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Re: Estate taxes
Old 12-13-2006, 07:10 AM   #61
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Re: Estate taxes

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Originally Posted by Bikerdude
I vote for a consumption tax. Eliminate the regressive employment tax for the working poor. Those that spend more pay more. Sounds fair to me.
I think that is an option that should definitely get more attention and discussion.
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Re: Estate taxes
Old 12-13-2006, 08:21 AM   #62
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Re: Estate taxes

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Originally Posted by saluki9
Question for you, do you actually think that people will accumulate capital at their current rates if they know that the govt will take it all at death?
Probably. I know I would.

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Originally Posted by saluki9
I do work for some very wealthy people. These people could have stopped working long ago, but instead they keep building businesses and creating wealth in most cases because they want to create a legacy for their families.
Maybe they enjoy what they are doing. Maybe they plan to set up a foundation and give to charity.


Quote:
Originally Posted by saluki9
Are these the people (wealth and job creators) that you want to dis-incentivize?
You don't think raising income tax rates and rates on capital gains dis-incentivizes people? I think it dis-incentivizes people more than the estate tax. In addition it makes it harder for someone who starts with nothing to amass wealth. All I'm saying is I would prefer an estate tax over raising income taxes and taxes on capital gains and dividends.
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Re: Estate taxes
Old 12-13-2006, 08:56 AM   #63
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Re: Estate taxes

Just as an aside, there is a new book on this topic called "Death by a Thousand Cuts (The Fight Over Taxing Inherited Wealth)" by Graetz and Shapiro.

It might be an interesting read for those of you who enjoy this subject.

As a reminder, you can buy it from Dory's link on the bottom right.
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Re: Estate taxes
Old 12-13-2006, 09:01 AM   #64
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Re: Estate taxes

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Originally Posted by Martha
Here is a study from the Congressional budget office which indicates that the estate tax at the current rates does not unfairly burden family farms and small businesses. http://www.cbo.gov/ftpdocs/65xx/doc6...-EstateTax.pdf

One more point. Estate taxes are simple if you lead a simple life. Even if you are rich. Value the assets at fair market value and pay the tax. Complications come when you try to take discounts on the valuation or try to squirrel away your assets.
. the best way to eliminate the problem is for congress to make the $3.5 million exemption permanent and to adjust annually for inflation. This will eliminate the problem for small businesses and farmers. $1 million ain't what it used to be.....
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Re: Estate taxes
Old 12-13-2006, 09:05 AM   #65
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Re: Estate taxes

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Originally Posted by brewer12345
Right, right. Children can go without hot meals. Seniors can go without healthcare and eat cat fod (the cheap stuff). Schools can be left to crumble. But fergawdsakes, don't cut that precious military budget. That's bull****, pure and simple.
I told you a million times not to exagerate!!!
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Re: Estate taxes
Old 12-13-2006, 09:08 AM   #66
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Re: Estate taxes

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I told you a million times not to exagerate!!!
Whatever you say, chief. :
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Re: Estate taxes
Old 12-13-2006, 09:13 AM   #67
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Re: Estate taxes

I'm late, again, but I have an example of the government taking a family farm from the family. I have cousins in upstate New York. If the farm had stayed in the family it would be on the fourth generation. The first generation was two brothers who purchased a large tract of land in the middle of no where. The company, as with most farming operations, was cash poor but land rich. By the time they died off a highway had been built in front of their farm. Their heirs had to sell of a portion of the farm land to McDonald's to pay the taxes. When the second generation started dying off they sold off another portion of the land to the Red Roof Inn, again to pay the estate tax. Now all that is left is a house with a modest lot with a highway view out the front. The farm is gone, taken by taxing the land as part of an estate. My cousins farm used to employ several people, but not any longer. With this said I think some form of estate tax should be in place. Maybe the government should not included an operating business in the value of an estate. This would allow it to pass from generation to generation, without losing the tax generated by a profitable business.

As far as the cost of aircraft for the military, all I'm going to say is there are more advanced aircraft on the drawing boards of other nations than what we currently have in the old technology. Drones might be a good option in the future, but now it is similar to playing a video game and there are several shortcomings with that idea.
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Re: Estate taxes
Old 12-13-2006, 09:48 AM   #68
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Re: Estate taxes

OH.... this came back to me on this subject...

Many years ago when I was doing estate tax work... (yes, I actually did it for a living, so I know a bit...) The Gallo family, who has hundreds of millions of dollars (maybe a billion by now, I don't know).... BUT, they got their congressman to put in a special exemption for them in a tax bill way back when.... I heard about it from an attorney during one of my classes... basically, they got an exemption from paying estate taxes on all thier wealth.. It was buried in the text that nobody reads and you would not know it was there unless you questioned the language...

