which tax is fairest?

[masterrig 1]

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For somebody ranting such support of the inheritance tax, you don't seem to know much about it.

No, I never claimed to now the minute details of the estate tax. That does not mean I cannot have a reasonably informed opinion on the matter.

I'm still waiting for your reply with respect to how much land your friend's ranch lost due to his siblings liquidating their share compared to how much was lost due to the estate tax. You seem to be avoiding that question.

I haven't responded to that because I can't see what difference it makes other than being 'nosey'.


Chuck

[jcd11235 0]

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I haven't responded to that because I can't see what difference it makes other than being 'nosey'.

It can hardly be considered being nosey if I don't know who your friend is.

It's relevant because, so far, you've offered no indication that your friend lost any significant, portion of ranch land to the estate tax. Blaming the estate tax for his siblings wanting to liquidate the property they inherited isn't a fair criticism of the estate tax.

It's understandable why his siblings would want to liquidate, especially if the land was not owned free and clear. Keeping the land would have meant taking on additional debt, which they may not have wanted, or may not have been able to afford. That's hardly the fault of the tax code, but it's easier to criticize Uncle Sam than one's siblings.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[mnealtx 0]

From wiki:

The Federal estate tax is imposed "on the transfer of the taxable estate of every decedent who is citizen or resident of the United States"[1]. The starting point in the calculation is the "gross estate". Certain deductions (subtractions) from the "gross estate" amount are allowed in arriving at a smaller amount called the "taxable estate".


[edit] The "gross estate"
The "gross estate" for Federal estate tax purposes often includes more property than that included in the "probate estate" under the property laws of the state in which the decedent lived at the time of death. The starting point for the calculation of the estate tax is the value of the "gross estate"[2], as modified by certain other statutory provisions. The gross estate (before the modifications) may be considered to be the value of all the property interests of the decedent at the time of death. To these interests are added the following property interests generally not owned by the decedent at the time of death:

the value of property to the extent of an interest held by the surviving spouse as a "dower or curtesy"[3];
the value of certain items of property in which the decedent had, at any time, made a transfer during the three years immediately preceding the date of death (i.e., even if the property was no longer owned by the decedent on the date of death), other than certain gifts, and other than property sold for full value[4];
the value of certain property transferred by the decedent before death for which the decedent retained a "life estate", or retained certain "powers"[5];
the value of certain property in which the recipient could, through ownership, have possession or enjoyment only by surviving the decedent[6];
the value of certain property in which the decedent retained a "reversionary interest", the value of which exceeded five percent of the value of the property[7];
the value of certain property transferred by the decedent before death where the transfer was revocable[8];
the value of certain annuities[9];
the value of certain jointly owned property, such as assets passing by operation of law or survivorship, i.e. joint tenants with rights of survivorship or tenants by the entirety, with special rules for assets owned jointly by spouses.[10];
the value of certain "powers of appointment"[11];
the amount of proceeds of certain life insurance policies[12].
The above list of modifications is not comprehensive.

As noted above, life insurance benefits may be included in the gross estate (even though the proceeds arguably were not "owned" by the decedent and were never received by the decedent). Life insurance proceeds are generally included in the gross estate if the benefits are payable to the estate, or if the decedent was the owner of the life insurance policy or had any "incidents of ownership" over the life insurance policy (such as the power to change the beneficiary designation). Similarly, bank accounts or other financial instruments which are "payable on death" or "transfer on death" are usually included in the taxable estate, even though such assets are not subject to the probate process under state law.


[edit] Deductions and the taxable estate
Once the value of the "gross estate" is determined, the law provides for various "deductions" (in Part IV of Subchapter A of Chapter 11 of Subtitle B of the Internal Revenue Code) in arriving at the value of the "taxable estate." Deductions include but are not limited to:

Funeral expenses, administration expenses, and claims against the estate[13];
Certain charitable contributions[14];
Certain items of property left to the surviving spouse[15].
Beginning in 2005, inheritance or estate taxes paid to states or the District of Columbia[16].
Of these deductions, the most important is the deduction for property passing to (or in certain kinds of trust for) the surviving spouse, because it can eliminate any federal estate tax for a married decedent. However, this unlimited deduction does not apply if the surviving spouse (not the decedent) is not a U.S. citizen[17]. A special trust called a Qualified Domestic Trust or QDOT must be used to obtain an unlimited marital deduction for otherwise disqualified spouses[18];.

