10.15.09
Posted in Tax at 11:17 am by Eric
Congress’ 2001 estate tax provisions have created delays and uncertainty. For the past three years, if estate planning clients have come to my office with a net worth over $2 million, I’ve told them (i) not to die and (ii) to hold off on a comprehensive estate plan until 2009 because that’s when everything gets changed (in the meantime, we stay with their existing plan or put simple Wills and related documents in place). My rationale: if things don’t get changed, the estate tax gets repealed entirely on 1/1/2010 (meaning that anyone who dies during 2010, no matter how rich, escapes estate taxes), then on 1/1/2011, the estate tax exemption goes back to $1 million. Both scenarios–the no estate taxes and the low exemption–aren’t desired by many people in the Beltway, so everyone thought new estate tax provisions would be passed in 2009.
But 2009 is nearing the end, and nothing is happening. Congress is embroiled in health care, job creation, and other socio-economic scheming. The estate tax situation isn’t being addressed at all.
So what’s going to happen? According to John L. Buckley, the Chief Tax Counsel of the House Ways & Means Committee, Congress will probably just “kick the can down the road a bit.” Speaking at the 2009 Notre Dame Estate Planning Institute, he said Congress will likely extend the 2009 rules into 2010–in effect, buying themselves another 12 months to deal with the situation.
And what then? That’s where it becomes interesting. If Congress then does nothing, the low $1 million estate tax exemption would be re-instilled on 1/1/2011, meaning that far more middle class Americans get stung by it. This would please people on the further reaches of the left aisle in Congress like Charlie Rangel. Rangel and his ilk want more people to pay estate taxes. Democrats could also deflect criticism for it by simply pointing out that they didn’t do anything. They merely left in place the tax scheme implemented by Republicans back in 2001.
Interesting stuff.
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07.30.09
Posted in Tax at 11:41 am by Eric
Are you thinking about transferring a parcel of real estate from yourself to yourself and another as tenants-in-common (not as joint tenants)? If the parcel is in Michigan, you’re going to face an anomalous property tax result.
Under 1994’s Proposal A, all property values for purposes of taxation became subject to a limit: they could only go up the rate of inflation or 5%, whichever is less. Prop A also provided, though, that when a piece of property is transferred, the limit (the “cap”) comes off, with the result that the parcel is then valued (for purposes of taxation) at its then-fair market value.
If you transfer a parcel into a tenancy-in-common, retaining one-half for yourself, you are essentially transferring one-half of the parcel, with the result that one-half of the cap should come off. Example:
Parcel’s Current Fair Market Value: $90,000.00
Parcel’s Current Taxable Value: $50,000.00
Parcel’s New Taxable Value: $70,000.00 ($25,000 original one-half + $45,000 uncapped one-half).
The resulting tax hit? It’s impossible to say. To figure it out, you need to multiply your tax jurisdiction’s mills by 70 and contrast it with the old tax hit.
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05.27.09
Posted in Tax at 11:23 am by Eric
“When the king of Bithynia died he left his entire kingdom to the Roman Senate. The Bithynians had been loyal to Rome during the first revolt of Mithridates and they enjoyed tax immunity. The gift of the kingdom to Rome seemed like an appropriate way to show appreciation to the ever-so-generous Senate. The king did not realize the legal implications of this provision in his will. As a new Roman territory, Bithynia would no longer have tax immunity. It now had the same legal status as land that had been forfeited to Rome as punishment for rebellion. Bithynia was open for new taxation or rental in whatever form the Senate desired. This blunder by the king’s lawyer was probably history’s worst example of estate planning.”
Charles Adams, For Good and Evil: The Impact of Taxes on the Course of Civilization (Madison Books, 2001), pp. 91-92.
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05.15.09
Posted in Tax at 5:30 pm by Eric
The Christian Science Monitor criticizes the flurry of sin taxes being tossed around the Beltway. Excerpt:
Remember: one man’s sin is often another’s little piece of heaven on earth. Our ability to control the personal details of our lives is rare and precious. What a shame if the Statue of Liberty no longer held up a torch of liberty but instead a ruler to whack citizens across the knuckles when they reach for a treat.