Also, there are some super rich that have given up their American citizenship so they do not have to pay, but I think there is some law that trys to tax them for leaving.... not sure on this...
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Re: Estate taxes
Old 12-13-2006, 10:56 AM   #69
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Re: Estate taxes

Quote:
Originally Posted by lets-retire
I'm late, again, but I have an example of the government taking a family farm from the family. I have cousins in upstate New York. If the farm had stayed in the family it would be on the fourth generation. The first generation was two brothers who purchased a large tract of land in the middle of no where. The company, as with most farming operations, was cash poor but land rich. By the time they died off a highway had been built in front of their farm. Their heirs had to sell of a portion of the farm land to McDonald's to pay the taxes. When the second generation started dying off they sold off another portion of the land to the Red Roof Inn, again to pay the estate tax. Now all that is left is a house with a modest lot with a highway view out the front. The farm is gone, taken by taxing the land as part of an estate. My cousins farm used to employ several people, but not any longer. With this said I think some form of estate tax should be in place. Maybe the government should not included an operating business in the value of an estate. This would allow it to pass from generation to generation, without losing the tax generated by a profitable business.
I'm curoius... what's the "house with a modest lot" worth? I would suspect that its worth a lot. Also If you consider how many people work for the McDonalds & the Red Roof Inn vs. the farm. I think you'll see there are more workers and more economic value than before.
As for fairness, with land one can generate giants capital appreciations & never pay capital gains tax. Estate just trys to capture some of that. I see that as a fair tax.
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Re: Estate taxes
Old 12-13-2006, 11:08 AM   #70
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Re: Estate taxes

I work with a real estate developer down near Minneapolis. The company has been buying up farm land from a family of farmers for development projects. That farm family recently got paid $20,000,000 for part of their farm where a Target store and other retail operations are now going to be located. They were complaining about the capital gain taxes when we cut them the check. (Actually, a wire transfer but it doesn't sound as sexy) They were also complaining bitterly about how much their property taxes had increased on their remaining land. They still keep cattle and went home to do chores.

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Re: Estate taxes
Old 12-13-2006, 11:18 AM   #71
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Re: Estate taxes

Quote:
Originally Posted by Texas Proud
OH.... this came back to me on this subject...

Many years ago when I was doing estate tax work... (yes, I actually did it for a living, so I know a bit...) The Gallo family, who has hundreds of millions of dollars (maybe a billion by now, I don't know).... BUT, they got their congressman to put in a special exemption for them in a tax bill way back when.... I heard about it from an attorney during one of my classes... basically, they got an exemption from paying estate taxes on all thier wealth.. It was buried in the text that nobody reads and you would not know it was there unless you questioned the language...

Also, there are some super rich that have given up their American citizenship so they do not have to pay, but I think there is some law that trys to tax them for leaving.... not sure on this...
Wasn't this the generation skipping transfer tax exemption? IIRC they worked with Bob Dole to reduce estate taxes. It didn't just apply to them, but to everyone.
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Re: Estate taxes
Old 12-13-2006, 11:28 AM   #72
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Re: Estate taxes

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Originally Posted by brewer12345
That one is very easy to avoid even if you imbibe. Make it yourself. No taxing authorities involved in any way.
And it can taste better too. I just bottled a batch of German Alt, an English Pale Ale, a Nut Brown Ale, a Cream Ale, a Pumpkin Ale and I'll probably start a Porter after the holidays.

Whoops, a bit off-topic, but heck - taxes can drive one to drink, so maybe not.

-ERD50
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Re: Estate taxes
Old 12-13-2006, 11:37 AM   #73
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Re: Estate taxes

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Originally Posted by dmpi
I'm curoius... what's the "house with a modest lot" worth? I would suspect that its worth a lot. Also If you consider how many people work for the McDonalds & the Red Roof Inn vs. the farm. I think you'll see there are more workers and more economic value than before.
As for fairness, with land one can generate giants capital appreciations & never pay capital gains tax. Estate just trys to capture some of that. I see that as a fair tax.
You miss the $$#$ point.... Yes, they are left with a house. And how does that house produce income (which after all is what they needed from the farm). Their only option is to sale the house to a McDonald's nightshift manager and find a new line of work. What part of that is fair.....

Spoken by someone who doesn't seem to be able to relate to the effected party.
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Re: Estate taxes
Old 12-13-2006, 11:43 AM   #74
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Re: Estate taxes

I'm a newbie to this forum and I'm certain I've posted far beyond my alotted quota.

Unfortunately, as you can tell, I have passion about this topic.

I heard a motivate of the tax is to prevent wealth hording, etc. Fine setup a tax that would tax inheritance beyond a certain amount. So an estate could give xxx $ per person. Thus, estates that want to give to a larger number of people can give a meaningful amount to each individual.

