Estate taxes

[Andre1969]

Thanks for the info, Martha. That's one thing that was bothering me, that my uncle and I would suddenly get hit with some kind of hideous tax that we might not be able to pay, and it would force us to sell the house.

As for purchasing, neither me nor my uncle gave Grandma any money for it. She just had her lawyer draw up something, and the title is held as a Joint Tenancy with right of survivorship. I did put about $28,000 into the place to have a garage built...dunno if that makes any difference?

 

[ERD50]

Thanks for the info, Martha. That's one thing that was bothering me, that my uncle and I would suddenly get hit with some kind of hideous tax that we might not be able to pay, and it would force us to sell the house.

Well, if there are estate taxes, and if the estate does not have the liquidity to pay those taxes, it is possible that the house would need to be sold to pay the estate tax.

That was a lot of 'ifs'.

-ERD50

 

[Martha]

Yeah. Maybe Andre has a $3,000,000 house and didn't tell us.

 

[Andre1969]

How would they handle valuing the house for cost basis? Would it be market value or assessed value? I think the assessed value is around $250K. If we put it on the market, I'd say it might fetch about $500K. My grandmother also has her own house that she lives in, which might be worth $400K. With everything she has saved up on top of that, it would put her over $1 million (I think that's where Maryland's estate tax kicks in) but still well south of $2 million.

Wow, once upon a time $1M seemed like such a lot of money. It's hard to believe that just these two old houses puts us close to it!

 

[Martha]

Market value based on appraisal.

 

[retire@40]

Just a word of warning on all these IRS publications given as resources:

IRS publications should only be used for guidance, not to be relied upon since they are not binding. In fact, they are one of the least authoritative resources to use to establish your position. All they do is give you an idea of what the IRS's position and interpretation of the law is.

 

[Nords]

Just a word of warning on all these IRS publications given as resources:
IRS publications should only be used for guidance, not to be relied upon since they are not binding. In fact, they are one of the least authoritative resources to use to establish your position. All they do is give you an idea of what the IRS's position and interpretation of the law is.

You have a better reference, spit it out...

 

[retire@40]

You have a better reference, spit it out...

The best source to start with would be the Internal Revenue Code.

 

[Martha]

Do you see anything retire@40 in pub 551 regarding basis in inherited property which is inconsistent with the law? I don't.

I think people here who are curious about tax issues use the board to get a general idea of how things probably will work out. Rarely are "for sure" absolute answers given, but instead general information that may be helpful. For the most part IRS publications are very helpful. I agree though that at times IRS statements maybe be confusing or even wrong. But, I find the pubs more reliable than talking to an agent. IIRC, we had a discussion here once on claiming deductions for certain relatives. In that case different IRS publications lead to confusing answers. So yes, publications are not absolute authority.

Besides the revenue rulings, procedures and regulations, the only writing from the IRS that the IRS can be held to is a letter ruling.

(edited to correct due to reminder from retire@40)

 

[retire@40]

... For the most part IRS publications are very helpful. I agree though that at times IRS statements maybe be confusing or even wrong. But, I find the pubs more reliable than talking to an agent. IIRC, we had a discussion here once on claiming deductions for certain relatives. In that case different IRS publications lead to confusing answers. So yes, publications are not absolute authority.

The only writing from the IRS that the IRS can be held to is a letter ruling.

You basically said the same thing I said. Publications are dangerously "helpful" but not binding.

Would you ever go to court to argue a tax case using a publication to justify your position?

 

[retire@40]

The only writing from the IRS that the IRS can be held to is a letter ruling.

What about the regs, rev rulings, rev procedures?

 

[samclem]

IRS publications should only be used for guidance, not to be relied upon since they are not binding. In fact, they are one of the least authoritative resources to use to establish your position. All they do is give you an idea of what the IRS's position and interpretation of the law is.

This, and the discussion which follows, is a prime example of why many/most Americans hate our present tax system.
I know some people enjoy the "thrill of the game" in researching and applying arcane/detailed nooks and cranies of the tax code to best effect. Many of them find highly paid work as CPAs, tax attorneys, etc. I'm glad we have such people.
But, for the other 95+% of us who just want to pay the taxes we owe without feeling like chumps because we didn't find out about/exploit the tax code, the present system is infuriating. To be told "Don't depend on IRS publcations-they are often wrong" or "don't depend on what the IRS representative tells you over the phone--they are often wrong and you'll be responsible for paying any fees that result if you follow their bad advice" is maddening. Either the tax code is so convoluted that nobody truly knows the answers to some questions (this is my bet) or the IRS is staffed by idiots who are unable to tell Americans how to abide by the tax regulations their agency is charged with administering.

National Retail Sales Tax--YES!

 

[lets-retire]

samclem--the requirments for working for the IRS include classes or experience in the "tax arts", in many cases. I think it is the tax code is so convoluted nobody really knows what is going on. YOu can give th esame information to several tax preparers and have widely different results.

I second the sales tax.

 

[Texas Proud]

samclem--the requirments for working for the IRS include classes or experience in the "tax arts", in many cases. I think it is the tax code is so convoluted nobody really knows what is going on. YOu can give th esame information to several tax preparers and have widely different results.

I second the sales tax.

Actually I remember that there was a contest when I was doing taxes (back in the early 80s)... I think there were about 100 tax preparer who did a hypothetical couple with kids and rental property etc. etc... well, they got 100 answers for the tax due. One of the people actually got it 'right'... But, then one of the guy's who did not get it right argued that they were interpreting something wrong (a committee put it together) and they looked into it and agreed he was 'more right'....

I remember one of my tax professors said he did not have to change the questions on his test, but that the answers would change over the years as the tax codes changed or a court case ruling made it change...

So, yes, the tax code is such that NOBODY knows the whole thing..

 

[Nords]

The best source to start with would be the Internal Revenue Code.

You basically said the same thing I said. Publications are dangerously "helpful" but not binding.
Would you ever go to court to argue a tax case using a publication to justify your position?

What about the regs, rev rulings, rev procedures?

You're still a noodge.

I think 99.99675% of the board's posters will do fine with the IRS' publications & forms. We'll have the rest of them send you a PM for the appropriate reference.

 

[Martha]

You basically said the same thing I said. Publications are dangerously "helpful" but not binding.

Would you ever go to court to argue a tax case using a publication to justify your position?

I wouldn't go so far as saying that pubs are dangerous. And if the code was unclear (it often is) I would cite a publication to support my position, along with anything else that may be persuasive even if not law. Heck, I grab anything that might help. I have done that when requesting a letter ruling.

(Thanks for the catch on the regs, procedures and rulings. Since we are in the interest of accuracy, if a reg, procedure, or revenue ruling or letter ruling is inconsistent with a statute, of course the statute trumps and a court can set aside the reg, procedure or ruling. And if a statute is inconsistent with the constitution, the statute can be set aside as well )