So, it looks like the entirety of all property and assets owned by the deceased, minus any gifts, trusts or property passed to a surviving spouse.

Since the property in question doesn't appear to have been subdivided between the siblings prior to death, the estate tax would be payable *before* the siblings could divide the property, if I'm understanding it correctly.

Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706

[dreamdancer 0]

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Andrew Carnegie

While more suspicious of government intervention than Paine, Andrew Carnegie heartily endorsed estate taxes. The greater part of this steel magnate’s little magnum opus, The Gospel of Wealth, is devoted to a discussion of the three possible ways to dispose of wealth: (1) leave it to the families of decedents, (2) bequeath it for public purposes, and (3) administer it during one’s life. Carnegie abhorred the first, tolerated the second, and encouraged the third.

He asks his reader: “Why should men leave great fortunes to their children?” If it is from affection, then it is a misguided affection because “great sums bequeathed often work more for the injury than the good of the recipients.” The instances of public servants that live off their wealth in order to devote themselves to community service are rare. “It is not the welfare of the children, but family pride, which inspires these legacies.”

Carnegie sharply distinguishes between the intended consequence of the inheritance tax (to create funds for public purposes) and its unintended consequence (private philanthropy). The unintended effect of the tax is “to induce the rich man to attend to the administration of wealth during his life.” Wealth is a trust fund for the community that helps the rich “dignify their own lives.”

According to Carnegie, philanthropy in a capitalist economy solves the problem of rich and poor alike. “The laws of accumulation will be left free, the laws of distribution free. Individualism will continue, but the millionaire will be but a trustee for the poor.” Carnegie concludes his famous tract with the words: “The man who dies rich dies disgraced.”

Carnegie practiced what he preached and gave away more than 90 percent of his estate before his death, leaving a modest trust fund for his family. He included a trust fund for Theodore Roosevelt’s widow because the government at the time made no provision for the wives of former presidents.

http://pgt.liebertpub.com/pgt/articles/mt_rushmore_and_a_history.htm

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[jerryzflies 0]

Thanks, but presumably the estate gets to pay off debts before the tax assessment is made.

If you can't fix it with a hammer, the problem's electrical.

[masterrig 1]

O.K... I said it earlier. None of his siblings could afford the inheritance tax and had to sell their portion off. My friend was able to pay (with help) the taxes on his portion but couldn't afford to buy the rest out. What I was getting at was, had the tax not been so great, that ranch might still be 'entire'.
Savvy?


Chuck

[jcd11235 0]

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Since the property in question doesn't appear to have been subdivided between the siblings prior to death, the estate tax would be payable *before* the siblings could divide the property, if I'm understanding it correctly.

Interesting, but it addresses a point not thus far being discussed in this thread.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[mnealtx 0]

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Thanks, but presumably the estate gets to pay off debts before the tax assessment is made.

Perhaps, if it is considered a 'claim against the estate' - I have no clue if that is the case or not.

Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706

[jcd11235 0]

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O.K... I said it earlier. None of his siblings could afford the inheritance tax and had to sell their portion off. My friend was able to pay (with help) the taxes on his portion but couldn't afford to buy the rest out. What I was getting at was, had the tax not been so great, that ranch might still be 'entire'.

The net value of the estate had to exceed $3.5 million before it was even subject to the estate tax. That means after all debts were paid. If the net value exceeded $3.5 million, only the net value of the estate over $3.5 million would have been subject to the tax.

I don't know about you, but for me, $3.5 million is still quite a large sum of money, especially to receive free and clear of taxes.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[jcd11235 0]

According to this calculator, taxes are applied to the net value of the estate, not the gross value. so if the estate in question was taxed (under the estate tax), then the net value of the estate exceeded $3.5 million.

From The Estate Tax: Myths and Realities from the Center on Budget and Policy Priorities:

The number of small, family-owned farms and businesses that owe any estate tax at all is tiny, and virtually no such farms and businesses have to be liquidated to pay the tax.

