liability.
Third, I really, really, don't want to deal with partisan straw man arguements that are prevalent on internet bullentin boards.
Beginning in mid 1970s, heirs could establish a "step up in basis" on the value of inherited assets. With the temporary repeal of the estate tax the step up in basis was eliminated.
In 2009, a married couple could pass to their heirs up to $7,000,000 ($3.5M each) with no estate tax liability. Futhermore the heirs could turn right around and sell $7,000,000 worth of assets and have zero capital gains tax liability since their basis would have been "stepped up" to $7,000,000.
This year, worst case scenario, same heir inherits low basis assets and has no estate tax liability but will have a capital gains liability. Large capital gains liabilities often trigger AMT liability-wfich is definitely a middle class tax that the tax cuts of 2001 & 2003 failed to address.
The repeal of the estate tax includes a cumbersome (to me) type of basis carryover with some type of credit that I do not understand. It appears - from my cursory view-that some estates would benefit from this. The fly in this ointment is that taxpayers could be faced with justifying the decedent's orginal cost basis. With real estate this will not be so bad. However for mutual funds with decades of reinvested dividends, stock splits, mergers, individuals often do not know their basis of stocks/mutual funds.
The step up in basis is simply much easier to understand and to implement.
To further complicate (my opinion) things is the tax cut of 2001 has a mechanism that lowers the $3.5M indvidual estate tax exclusion (2009) to $1M in 2011.
Unless Congress makes some changes the estate tax will go away for one year and then kicks back in with a vengence in 2011 since the individual exclusion drops to 1M with a 50% tax rate.
Congress appears to be inclined to keep the 3.5M exclusion(indvidual) with a lower tax rate (45% maybe). Plus there appears to be a strong interest in reinstating the step up in basis.
To me, a tax bill that has an estate tax exclusion of 3.5M in 2011 and adjusted for inflation is preferable to the current one that has no estate tax liability for one year but has a much lower exclusion (1M) in subsequent years. I thnk continuing the step up in basis is preferable also.
If you have an estate tax liability there are a host of options available to minimize or to eliminate the burden.
This is broad overview and should not be taken as tax, financial or legal advice.
Whew....I knew I should have kept my mouth shut.
Time to listen to Marketplace Money on NPR.
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Simple inheritance laws like that is why my parents are just trying to spend it all before they die. 
? Congress Tinkers with Withholding Tax Tables for 2010 - Big Government
Democrats slipped a tweak of the withholding thresholds into legislation last spring. This boils down to a small forced loan from taxpayers to the federal government. The amount of money to individuals is small, but the combined numbers will help pump up tax receipt numbers (but not revenue) going into an election season. :roll: You'll get your money back, in the spring of 2011.
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Your parents are very wise. Betty and I have already told our children, six of them, and our grandchildren, seven of them, that if anything is left we didn't plan well.Simple inheritance laws like that is why my parents are just trying to spend it all before they die.