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04.22.09
Posted in Tax at 12:40 pm by Eric
“National Taxpayer Advocate Nina E. Olson announced today (IR-2009-43) that the IRS has awarded $9.5 million in matching grants to Low Income Taxpayer Clinics (LITCs) for the 2009 grant cycle (Jan. 1, 2009, through Dec. 31, 2009). Through the LITC program, the IRS awards matching grants of up to $100,000 a year to qualifying organizations. For the 2008 grant cycle, the IRS awarded LITC grants to 162 organizations representing all 50 states, plus the District of Columbia, Puerto Rico, and Guam.” Link.
Maybe I should be ashamed, but I didn’t even know such things exist. We give low-wage people the earned income credit and low marginal rates. We also pay money so they can get free help when they don’t pay the right amount?
According to the IRS publication, incidentally, a family of nine (yes, those freaks do exist) qualifies for LITC assistance if the family income level is below $101,876.
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04.06.09
Posted in Tax at 8:46 pm by Eric
The Top 10 Tax Procrastinating Cities in America determined by the number of tax returns electronically filed online via the TurboTax Online service from April 13-April 17, 2008 (previous year ranking in parenthesis):
1. San Francisco, Calif. – (#5) – The Golden Gate City takes the gold this year when it comes to tax procrastinators, moving up from number 5.
2. Houston, Texas – (#3) – After being booted from the number 1 spot last year, which they have claimed more than any other city (three times), Houston barely misses out this year coming in at number 2.
3. New York, N.Y. – (#2) – The “City that Never Sleeps” has made a habit of snoozing through tax season. Although it has dropped one spot to number 3, New York has made it onto the top 10 list the last eight years.
4. Chicago, Ill. – (#1) – After taking the crown last year, the “Windy City” drops to number 4 on the list.
5. San Diego, Calif. – (#6) – The sun and sand are good distractions for San Diegans. Despite being home to TurboTax, San Diego manages to move up to number 5 this year.
6. Phoenix, Ariz. – (#13) – Returning to the list this year and making the biggest jump (from 13 to 6) is Phoenix.
7. Seattle, Wash. – (#7) – Seattle coffee must come in handy for all those procrastinators at tax time. For the second year running, Seattle comes in at number 7.
8. Los Angeles, Calif. – (#10) – Too busy chasing down celebrities? Los Angeles has once again made its way onto the list at number 8.
9. Dallas, Texas – (#11) – The 9th largest city in the U.S. has gotten even bigger when it comes to tax procrastinators. Returning to the list this year is Dallas.
10. Las Vegas, Nev. – (#8) – Sin City proved to be too big of a temptation for taxpayers last year. Wrapping up the top 10 list this year is Las Vegas.
Link.
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03.23.09
Posted in Tax at 11:44 am by Eric
I dislike the IRS. That’s no secret, and most of my clients share the same distaste. But in the spirit of Vito Corleone, I advise my clients to hold the IRS close (keep your friends close and your enemies closer). The best way: Read their publications. The enemy lays out their plans, their ideas, their strategy . . . and the things are well-written and easy to understand, unlike the Internal Revenue Code, the regulations, and tax court opinions. If you want to check out a sample that is relevant to many people, check out their publication on educational savings.
If you want to see a complete list of IRS publications, get started here.
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03.11.09
Posted in Tax at 12:09 pm by Eric
Need to know what you’ll be paying for property taxes? Check out this site.
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03.09.09
Posted in Tax at 12:01 pm by Eric
Where are we with the estate tax? One seminar commentator recently offered the following:
Under the Obama plan detailed during his campaign, the estate tax exemption would be locked in at the level which just went into effect in 2009, with 45% estate tax on any excess. That would exempt estates of $3.5 million–$7 million for married couples—from any estate tax. The $1 million gift tax exemption would remain in place. The step-up in basis on death would also remain in effect. This was the essence of HR 436, which was introduced on January 6, 2009.
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03.02.09
Posted in Tax at 1:30 pm by Eric
Any stimulus money to prop up professional sports stadiums in the big cities? After paying $25+ for a ticket and $8 for a beer, there’s simply not enough money for the players and owners, so Joe Taxpayer needs to put in some more. The stimulus package is apparently okay with that.
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