The estate of only 0.24 percent of all people who die in 2009 (i.e., the estates of between two and three of every 1,000 people who die) are expected to owe any estate tax, according to the Tax Policy Center. And only about 1.3 percent of the few estates that still are taxable are small business or farm estates.

TPC estimates that only 80 small business and farm estates nationwide will owe any estate tax in 2009. This figure represents only 0.003 percent of all estates — that is, the estates of three out of every 100,000 people who die this year.

Furthermore, the minuscule number of small business and farm estates that do owe estate tax generally owe only a modest percentage of the estate’s value in tax. The 80 small farm and business estates left by people who die in 2009 that will owe any estate tax will owe the tax at an average rate of just 14 percent..

Despite the oft-repeated claim that the estate tax has dire consequences for family farms and small businesses, no evidence supports that charge. Indeed, the American Farm Bureau Federation acknowledged to the New York Times several years ago, when the estate tax was more expansive than it is today, that even then it could not cite a single example of a farm having to be sold to pay the estate tax.

A Congressional Budget Office study, as well, exploded the myth that small businesses and farms have to be liquidated to pay the estate tax. CBO found that of the few farm and family business estates that would owe any estate tax under the 2009 parameters, the overwhelming majority would have sufficient liquid assets (such as bank accounts, stocks, bonds, and insurance) in the estate to pay the tax without having to touch the farm or business. For instance, of the 65 farm estates that would owe any tax after the $3.5 million exemption, just 13 could potentially face liquidity constraints, and CBO explained that even this figure likely overestimates the number of farm estates with liquidity constraints, because CBO was unable to take into account certain assets held in trusts (such as life insurance trusts) when calculating the liquid assets available to estates to pay the tax. Furthermore, the few, if any, farm estates that would face any liquidity constraints would have other important options available to them — such as spreading their estate tax payments over a 14-year period — that would allow them to pay the tax without having to sell off any of the farm assets.

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[jcd11235 0]

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Thanks, but presumably the estate gets to pay off debts before the tax assessment is made.

Perhaps, if it is considered a 'claim against the estate' - I have no clue if that is the case or not.

Jerryzflies is correct. The estate gets to pay off outstanding debt (as well as pay a few other qualifying expenses) prior to tax assessment. The estate tax is then subject to estate tax only on the vale that exceeds $3.5 million.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[dreamdancer 0]

another angle on the estate tax...

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If one statistic captures the persistence of racial inequity in the United States, it is net worth, also called wealth, equity or assets. If you want to know your net worth, add up everything you own and then subtract your total amount of outstanding debt. When we do this for white and minority households across America, incredible differences emerge.

Overall, the typical white family enjoys a net worth more than seven times higher than its non-white counterpart. (Latinos, a very diverse group, fare slightly better than African-Americans, but still fall far short of whites on this indicator. So do Asians.) This disparity is far greater than racial differences in education, employment or income. To make matters worse, this "equity inequity" between blacks and whites has grown in the decades since the civil rights triumphs of the 1960s.

That is because differential earnings alone cannot explain racial differences in wealth levels. In every income bracket, blacks own less wealth than whites. The typical black family earning $50,000 per year owns less than half the assets of its white counterparts. Among the wealthiest Americans, BET's Johnson and Oprah Winfrey and are the only African-Americans on the Forbes annual list of the 400 richest people in the United States, and they are both at the lower end of the list.

This equity inequity is, in part, the result of the head start that whites have enjoyed in accumulating and passing on assets. Simply put, it takes money to make money. Whites not only earn more now, they have always earned more than African-Americans -- a lot more. Wealth differences, in turn, feed upon these long-term income differences. Some researchers estimate that up to 80 percent of lifetime wealth accumulation results from family gifts in one form or another passed down from generation to generation.

These gifts range from a down payment on a first home to a free college education to a bequest upon the death of a parent. Over the long run, small initial differences in wealth holdings spin out of control. Estate and gift taxes are about the only social policies left that act as a small restraint on the runaway train of wealth inequality. Doing away with the estate tax would widen, not narrow, the gap between blacks and whites.

http://archive.salon.com/politics/feature/2001/04/05/black_wealth/

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[masterrig 1]

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O.K... I said it earlier. None of his siblings could afford the inheritance tax and had to sell their portion off. My friend was able to pay (with help) the taxes on his portion but couldn't afford to buy the rest out. What I was getting at was, had the tax not been so great, that ranch might still be 'entire'.

