"For Residents
Individuals who are either citizens or ``residents" (as defined below)
of the United States at the time of their death are subject to the
United States estate tax. The estate tax applies to all of their assets,
whether located in the United States or in other countries. In addition,
individuals who make gifts while they are citizens or residents of the
United States are subject to the United States gift tax.
Individuals are United States residents for estate and gift tax purposes
if the United States is their domicile. In general, a person's domicile
is the United States if he regards one of the fifty states or the
District of Columbia (but not Puerto Rico, Guam or the United States
Virgin Islands) as his permanent home. An individual who enters the
United States on a G-4 visa or a diplomatic officer present in the
United States on an A-1 visa are United States residents for estate and
gift tax purposes. For income tax purposes, the definition of a
resident is different. It is possible to be a resident for income tax
purposes, but not for estate and gift tax purposes.
The estate and gift tax rates are identical and are applied on a
cumulative basis. Thus, prior gifts are taken into account in computing
the rate applicable to subsequent gifts and transfers at death. The
rates start at 18% and climb to 55% on cumulative transfers in excess of
$10,000,000. However, United States residents are allowed a ``unified
credit" against their estate and gift tax, which effectively permits
them to transfer a total of $650,000 (increasing to $1,000,000 by 2006)
free of estate or gift tax. The benefit of graduated rates and the
``unified credit" are phased out by means of a 5% surtax on estates over
$10 million. The surtax is applied until the average rate of tax on the
estate is 55%. (TOC)"
Cheers,
Erika
--------------------------------------------------
>>| -----Original Message-----
>>| From: Raymond Camden [mailto:[EMAIL PROTECTED]
>>| Sent: Tuesday, January 20, 2004 9:45 PM
>>| To: CF-Community
>>| Subject: dumb question about the estate tax
>>|
>>|
>>| Question - is the estate tax an extra tax or simply the
>>| same tax that you
>>| pay on earned income? In other words, if I give my friend a thousand
>>| dollars, I expect he will have to pay some of that as taxes
>>| at the end of
>>| the year. If I die and leave him money, is he paying the
>>| 'normal' earned
>>| income tax or an extra ammount because of estate taxes?
>>|
>>|
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