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Two Halves Do Not Make a Whole?

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Stepping away from celebrities for a minute and focusing on estate laws, yesterday the IRS issued proposed regulations to minimize valuation discounts in estate planning. In a nutshell, the regulations prohibit taxpayers from dividing property between family members and then claiming their proportionate shares are not worth the exact proportion because that small proportion does not have control of the property. Wonky? Yes.

 
Three small points:
1. These regulations have been bandied about for 25 years.
2. From a practice viewpoint, I have never completely bought into the idea of valuation discounts for marketable securities transferred to an LLC or partnership solely for the purpose of obtaining a reduced value for estate tax purposes.
3. Nonetheless, this issue seems to be one for Congress to address through legislation rather than one more edict from a lame duck (re: imperial) administration to issue in its waning days.
 

Hey, New Jersey, Your Tax Base Is Too Narrow

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David Tepper is a hedge fund manager whose company is located in New Jersey.  He is also a resident of the Garden State (misnomer alert). He recently announced that he was moving his corporate headquarters and his personal residence to Florida.  The NJ state budget director then stated that this move could affect the amount of tax revenues generated by NJ.  

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Feel the Burn?

3izqaim1Last week Bernie Sanders released his tax increase plan for paying for his $1.4 trillion annual single payer health care plan. Among other hefty increases, his plan would increase the estate tax on the “wealthiest .3% of Americans who inherit more than $3.5 million” to raise an additional $21 billion annually.

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Pistons, Lightning, Shock, and Fury

William Davidson was the owner of the Detroit Pistons, Tampa Bay Lightning, and Detroit Shock (WNBA). When he died in 2009, he was listed as the 62nd richest man in the U.S. His estate recently settled litigation with the IRS over the amount of estate taxes owed. The IRS claimed that the estate owed an additional $2.8 billion (yes, with a B) in estate taxes. The dispute involved the value of closely held stock transferred to various trusts. The estate settled for $388 million.

Points, if I must:

1. I would call this a victory for the estate given that the IRS was seeking 7X more than the settlement amount.

2. Of course, it is never a victory for the family when they had already presumably paid more than $1 billion in estate taxes and were fighting over the incremental taxes.

3. All of this begs the question about how much estate tax is enough from one individual. If Democratic candidate nee Socialist Bernie Sanders were president, Davidson’s tax bill would have been $1 billion more.

4. Last, if one owns a professional sports team, or three, good estate planning advice is essential.

WNBA Finals Game 1: Sacramento Monarchs v Detroit Shock

Will the Senate be Sancho Panza?

In tilting at windmills news, the House of Representatives voted this week to repeal the estate tax. The bill also provides that estates would continue to avoid payment of capital gains tax on appreciated assets even in the absence of the estate tax.

Several quick points:

1. With President Obama annually proposing an increase in the estate tax rate from 40% to 45% and taxing capital gains on appreciated assets, while also lowering the threshold at which taxes become due to $3.5 million from $5.43 million, this bill has no chance of passing during the next two years.

2. Last year, only 5,000 estates paid federal estate taxes, a rate of 2 out of 1,000. I suspect that many of the beneficiaries of an estate tax repeal would be the same Wall Street weenies, most of whom vote Democrat, who already benefit from favorable taxation of their compensation due to calling it carried interest rather than earned income.

3. With this Quixotic bill passed, the House Republicans can now devote their energy to passing a 60th bill to defund or repeal Obamacare.

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All Posts By Jay Brinker

I am an attorney located in Cincinnati, Ohio who practices in the areas of estate planning, probate, asset protection, and small business advice. I make a difficult and bewildering process as simple as possible. Most importantly, I provide "more for less" for my clients.