The net value of the estate had to exceed $3.5 million before it was even subject to the estate tax. That means after all debts were paid. If the net value exceeded $3.5 million, only the net value of the estate over $3.5 million would have been subject to the tax.

I don't know about you, but for me, $3.5 million is still quite a large sum of money, especially to receive free and clear of taxes.

Yup!


Chuck

[BDashe 0]

Do you have your own mind? or just google?

So there I was...

Making friends and playing nice since 1983

[billvon 2,998]

Your one warning. If you can't refrain from personal attacks do not post here.

[cliffwhite 0]

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We give tacit consent for taxation when we utilize the benefits of government (e.g. driving on roads, walking on sidewalks, utilizing law enforcement, etc.).

Got a mouse in your pocket jcd?

Listen, here's an exercise for you. It may be an eye opener.
Show us the law which makes you liable to pay income tax.
That should be easy enough. Or have you been paying tax you aren't liable for?

Blues,
Cliff

2muchTruth

[jcd11235 0]

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Listen, here's an exercise for you. It may be an eye opener.
Show us the law which makes you liable to pay income tax. That should be easy enough. Or have you been paying tax you aren't liable for?

Try lookinghere.

You're kidding yourself if you think people are not legally obligated to pay taxes in the US, including income tax. Don't believe all of those tin-foil hatter websites.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[cliffwhite 0]

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Quote

Listen, here's an exercise for you. It may be an eye opener.
Show us the law which makes you liable to pay income tax. That should be easy enough. Or have you been paying tax you aren't liable for?

Try lookinghere.
You're kidding yourself if you think people are not legally obligated to pay taxes in the US, including income tax. Don't believe all of those tin-foil hatter websites.

__________________________________________________

Good . You've linked us to the tax code.
Now show us where you or I are liable for income tax.
I'll bet you can't do it.

Blues,
Cliff

2muchTruth

[Gawain 0]

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Listen, here's an exercise for you. It may be an eye opener.
Show us the law which makes you liable to pay income tax. That should be easy enough. Or have you been paying tax you aren't liable for?

Try lookinghere.
You're kidding yourself if you think people are not legally obligated to pay taxes in the US, including income tax. Don't believe all of those tin-foil hatter websites.

__________________________________________________

Good . You've linked us to the tax code.
Now show us where you or I are liable for income tax.
I'll bet you can't do it.

Blues,
Cliff

Dude, I hate, hate, hate, hate, hate the income tax, but the Sixteenth Amendment states: "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."

This is a power that Congress and the Executive branch have abused in my opinion, and unless this amendment is repealed, we can never rely on an alternative like the "Fair Tax" plans that have been proposed over the years.

So I try and I scream and I beg and I sigh
Just to prove I'm alive, and it's alright
'Cause tonight there's a way I'll make light of my treacherous life
Make light!

[dreamdancer 0]

bit more on inheritance tax...

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The Duchy of Cornwall is, with the Duchy of Lancaster, one of the two Royal duchies in the United Kingdom. The eldest son of the reigning British monarch inherits the duchy and title of Duke of Cornwall at the time of his birth (if the monarch has no son the estates of the Duchy are held by the Crown and there is no Duke). The current Duke is Charles, the Prince of Wales.

The Duchy owns land totalling 571 km² (or 135,000 acres). Nearly half of the holdings are in Devon, with other large holdings in Cornwall, Herefordshire, Somerset, and the constituent country of Wales. For the fiscal year 2007, the Duchy was valued at £647 million, and annual profit in 2007 was £16.3 million, thus yielding 2.5%.

As a Crown body, and managed by the Crown Estate, the Duchy is tax-exempt from paying corporation tax, but since 1993 the Prince of Wales has voluntarily paid income tax. The Prince paid a voluntary contribution to the Treasury of 50% of his Duchy income from the time he became eligible for its full income at the age of 21 in 1969, and had paid 25% since his 1981 marriage. Tax is calculated after deducting business expenditure, the biggest source of which is The Prince's staff of around 110.

http://en.wikipedia.org/wiki/Duchy_of_cornwall

stay away from moving propellers - they bite
blue skies from thai sky adventures
good solid response-provoking keyboarding

[cliffwhite 0]

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Quote

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Listen, here's an exercise for you. It may be an eye opener.
Show us the law which makes you liable to pay income tax. That should be easy enough. Or have you been paying tax you aren't liable for?

