Broken promise ???

[MrsHaloFIRE]

Is there some reason that family farms and other businesses must be inherited? Can't you start your own if that's what you want to do for a living? That's what the vast run of humanity does - find something they can do to make money to live on.

Having grown up on a family farm I will take a wild stab at that. Couple reasons we dont want farms to go away after 1 generation. Immense amount of capital required to run a farm which takes generations to build. Equipment, expertise, appropriate land management so it will yield correctly, acquisition of complimentary parcels to give you access to soil you need. Also, as someone who likes to eat, I dont want every farm having to start over every generation with someone looking around for land. Yeah there are big commercial farms, but there are also BIG privately owned farms that bring you your eggs, milk and produce. EVen the pretty flowers you like in a vase.

My family's farm has been ENTIRELY encircled with subdivisions. If it were to hit the market it would turn into prob a golf community in approx 10 months time from date of death. You cant just fly out west, land at an airport, go walk around and find an appropriate available parcel and commence to farming. its takes decades to even get decent, establish your suppliers and to whom youre selling. Treat and condition your soil. Learn more about it and do it again. Determine what grows best on what parcel given sun, water, soil conditions. Learn your pests.

TO me the idea of selling every farm at the death of the original farmer is like erasing the research of a scientist when he/she dies. Maybe next generation will figure out cancer in a single career, but we have to destroy all this research because this person died. Kids, go get a "REAL" job bc Gumby doesnt think you should farm on your parent's land. (sarcasm intended)

 

[Dash man]

Is there some reason that family farms and other businesses must be inherited? Can't you start your own if that's what you want to do for a living? That's what the vast run of humanity does - find something they can do to make money to live on.

This would force sales of the farm or business at rock bottom prices because the family has to pay the estate taxes. Corporations would end up owning all the farms and would likely see much land turned into housing developments. Private companies would be gobbled up by corporations. The money to start a farm or a business of any size is tremendous and competition from corporations will be brutal.

 

[Oilcan]

Having grown up on a family farm I will take a wild stab at that. Couple reasons we dont want farms to go away after 1 generation. Immense amount of capital required to run a farm which takes generations to build. Equipment, expertise, appropriate land management so it will yield correctly, acquisition of complimentary parcels to give you access to soil you need. Also, as someone who likes to eat, I dont want every farm having to start over every generation with someone looking around for land. Yeah there are big commercial farms, but there are also BIG privately owned farms that bring you your eggs, milk and produce. EVen the pretty flowers you like in a vase.

My family's farm has been ENTIRELY encircled with subdivisions. If it were to hit the market it would turn into prob a golf community in approx 10 months time from date of death. You cant just fly out west, land at an airport, go walk around and find an appropriate available parcel and commence to farming. its takes decades to even get decent, establish your suppliers and to whom youre selling. Treat and condition your soil. Learn more about it and do it again. Determine what grows best on what parcel given sun, water, soil conditions. Learn your pests.

TO me the idea of selling every farm at the death of the original farmer is like erasing the research of a scientist when he/she dies. Maybe next generation will figure out cancer in a single career, but we have to destroy all this research because this person died. Kids, go get a "REAL" job bc Gumby doesnt think you should farm on your parent's land. (sarcasm intended)

I thought all you had to do to be a farmer was to dig a hole, plant a seed, cover it up and that was that. At least that's what Michael Bloomberg from New York thought. Guess Gumpy thinks like Bloomberg.

Seriously yours was a very good post!

 

[Gumby]

TO me the idea of selling every farm at the death of the original farmer is like erasing the research of a scientist when he/she dies. Maybe next generation will figure out cancer in a single career, but we have to destroy all this research because this person died. Kids, go get a "REAL" job bc Gumby doesnt think you should farm on your parent's land. (sarcasm intended)

No need to be angry about it. BigDawg asked my reasoning. I provided it. I don't expect everyone to agree with me. Heck, I don't expect very many people at all to agree with me, which is why things won't change.

However, I do wish that all those people who have inherited assets, whether they be a family farm or family business or a pile of appreciated stock, would have some appreciation for the fact that the taxpayers of this country are subsidizing you and your family, in some cases going back several generations. Although maybe your particular family has some morally superior claim to taxpayer subsidies than other families. I don't know.

 

[Gumby]

I thought all you had to do to be a farmer was to dig a hole, plant a seed, cover it up and that was that. At least that's what Michael Bloomberg from New York thought. Guess Gumpy thinks like Bloomberg.

Seriously yours was a very good post!

Actually, I do have an idea of what it takes, given that the young wife and I grow virtually all of our own vegetables (and can/dry/freeze them for the winter). It's hard work just to feed the two of us. Doing it at a scale needed to make a living at it would be incredibly difficult.

 

[pb4uski]

No need to be angry about it. BigDawg asked my reasoning. I provided it. I don't expect everyone to agree with me. Heck, I don't expect very many people at all to agree with me, which is why things won't change.

However, I do wish that all those people who have inherited assets, whether they be a family farm or family business or a pile of appreciated stock, would have some appreciation for the fact that the taxpayers of this country are subsidizing you and your family, in some cases going back several generations. Although maybe your particular family has some morally superior claim to taxpayer subsidies than other families. I don't know.

