[rollei_list] Re: OT Estate Tax (was Re: Copyright Law)

  • From: Marc James Small <marcsmall@xxxxxxxxxxx>
  • To: rollei_list@xxxxxxxxxxxxx
  • Date: Wed, 02 Dec 2009 22:37:00 -0500

At 08:12 PM 12/2/2009, Eric Goldstein wrote:
>Hi Austin -
>
>Then for the benefit of the rest of our readers who are likely not so
>conversant in US Estate Law, let's get accurate information out there.
>The tax to which you refer only effects the very wealthiest of all
>Americans, the top 3-4% I would guess. The US tax structure is
>basically a progressive one, and those who are able to pay more are
>generally called upon to do so with their income tax, property tax,
>and estate tax. At least that the law intends.

First, there are State and Federal estate taxes. Most, but not all, States seem to have abolished their death taxes. The Federal government currently exempts estates worth $800,000 or so.

Second, there are estate taxes and estate income taxes. During the period from death until distribution, an estate must pay income taxes on any profits made by the estate.

Third, the real problem is in illiquid assets such as farms and businesses. That is, a man may die owning, say, a barbershop. His annual income has been $50,000 a year. But, in the eyes of the IRS, his business may be worth a million dollars due to the good-will, annual gross income (they generally value a business at three times annual gross), and the enhanced value of the building in which the storefront shop is located. So, the dead man's son is suddenly told, "cough up $340,000 to keep the business alive". (There are workarounds, incidentally: many commercial insurance firms sell policies specifically designed to pay off tax charges such as these.)

Marc


msmall@xxxxxxxxxxxx
Cha robh bàs fir gun ghràs fir!

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