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Honored Advisor

Re: Estate Taxes..Uff Da

Good observation ida,

 

Accelerated depr. is just a tool to stimulate the economy.-----------------not deere's fault-------they just enjoy the benefit.

The tool has been used so much the country is addicted to it.---that's an exageration----------but the government seems to be.

I am still waiting for that depr rule that lets us take accelorated depr on the assets we might buy someday.  Smiley Happy      Used to be a joke.

 

It is a trap -------only if you are borrowing the funds for that asset.  If one has the income(in that same year) to protect and the funds to pay cash it is good-------as goofy as it might seem.  Borrowing??  Then you are pushing the problem down the road and creating a tax liability "bubble" or will have trouble making the payments----or both.

 But the way tax policy changes it is who knows.-------IMO---Many of us have reached a point where we just do what's best for this year because the future is uncertain.

 


 

 

 

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Re: Estate Taxes..Uff Da


@sw363535 wrote:

Good observation ida,

 

Accelerated depr. is just a tool to stimulate the economy.-----------------not deere's fault-------they just enjoy the benefit.

The tool has been used so much the country is addicted to it.---that's an exageration----------but the government seems to be.

I am still waiting for that depr rule that lets us take accelorated depr on the assets we might buy someday.  Smiley Happy      Used to be a joke.

 

It is a trap -------only if you are borrowing the funds for that asset.  If one has the income(in that same year) to protect and the funds to pay cash it is good-------as goofy as it might seem.  Borrowing??  Then you are pushing the problem down the road and creating a tax liability "bubble" or will have trouble making the payments----or both.

 But the way tax policy changes it is who knows.-------IMO---Many of us have reached a point where we just do what's best for this year because the future is uncertain.

 


 

 That last line says a lot, both for individuals trying to figure out what to do, as well as businesses.  I know a guy who works in a factory, and they are almost to the poiint of turning down work, because the employees are doing all the overtime they can, but are afraid to hire more people, because of all those 'threshold' regulations.  You know, the ones that require a business with over 25 employees to do A, B and C, or the ones that require a business with over 50 employees to do X, Y, and Z.  They are right up against one of those 'thresholds' and until they know it is the smart thing to do, they are not going to expand.  Believe it or not, their business model shows that if they expand a bit, and hire 4-5 more people, which would be about how many full time employees needed to keep up with expected orders, and still keep everyone fully employed, but without overtime, they can't see how they (the owners) could be any better off by doing it.  Their profit would be the same, and they would be subject to greater regulatory scrutiny, which they don't want.

 


 

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Re: Estate Taxes..Uff Da


@smokeyjay wrote:

Revenue can never be deducted for tax purposes.  It's revenue, not an expense and reportable on the appropriate tax form.

 

Buffett gets very little 'revenue' from his job at BKH.  His salary is extremely low, compared to other CEOs, but they have things set up in such a way that the business pays most of his expenses, and writes it off as a business expense.  That way, if he gets paid $100,000, for example, almost all of it goes straight to his pocket.  I think they even buy his business suits.

 

The rest I say here is my understanding of the IRS rules, but I'm not the final expert on everything. 

 

As for living expenses, insurance policies, wages, etc., the corporation can only deduct expenses that are directly related to business endeavors.  If a corporation owns a house and uses it for corporate meetings, it's a deductible expense on appropriate schedules, ie, depreciation, Schedule C or similar form.  Same thing with utilities, insurance, property taxes, employment taxes, etc.

 

That is a much better way of putting it than I had.  What I was trying to say is that Buffett has enough lawyers on call to draw up all the legal papers necessary.  My point about Buffet being able to do it much easier than someone like I could, is that it is much easier to 'expense' things such as insurance, lunches, etc when you have a multi-million dollar corporation, than a guy like me.  How many 'business' lunches do you think a guy who doesn't have any full time employees can deduct, before it raises a red flag?  Large corporations, by their very nature make that easier to do.  Heck, Bill Gates bought a Helicopter that flies around no one but him, and it is a BUSINESS expense, which I believe he got to deduct the full price of off his taxes.  When I bought an old pickup for running around, which I paid only $2000 for, I couldn't deduct the full purchase price for it, because it was also used for 'personal' transportation.