Yeah, I actually thought a 100% estate tax was one of your dumber ideas.

I also disagree that people who have inherited assets are being subsidized by taxpayers.... how so? There is no taxpayer subsidy, in fact the inverse.... those inherited assets are still generating income and are paying income tax annually.

IMO it would be stupid to have a decedent's assets revert to the state upon their death.... not even socialist couries like China, Vietnam, Cuba, etc do that.

 

[Gumby]

. . . I also disagree that people who have inherited assets are being subsidized by taxpayers.... how so? There is no taxpayer subsidy, in fact the inverse.... those inherited assets are still generating income and are paying income tax annually . . .

Not necessarily. I could inherit a large portfolio of appreciated stocks or a house or a business or a farm. I could sell any of them the next day and there would be no taxes due. If I continue to use those assets to generate income in the future, of course, then I'll pay taxes on the new income. But the taxes on the step up amount are gone forever. In fact, if I just left the sale proceeds in a no interest bank account and spent them down over my life, I'd never pay income tax. And that amount I have available to spend would be increased by the amount of the tax not collected on the step up amount, which is a subsidy from other taxpayers. Roll that amount over through several generations and the subsidy becomes quite large.

 

[pb4uski]

OK, I concede that the step-up in basis is a nice tax benefit that is theoretically dubious... not really a taxpayer subsidy except in comparison to a sale by the decedent.

If you have advocated carryover basis for inherited assets or only 50% step up or a 15% tax in exchange for a 100% stepped up basis rather than 100% estate tax then you might have got more traction.

 

[Brat]

Perhaps inheritance tax on an illiquid asset such as a farm could be a lean which could be paid as a part of operations over time or when the property is sold.

 

[wolf]

I started reading a book “beating the new death tax” by James Lange,cpa/attorney. I’m interested in looking for possible new ways to structure my distributions in retirement to possibly be more tax efficient. I’m in the part of the book where he mentions that if I die first my traditional Ira monies will pass to my wife first. After she dies whatever is left will go to our children (as per the beneficiary setup). What bothers me is that once the money is passed down to the children they must pull out distributions within a 10 year window. This may be a time in their lives where they might be making good money and this additional required distribution might throw them in a higher tax bracket. The CARES ACT deleted the “stretch Ira” feature. I feel that I have been saving for over 40 years so my kids might be able to prolong these distributions per their longevity numbers. Now all of a sudden the govt is looking for money to pay for all their programs, etc and deleting the stretch Ira features. This seems like a broken promise - to change the rules of the game. I understand the govt needs money to pay for programs but why not grandfather this up to 2020 so that those that saved for the intended purpose of utilizing the stretch Ira don’t get screwed? If people still want to contribute, fine but don’t keep changing the rules when convenient for one side. I feel the govt broke its initial promise to us.

Rant over.. what are your thoughts?

++1. However, many posters on this forum will disagree. Like you, I think
changing the "rules", in the middle of the game is not fair or ethical.

 

[MichaelB]

OK, I concede that the step-up in basis is a nice tax benefit that is theoretically dubious... not really a taxpayer subsidy except in comparison to a sale by the decedent.

Our tax system taxes transfers and income. The estate tax is in lieu of an income tax on the inheritors. If that were not taxed it would be considered a “revenue expenditure”, which is what congress calls a tax break. There are others of these, and they do meet the test of “taxpayer subsidy”.

 

[Gumby]

OK, I concede that the step-up in basis is a nice tax benefit that is theoretically dubious... not really a taxpayer subsidy except in comparison to a sale by the decedent.

If you have advocated carryover basis for inherited assets or only 50% step up or a 15% tax in exchange for a 100% stepped up basis rather than 100% estate tax then you might have got more traction.

Perhaps inheritance tax on an illiquid asset such as a farm could be a lean which could be paid as a part of operations over time or when the property is sold.

As I see it, there are two separate issues. One is the idea of inheritance at all. I know I will never convince anyone of my idiosyncratic position on that, as it flies in the face of human nature to provide for our progeny. The second is how inherited assets should be taxed. I hold out more hope on that issue, and it seems to me that yours are both excellent ideas.

And while I'm on a roll about inheritance, let me say that I am greatly annoyed by the various trust and estate tricks used to ensure that Medicaid pays for grandma's nursing home and the kids's inheritance is preserved. That is yet another tax subsidy for, generally, upper income families.

 

[Vacation4us]

As I see it, there are two separate issues. One is the idea of inheritance at all. I know I will never convince anyone of my idiosyncratic position on that, as it flies in the face of human nature to provide for our progeny. The second is how inherited assets should be taxed. I hold out more hope on that issue, and it seems to me that yours are both excellent ideas.

And while I'm on a roll about inheritance, let me say that I am greatly annoyed by the various trust and estate tricks used to ensure that Medicaid pays for grandma's nursing home and the kids's inheritance is preserved. That is yet another tax subsidy for, generally, upper income families.

Although I totally disagree that there should be a 100% inheritance tax I will definitely agree that your second point is valid.

