--- In [email protected], "shempmcgurk" <[EMAIL PROTECTED]> wrote: > > --- In [email protected], new_morning_blank_slate > <no_reply@> wrote: > > > > --- In [email protected], "shempmcgurk" <shempmcgurk@> > > wrote: > > > > > > Few people are aware that any suggestion for the elimination of > the > > > estate tax comes with the elimination of the stepped-up basis > for > > > capital gains. Currently, all capital gains get "stepped-up" of > > > their cost basis to market value on the day of death...so when > your > > > heirs inherit an asset of your's with a capital gain the cost > basis > > > on it is considered the market value on the day of death...in > other > > > words, ZERO capital gains. > > > > > > With the elimination of the estate tax (as the law currently > calls > > > for in the year 2010...and JUST the year 2010...it comes back in > > > 2011) is the elimination of the stepped-up basis....so the > > > government gives with one hand and takes with the other. > > > > > > So if and when the government eliminates the estate tax don't > scream > > > that it is a give-away for the rich because the rich very well > may > > > end up paying MORE on death than if there was an estate tax... > > > > > > By the way, that is the way it is in socialist Canada: there is > no > > > estate tax but there IS a capital gains tax on death. > > > > Shemp, > > > > While its a good point you raise about the (partial) take back due > to > > loss of stepped-up basis, I am unable to construct an example > where an > > heir would pay more taxes with an original basis and a 15% capital > > gains tax vs an inheritance tax of ~35-46% on a stepped up basis. > Can > > you provide one. > > > > Sorry to respond so late...but I had trouble finding your response > under this new godawful Yahoo! format. > > I'll give you a real example under Canadian law that I am > experiencing right now...I know, what does Canadian law have to do > with the States? Nothing, but there is no estate tax there and no > stepped-up basis. > > My dad died 6 months ago and left an estate worth about CDN$500,000. > One of the assets was a home in the U.S. worth about CDN$250,000 > with a cost basis of about $100,000. He has to pay (actually we his > heirs have to pay out of the estate) about 20% on the gain of > $150,000 which is about $30,000. > > Assuming instead an estate tax with an exemption of $2,000,000, we > wouldn't have to pay any estate tax at all. > > But that's not really fair to you because there is to be an > exemption on inherited capital gains in the U.S. in the year 2010 > and I'm not sure what the amount is, so I probably jumped the gun in > brashly claiming that the government will get more with the > elimination of the stepped-up basis than with the estate tax. So it > will all depend upon what exemption there will be. But somehow I > think I'll be right and that the government WILL make more under the > stepped-up basis elimination. > > > > > > > > > For example using current limits, if origianl basis in a house is > 300k > > and is sold by the estate for 1,300K (not unusual in todays > inflated > > RE market) then heirs would be subject to 15% x 1Mil capital gain = > > $150k. (Unless the house had been placed in an irrevocable trust > prior > > to the "willer's" death. If so, then as I understand it, the basis > is > > stepped up, and is under the estate tax limit, thus no tax on the > > house is due.) > > > > In contrast, if no estate tax exepemtion were in place, the heirs > > would owe 35%+ on the 1.3 mil = ~450k. Much more than the $150 with > > the stepped up basis and estate tax limitations. > > > > Can you clarify when and how an heir would pay more taxes with an > > original basis and a 15% capital gains tax vs an inheritance tax of > > ~35-46% on a stepped up basis? Thanks. > > > > See above. > > By the way, did you know that if someone with a large estate dies > AND they have a large IRA that the loss on the IRA will be about > 73%? That's because there is not only estate tax on the IRA but > I.R.D. tax as well (Income Tax in Respect of a Decedent). Top > marginal federal and state income taxes (about 50% combined in both > New York and California) plus 46%, so: > > 1,000,000 IRA > Less 500,000 combined state and federal income tax > = 500,000 > Less 230,000 Estate tax at 46% > = 270,000 Net to heirs
Sorry, the figures for combined state and federal tax should be about 3% lower as the maximum combined state and federal tax anywhere should be about 47%, not 50%. > > Now, what's REALLY fun, new.morning, is to figure out ways to > SHELTER estates from the estate tax. The funnest and best way for > many is something called a "Private Annuity Trust". Wheee! > ------------------------ Yahoo! Groups Sponsor --------------------~--> Something is new at Yahoo! Groups. Check out the enhanced email design. http://us.click.yahoo.com/SISQkA/gOaOAA/yQLSAA/UlWolB/TM --------------------------------------------------------------------~-> To subscribe, send a message to: [EMAIL PROTECTED] Or go to: http://groups.yahoo.com/group/FairfieldLife/ and click 'Join This Group!' Yahoo! Groups Links <*> To visit your group on the web, go to: http://groups.yahoo.com/group/FairfieldLife/ <*> To unsubscribe from this group, send an email to: [EMAIL PROTECTED] <*> Your use of Yahoo! Groups is subject to: http://docs.yahoo.com/info/terms/