 

Farmers can do that as well, if structured properly as a corporation.  Even a home can be deducted if the corporation stipulates the resident/employee/stockholder must live on the premises of the corporate property, to manage the business, ie., livestock barns, feeding, etc..  Vehicles that qualifies for decutible expenses can be used for farm purposes.  Taxes, insurance, utilities, etc., are deductible as well.  Salaries are deductible, so are legitimate expenses for legitimate business meetings, including meals, but are subject to IRS rules and exceptions.  Personal meal expenses are not deductible.

 

Buffett has 'expensed' a lot of meals, by nature of the people at the meal were 'employees', and it was a 'business' lunch.  It must have been mere coincidence, that he employs his family.  Then again, maybe those are some of the reasons his company owes something like one BILLION in back taxes

 

Just make sure its done according to IRS guidelines, or you will regret it when the auditors come knocking on the door.



However, if you are a super-rich Dem, like Buffett, you get several years to 'negotiate' your back-taxes.  They are still in 'negotiations' on back taxes owed for 10 years now!  Do you really think you or I would get that kind of a break?

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Re: Estate Taxes..Uff Da


@kraft-t wrote:

He doesn't live tax free. The last time I heard his taxes reported it was over $7 million. However, as he said his tax rates are lower than his secretary who pays ordinary income plus SS and fica taxes.

 

I think you are dealing a bit of disinformation.  (Emphasis added by Neb)

 

Well, here is a quote, from a NYT article, which quotes a letter he wrote to a Congressman:

Warren Buffett recently sent a letter to Congressman Tim Huelskamp providing the following details from his 2010 form 1040:  Adjusted Gross Income (AGI) $62,855,038, Taxable Income: $39,814,784, Federal Income Tax $6,923,494.  Dividing his Federal Income Tax by his Taxable Income results in an average tax rate of 17.4%.

 

 

Or how about this quote from the NYT?:

 

Warren Buffett’s got a piece in the New York Times today. A piece in which he makes a very strange claim about the rate of tax that he pays.

Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.

 Note the 'on my behalf'.  This includes ALL the employer's taxes, for all his employees, for a multi-BILLION dollar company (with a net worth in the TRILLIONS, the multi-billlions are just the money that flows around year to year)  See the first quote for his PERSONAL income tax, which he, himself pays, and subtract that from his total burdeon which adds up to $15,250 total (for the part he, and B-H pays in payroll and other taxes for his employees)  Buffett is playing a shell game, and why? .  Buffett is a nice guy, very likable, but when it comes to business, he is a shark of the highest caliber.

 

 

 He does pay taxes but he does have the conscience to know that the tax code is strongly favorable to those at the top of the income ladder. Why would they be for higher taxes? Because they think that people like him should pay a higher percentage of their income in taxes.There are alot of people that recognise the unfairness of the code and they may even recommend changes that are not in their own best interest.

 

No, higher INCOME taxes don't bother him much, because he has ways around paying the highest rates. 

I bet if you raise the income tax rate to those making over $250,000 a year to 100%, his lawyers will find a way around it. 

The rest of his 'net worth' is in the form of unrealized capital gains, and he had been on the record for being against raising the capital gains tax.

 

It's pretty hard to fathom that if you only think about me me me!

 

Remember, Buffett already has 'his'.  If you raise the income tax rate greatly, it won't affect the money he already has, nor his taxes if and when he ever cashes in a trust, as he is on record against raising the Cap Gains tax.  The higher rate will help keep him on the top of the heap, so to speak.  I really don't see where his great personal sacrifice lies. 

 

 

I live in Nebraska, and Buffett is the biggest fish in the State.  There are plenty of pieces I get to read about him, and what he does, and how he does it.  In fact, I read them now more than ever, simply because there seems to be so many people out there who don't know the whole story.