Taxpayers should not be paying for Grandma just so her heirs can inherit.

 

[Letj]

Dynastic wealth is bad for society. It exacerbates inequality and stifles ambition. Make as much as you want and spend as much as you want, just don't pass it on to your children. Everyone should stand on their own two feet, not on the shoulders of their parents and grandparents, and should run their own race through life. The children who grow up in wealthy households already have more advantages - typically better education (both the formal and the informal kind), better connections and better support systems - than those who grow up in poor households. They don't need additional wealth that has not been taxed (which is what happens with the step up basis).

This!! I am voting for you! And I would ask what have they done to deserve it.

 

[ExFlyBoy5]

However, I do wish that all those people who have inherited assets, whether they be a family farm or family business or a pile of appreciated stock, would have some appreciation for the fact that the taxpayers of this country are subsidizing you and your family, in some cases going back several generations. Although maybe your particular family has some morally superior claim to taxpayer subsidies than other families. I don't know.

Who says they don't? You are painting with pretty broad strokes.

Let's say after your Navy days you started a law firm that was run so much differently than "normal" firms. You charge rates that almost anyone can afford and it's resulted in a nice lifestyle for you. Let's say you have two children that went to law school and started working at your firm. Well, you die. Guess what? Firm goes away. Sorry, kids...that's the rules. Figure it out on your now, mmmkay? Seems pretty fair to me, right?

 

[ncbill]

It seems like the ultra-wealthy agree... from what I have read, Buffett's kids are getting pretty modest inheritances. I suspect the same for Gates.

It would penalize family businesses where offspring have been groomed to takeover... Steve Forbes comes to mind.

A family business could easily employ hundreds outside the family...now slap it with a 100% tax should the owner suddenly die...might have a negative impact on the employees, not just the heirs?

 

[Exchme]

If I had my way, the estate tax would be 100% and this entire topic would be irrelevant.

Yes socialism has worked so well every time it's tried. Oh, wait.

 

[Gumby]

Yes socialism has worked so well every time it's tried. Oh, wait.

Socialism does not mean "anything I don't like which could possibly harm my privileged economic position." Rather, socialism addresses the question of how the means of production are owned in an economic system. You may be interested to read more here. https://en.wikipedia.org/wiki/Socialism . If you want to argue that my idea is bad on the merits, you should do that. Several others already have, and they have made good arguments. Merely labelling something "socialism," as if that is the be all and end all of criticism, just doesn't cut it.

 

[flintnational]

I think the over/under on when this thread is closed is about post 52. I going with under.

 

[Gumby]

Who says they don't? You are painting with pretty broad strokes.

Let's say after your Navy days you started a law firm that was run so much differently than "normal" firms. You charge rates that almost anyone can afford and it's resulted in a nice lifestyle for you. Let's say you have two children that went to law school and started working at your firm. Well, you die. Guess what? Firm goes away. Sorry, kids...that's the rules. Figure it out on your now, mmmkay? Seems pretty fair to me, right?

Most law firms are LLCs and the operating agreement controls how ownership interests are apportioned and changed. There are also professional rules about who can own an interest in a law firm. So, you can't pass your interest in the firm by way of inheritance in any event. But I understand your point.

I think the over/under on when this thread is closed is about post 52. I going with under.

Maybe. But let's try to head that off and get the thread back on track. My original comment was originally made primarily as a somewhat tongue-in-cheek way to indicate that I am unsympathetic to those whining about the loss of the super-stretch IRA provision. Perhaps not surprisingly, given that it threatens the established order, it has generated debate far beyond the original bounds of the thread. I could debate the idea for hours, but the vast majority of you will never change your mind and it is more likely pigs will fly than that it will ever happen in real life. So I propose that we just drop the issue.

 

[USGrant1962]

A family business could easily employ hundreds outside the family...now slap it with a 100% tax should the owner suddenly die...might have a negative impact on the employees, not just the heirs?

Try ~50,000 employees like my former, family-owned megacorp.

 

[pb4uski]

.... And while I'm on a roll about inheritance, let me say that I am greatly annoyed by the various trust and estate tricks used to ensure that Medicaid pays for grandma's nursing home and the kids's inheritance is preserved. That is yet another tax subsidy for, generally, upper income families.

Totally agree.... medicaid LTC planning is one of my top pet peeves.

 

[pb4uski]

++1. However, many posters on this forum will disagree. Like you, I think
changing the "rules", in the middle of the game is not fair or ethical.

To think that rules will never change is a bit of an ignorant position to take The reality is that rules are made, people find loopholes or other ways to twist rules to their benefit. If the loopholes and twists are aggregious enough the the rulemakers update the rules to prevent abuse.

If the possibility of rules changing is a problem for you then just don't play.

 

[Surewhitey]

Totally agree.... medicaid LTC planning is one of my top pet peeves.

I was wondering if I was the only person who thought this way. DM wanted to put her house in my name and I asked that she not. I always felt like it was a tax-dodge (albeit legal). We never did in my name, not sure if she picked another sibling...

 

[jollystomper]

Life is not fair. Deal with it and move on .