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Honored Advisor

Estate Taxes..Uff Da

Prepare for the worst according to Iowa Farmer Todayhttp://www.iowafarmertoday.com/feature/columnists/farm_transition/prepare-for-worst/article_2715bd6e...   If you croak in 2013 with a $10 million estate  Poof! half of it will go to Uncle Sam.   I know this isn`t the Forum page so I promise that I`ll play nice.

87 Replies
Senior Advisor

Re: Estate Taxes..Uff Da

In all fairness the estqate should have to pay ordinary income onthe gains and forget aboutn the estate tax;. I f you bought a farm for $100k and you leave the same property valued at $600 to your kids then $500K should be taxed as ordinary income. The same rate that a employee pays on ordinary income over the years.. We do want tax fairness don't we?

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Re: Estate Taxes..Uff Da

And, I think, the generous opportunity to spread that income over say 5 years to avoid huge bracket shock for those in the middle class.

 

If a $3 million estate has $2 million in assets that have built in gains of $1 million and it goes 3 ways it would only add about $57K taxable to each heir's tax per year. Which depending on their bracket would mean it gets taxed at a rate below the top bracket.

 

Further as discussed before, there really shouldn't be a capital gains preference other than to index for inflation. Which is to say that if you bought a farm for $1500/acre in 1987 and sold it for $8000/acre in 2011 tthe taxable amount should be reduced by accumulated inflation over that period to reflect real gain. I'm not doinfg the math but that would eliminate the inflation tax.

 

However if Mitt Romney buys a company in one year and sells it for twice as much in the next he should pay the full rate, less the few points of inflation.

 

I think the same should be true for an estate income tax which would hugely reduce the burden on farms and other small businesses.

 

Also- a lot of assets that have already been taxed- cash, a lot of financial instruments, would pass tax free.

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Re: Estate Taxes..Uff Da

And of course as before, the tax basis of the asset would then be valued upwards leaving no or less tax due on any future sale or estate.

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Advisor

Re: Estate Taxes..Uff Da

Not to mention that the 100s of millions of people who die leaving nominal estates, or no estate at all will leave virtually no taxes to be paid at all.

 

Hardly fair.   Smiley Very Happy 

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Honored Advisor

Re: Estate Taxes..Uff Da

A couple things Don, the money in your estate has already been taxed, to have a death tax on top is just harsh.  If we revert back to the 2001, $1 million exemption back then that was 500 acres.  Today if we go to the 55% rate above $1million your heirs wouldn`t get the same 500 acres clear, with today`s prices after the taxman they`d be lucky if they only had to sell 200 acres for taxes netting them maybe 300 acres.  These high land values are only phantom inflation gains that only show what has happened to the US Dollar. See the government shouldn`t send us a bill due to their mismanagement of the US currency.  Would it be fair if a heir payed exorbitant death taxes possibly going into debt for the family farm only to see land prices crash shortly after?  It could occur where the bill would exceed the value of the farm if they had the timing wrong.  You and I both have seen $3,000 land crash to $1,000 in the span of 4 years.  With the possible 55% rates a heir very well could owe more in death tax than the farm is worth one day. 

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Honored Advisor

Re: Estate Taxes..Uff Da

Inflation was precisely what I found myself thinking on this one, too.  My mind jumped back to the famous SNL sketch of Amuh and Jimmuh Carter, "Inflation is Our Friend".  In that one, Dad explained how we would all be millionaires someday.  It was prophetic. 

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Honored Advisor

Re: Estate Taxes..Uff Da

Estate taxation is designed to redistribute wealth, so that it doen'st accumulate in the hands of too few.  People with minimal estates were never going to generate estate tax anyway. 

 

If we look at the Congress, and see that the vast majority of members' income comes form stock transaction in most cases, the safe bet it that capital gains rates will stay pretty low. 

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Senior Advisor

Re: Estate Taxes..Uff Da

No the money in my estate has not all been taxed. The money I paid for the assets was taxed but not the capital gains on those assets. Inflation is of benefit to the asset holder and when they lose money on an asset the deduct their losses. Do you want privatize the gains and share the losses with the tax payers?

 

You forget that working people share the burden of inflation and nobody suggests they should be taxed less on on their income because of inflation.

 

In the first place, we do get an exemption on estate taxes which is currently $5 million for me and $5million for my wife if we had that much.  That sir is a lot of capital gains exempted. I doin't think the estate tax exemption will ever decline to $1 million because no one is in favor of that. $5 million per couple is amost likely scenario.

 

But don't try to convince me. Convince Joe Sixpack tha has wages that hasn't kept up with the cost of living. Explain to him why you think  your 10 million estate which includes $5 million of capital appreciation should pass without taxation. Keep in mind that your farms have been like a giant IRA gaining in value without burdensome taxes.

 

Deflation? Why don't you mention to homeowners that they should get to deduct the $50K or $100K their homes have lost in value that last 4 years?

 

 

 

 

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Senior Advisor

Re: Estate Taxes..Uff Da

Such bullcrap! When ever they tax rich people they claim is wealth distribution. When it fact it is only meant to raise revenues to fund government.

 

Progressive taxes serve only one purpose and that is because higher income folks have the ability to pay more. I never would esxpect my grandson to pay the same rate as I do. His income is about 10% of mine.

 

If this country is going to tax income they should tax all of it. Capital gains should not have preferential treatment over ordinary income. One dollar is just as precious to one type of taxpayer as another.

 

If capital gains taxes are postponed for many years they ought to become due and payable when the asset is sold or transferred to another. Usually upon death most assets are transferred.

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