That's my piece.

sorry for the emotion...
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Re: Estate taxes
Old 12-13-2006, 01:32 PM   #75
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Re: Estate taxes

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Originally Posted by HelpMeRhonda
You miss the $$#$ point.... Yes, they are left with a house. And how does that house produce income (which after all is what they needed from the farm). Their only option is to sale the house to a McDonald's nightshift manager and find a new line of work. What part of that is fair.....
Exactly. Where they once were able to fend for themselves and make a decent living, now they are forced to work for someone else. Farming traditionally does not make a lot of cash, all of the value is in the land. These people lost their farm, not because of market forces or poorly running their enterprise, but because the government forced them to pay estate taxes on the value of the land. As I said, I think the estate tax should not include the value of a family run business in the tax.

As far as the value of the property, it has little value as a house, due to being in the flight path of the local airport and being next to a major highway. As commercial property it has some value, but only to the Red Roof Inn or McDonald's, as a parking lot. The lot is too small to build any type of reasonable business on it.
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Re: Estate taxes
Old 12-13-2006, 01:45 PM   #76
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Re: Estate taxes

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Originally Posted by lets-retire
Exactly. Where they once were able to fend for themselves and make a decent living, now they are forced to work for someone else. Farming traditionally does not make a lot of cash, all of the value is in the land. These people lost their farm, not because of market forces or poorly running their enterprise, but because the government forced them to pay estate taxes on the value of the land. As I said, I think the estate tax should not include the value of a family run business in the tax.

As far as the value of the property, it has little value as a house, due to being in the flight path of the local airport and being next to a major highway. As commercial property it has some value, but only to the Red Roof Inn or McDonald's, as a parking lot. The lot is too small to build any type of reasonable business on it.
So us employees should subsidize (via payroll, income and RE taxes) these marginally successful farmers who pay little in income or real estate taxes?
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Re: Estate taxes
Old 12-13-2006, 01:49 PM   #77
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Re: Estate taxes

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Originally Posted by lets-retire
Exactly. Where they once were able to fend for themselves and make a decent living, now they are forced to work for someone else. Farming traditionally does not make a lot of cash, all of the value is in the land. These people lost their farm, not because of market forces or poorly running their enterprise, but because the government forced them to pay estate taxes on the value of the land. As I said, I think the estate tax should not include the value of a family run business in the tax.
I agree with you on that. Exclude it, and don't step up the basis.
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Re: Estate taxes
Old 12-13-2006, 01:50 PM   #78
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Re: Estate taxes

I don't buy that family farmers who are land rich and cash poor are forced to sell to pay taxes. Don't forget, the IRS allows the payment of the estate tax over time for family farms and family businesses. You get 14 years to pay the tax. Another option would be to finance the payment of the taxes by getting a mortgage on the farm.Selling part of the farm is only one option. Plus, almost no family farms have the kind of equity anyway that results in an estate tax.

http://www.newfarm.org/columns/policy/2006/0713.shtml

The report shows that in 2000, the number of farm estates that had to file an estate tax return was 4,641 and of those a little over one-third (1,659) owed any estate tax at all. Of the 1,659 who owed estate taxes only 138 did not have sufficient liquid assets to immediately pay the taxes due. It should be noted that for farmers, the estate tax payments can be paid over as many as 14 years. The 2000 filings included the estates of persons dying in 1998, 1999, and 2000 and the exemption level varied from $625,000 to $675,000, according to the year of death.

If the exemption level were raised to $1.5 million, the number of farm estates required to file an estate tax return would shrink to 1,005 with just 300 of those having to pay any estate tax. Of that 300, only 27 would lack sufficient liquid assets to immediately pay the tax. At a $3.5 million exemption the numbers would be 187 tax returns, 65 owing any tax, and 13 with insufficient liquid assets to pay the estate tax liability.


Estate taxes just arent a problem for family farms. The real problem is that the next generation often doesn't want to farm so they sell. Plenty of problems with family farms and difficulty in competing with big operations, but the problems have nothing to do with estate taxes.

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Re: Estate taxes
Old 12-13-2006, 01:58 PM   #79
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Re: Estate taxes

Can't a small family business (farm or otherwise) incorporate to avoid estate tax? Corporation s don't 'die', do they (go bankrupt yes, but no tax then)?

Or would they need to 'sell' the business to the corpoation and get hit with cap gains tax? 15% now vs 50% later, and no exclusion.

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Re: Estate taxes
Old 12-13-2006, 02:04 PM   #80
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Re: Estate taxes

You will own shares in the corporation that will have to be valued when you die. I have done succession planning with small business owners where the primary owner gifts shares of stock in the business over a period of time in order to minimize estate taxes. All sorts of interesting valuation issues occur and opportunities to fight with the IRS. For example, the original owner may gift non-voting shares that don't become voting until the original owner dies. The parties will argue that the gifted stock is of relatively low value because it is non-voting and also subject to minority discounts.

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