Try lookinghere.
You're kidding yourself if you think people are not legally obligated to pay taxes in the US, including income tax. Don't believe all of those tin-foil hatter websites.

__________________________________________________

Good . You've linked us to the tax code.
Now show us where you or I are liable for income tax.
I'll bet you can't do it.

Blues,
Cliff

Dude, I hate, hate, hate, hate, hate the income tax, but the Sixteenth Amendment states: "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."
_________________________________________________

Great . The ammendment supports it but can you show me any section of the tax code that holds you personally liable for any income tax? Can you show us the law?

Here is a link where the tax commisioner is asked that question
http://www.youtube.com/watch?v=pu0iSxAKxT0

Blues,
Cliff

2muchTruth

• Quote

[DrewEckhardt 0]

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Show us the law which makes you liable to pay income tax. That should be easy enough. Or have you been paying tax you aren't liable for?

It doesn't matter what I'm technically responsible for as long as I have a regular "job" (with wages the IRS can garnish) or real property (against which the IRS can get a lien).

[dreamdancer 0]

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Only about 8,000 bequests would be taxed under Obama's generous estate tax rules. To put it another way, 99.7 percent of those who die in 2011 would be exempt from the tax. Even those making more than $1 million annually would get a tax cut of $8,000 in 2012. Let’s say that again: a tax cut of $8,000. That doesn't slow down the anti-estate tax crowd. They're still spinning this as a tax increase. Orwell would be proud.

Opponents of the estate tax are the best I’ve seen at this. Their economics may be a little shaky, but they are great polemicists. After all, they are the folks who successfully renamed the levy the “death tax” and conjured up images of an IRS agent in a cheap suit waiting to grab your last dollar as you take your last breath. They even successfully created a new image of the American Gothic—a salt of earth family farmer tearfully watching as the heartless IRS man sold his farm at auction to pay the hated tax. To mix historical metaphors, it was all enough to make us wish for a modern Robin Hood who’d save us from the evil Norman taxman. Imagine Grover Norquist as a latter-day Errol Flynn. Or not.

It is all myth, of course. TPC figures 140 family farms and small businesses would owe estate tax under the Obama proposal. You read that right: 140.

That’s not good enough for senators John Kyl (R-Az) and Blanche Lincoln (D-Ark.). They’d increase the exemption to $5 million per individual ($10 million per couple) and lower the rate to 35 percent. It is bad enough that the Obama plan would boost the deficit by roughly $280 billion over 10 years. Kyl and Lincoln would add another $250 billion in red ink. That’s a lot of money for 8,000 uber-rich families at a time when the nation is running massive budget deficits.

This peek-a-boo 2001 tax law has to be fixed. And Laffer and others are right that the estate tax raises a lot less revenue that it might, thanks to myriad planning opportunities. But spinning aside, Obama is already cutting estate taxes for the very wealthiest. All we are arguing about now is how much more of a tax break they should get.

http://taxvox.taxpolicycenter.org/blog/_archives/2009/4/2/4141626.html

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[nanook 1]

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Now show us where you or I are liable for income tax.

From the link that was provided by jcd:

"There is hereby imposed on the taxable income of every individual (other than a surviving spouse as defined in section 2 (a) or the head of a household as defined in section 2 (b)) who is not a married individual (as defined in section 7703) a tax determined in accordance with the following table:"

"There is hereby imposed on the taxable income of every head of a household (as defined in section 2 (b)) a tax determined in accordance with the following table:"

"There is hereby imposed on the taxable income of—
(1) every married individual (as defined in section 7703) who makes a single return jointly with his spouse under section 6013, and
(2) every surviving spouse (as defined in section 2 (a)),
a tax determined in accordance with the following table:"

_____________________________

"The trouble with quotes on the internet is that you can never know if they are genuine" - Abraham Lincoln

[dreamdancer 0]

an inheritance tax is the fairest - duh

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