 


 

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Re: This thread needs an accountant


@sw363535 wrote:

Sorry kraft but I am going to try to correct you again.

You are talking about INCOME tax(the seven figure),

Buffet's statement was a very missleading thing from the start.--------------His secretary pays tax on EARNED income.  Mr Buffet does not have any of that,  his is investment income.  He has to mix the two to make his statement correct.  AND he has to include her FICA tax to make it work.  

@FICA tax is the only one that might be skewed to favor the rich because there is an upper limit to the tax(he does not have to pay more than @ the 60k rate on personal income)   Since fica is a tax to be withdrawn by the depositer at some point you could say he is penalized because he cannot deposit excesses  to increase his SS returns at retirement exponentially.  

 

the Income tax code does not favor the rich.  Mr Buffet pays equivilantly more taxes than his secretary does and does not get the deductions she does.   Otherwise I want to see the secretary's canceled check , compare to his $7m+, and then we will compare the % rate and I bet she still wins.  

What you are trying to do Kraft is look at his wealth,  or potential wealth(unrealized capital gains, and unrealized stock gains), and then add it to his actural investment income and yell it is not fair.  If we are going to do that then we need to add in the secretaries future potential worth as a secretary to Mr Buffet and the marketable value of her experience should she seek employment elsewhere with that level of knowledge and experience.  Once we find that figure and take it times the number of years she will have til retirement, multiply the two, add in some for potential consultation income and we would arrive at her real potential income.  Now if we tax that figure we have achieved a potential epuality.

 

It can be argued that the under $40k earners in the US have most of the tax breaks.  After deductions on average they only pay income tax on about 25% of their income or less because of the deductions.  

 

 

 

Where the super rich have advantage is they don't need the income,  They can take as little or as much income as they need in any given year.  They have investments in things like stock that appreciate in value but are not income till they are sold.  And own them through trusts or corporations.  They know better than to actually take the income.

 

Farmers have 2 wonderful advantages, one that most use, and one that a few use.

1----is, up to 10m of income expenses and income can be delayed or prepayed into a different year.  Most use this. knowing that eventually a bad year evens things out.  So you keep any tax burdon fairly even.

2----Gradual growth, if a farm is in a state of growth, say 10% asset base growth per year, this years income can be, in effect, used up by next years expenses.  If the gradual growth stops then taxes become a big issue.  But in effect growth can delay income tax burdon for many, many years.  It is tricky and one can get in trouble growing too fast.

 

Lack of growth can create a tax burdon that is hard to handle now because replacement costs for equipment demand growth.

 

Dad's neighbor used to say "if you ain't moving forward your in reverse, cause nobody can sit still."--------he was right, and taxation favors growth.

 


 


 

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Re: This thread needs an accountant

I always wondered what the big  ""hellabalue"" that came from ag about the EWG folks releasing all these gov. gimy numbers---now seems no one wants to pay taxes cause of all the ""stuppid gov  spending""---time to pay the fiddler ? ?  

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Re: Estate Taxes..Uff Da

One way people do it is to gift land and assets to the maximum every year but restricting their use or dissolution until they (parents) are gone.  I know of a good number of parents that did this well in advance of their retirement so the retirement homes could not reach back and access these assets.  Must be done in with competent, legal help and done properly.

 

Estate tax reform is not the only thing that needs to be done.  Retirement homes, though they are a vital and necessary component of local communities, they must have the incentive to be as efficient as possible and not think of Uncle Sam/medicare and personal assets as their ticket to a free ride to charge whatever they decide. 

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Re: Estate Taxes..Uff Da

The topic was estate taxes, Kay and you were the one claiming that estate taxes go to wealth redistribution. That is factually an error, but that woin't stop you from trying to support your argument.

 

I wonder how many actually think you know what you are talking about. You scoop BS out by the bushels and don't like anyone challenging you.

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