My tax free investment scenario was only in a pure consumption tax world. THe best I can come up with is the following: Please send $100 to the five people on this list, remove the first name, add yours to the bottom and mail out 25 copies... 1. bnb 2. bnb 3. bnb 4. bnb 5. bnb That, and a Nigerian opportunity i could email you more details about, if you're interested.
In that case, the ESTATE tax should not be cut. Whatever you call it (death tax, estate tax, or inheritance tax), it is already part of the tax code and should not be cut until we know where the replacement funds are going to come from. If you can't identify replacement revenue then cutting this tax off the rolls will benefit only the super rich and will drive our deficits even higher than they are now.
The child credit is up to $1000. Folks received around $400 last year as a "prepayment", so most can claim $600 per child on their tax return they are currently working on.
There should not be an estate tax. I don't think there should be an "inheritance" tax either, but I am willing to listen to arguments about that. The estate tax taxes money BEFORE it is distributed, therefore there is less money to distribute. You should be able to distribute all of your money you have earned and already paid taxes on. You should not have to pay a lawyer, establish trusts or find loopholes to avoid paying estate taxes. If I earn 2 billion over the course of my lifetime and I duly pay my taxes such that I have 1 billion when I die, I should be able to distribute 1 billion dollars, not 800 million (for example). My estate should not be penalized simply because I died. It is much easier to argue that the recipient of the inheritance should have to pay taxes on their particular piece of the pie. Currently, the day before I die, I can "gift" $10,000 to 100,000 people with no tax consequences. The day after I die, my estate should be able to do the exact same thing. Why does dying change that?
Why do you care about extreme examples like this? Has anybody ever gifted 10K to 100K people before or after death, ever? You can craft the most sensible, logical rule on earth and I guarantee you anybody with an imagination can come up with a hypothetical extreme siuation that renders it absurd. However, that's not really a good argument against any law that I know of.
I'm just noting that an inheritance tax is a different tax. We don't have such a tax in the United States right now. If you call the estate tax an inheritance tax, you're calling it by the incorrect name. Since the term "death tax" is derided as propaganda because it's not a tax that everyone pays on death, then we shouldn't use the incorrect term "inheritance tax", either, since it's a completely different thing than what we've got. There is no tax on inheritances. There is a tax on estates.
Is a kid taxed if a parent pays for his tuition? Or if he gives the kid a bunch o' cash to help him buy a house? Or helps him with the payments? How do gifts of tax-payed money work within families?
It's not as extreme an example as you might think, though. At least for a time, if I gave someone a share of my privately-held company, my basis in that company transferred to the person on the receiving end of the gift. So, if I had started a business with $10K in capital, I could give away 50% of my business, regardless of what it was worth now, with no tax consequences because the basis of the 50% remained $5K. But once I was dead, the estate isn't taxed on my basis, it's taxed on the present value, so a transfer of half my business at that point may well be subject to the tax. Now, I don't know if they closed the loophole in the gift tax. I thought I remembered hearing something about that, but I don't recall the details. But that example is exactly how many wealthy people were able to avoid both estate and gift taxes completely while still transferring their wealth to their kids. Take a look at the Pritzker trusts to see a huge example of tax avoidance using the loopholes in the gift and estate tax. Some of those loopholes have since been closed, but these trusts are grandfathered in. It just seems to me that if you're going to have the estate tax, you should make it impossible to avoid (or get as close as you can to making it impossible to avoid), but I don't know how you do that.
If the child is claimed as a dependent, then the parent isn't taxed for tuition and they are entitled to the tax credits associated with paying for tuition. If the child isn't claimed as a dependent, then if tuition paid by the parent exceeds some threshold (max. gift exception), it is taxed for the child, and the child is entitled to the tuition tax credits.
Tuition is specifically exempted from the gift tax. My understanding is that anything over $11,000 per year is subject to the gift tax (or $22K from a married couple); however, the tax isn't due until your lifetime exclusion is used up (I believe the lifetime exclusion counts all gifts to everyone, but it's something like $1.5 million).
http://www.irs.gov/newsroom/article/0,,id=107815,00.html There are some exceptions to the tax rules on gifts. The following gifts do not count against the annual limit: * Tuition or medical expenses that you pay directly to an educational or medical institution or health care provider for someone's benefit * Gifts to your spouse * Gifts to a political organization for its use * Gifts to charities
This one drives me crazy. I don't see why a parent should have to justify to the IRS how they give money to their kids. That figure should be at least a $100,000 if we have to have it, and I think we could live without it..
The gift tax basically amounts to you can only give one person certain amount of money per year without being taxed (11k right now), spouse excluded. If you give more than the limit to a person, you will need to pay gift taxes, although the gift tax is not immediately collected, it counts against your estate tax exception. So if you have a lot of money, it's wise to give the 11k limit to your kids every year (distribute as much as you can each year). I know some couple would give 11k each year to their kid as soon as the kid is born. There are other tax advantages from doing this, such as the kids' income tax rate will be lower and hence investment return on the money will be taxed at a lower clip. As far as tuition, you can setup education trusts that will be tax free if used for education purposes. However the amonut you can contribute to these trusts is still limited by the gift tax limit.
The point is that the estate should not be taxed BEFORE disbursement. If I have 1 billion to disburse the day before I die, my estate should have 1 billion to disburse the day after I die. The question is, why does my death change the amount I can disburse? If the sole reason for my estate now having less than 1 billion dollars to disburse is my death, then it is very clear why this is referred to as a "death tax". Again, someone please explain to me why my death triggers a tax. There is no tax triggered based on how much my heirs get, but on how much my estate gives.
oops! Thanks for the correction mrpaige. I was not aware of that tuition gift exception. Man, tax rules are complicated...
Funny how everyone ran from this thread when it got busy with a bunch of us arguing against an OBVIOUS death tax. DD
I wouldn't have known about the tuition exemption had I not looked up gift taxes earlier during this debate. Tax are way too complicated. I actually think the fact that taxes are so complicated is one reason why people, by and large, are so down on taxes. I mean, it's sort of like buying a car. One of the reason people hate it is because they think they're getting ripped off and everyone else is getting a better deal than they are. It's kind of the same with taxes. Knowing that there are ways to manipulate the tax code makes me feel like that if I'm not finding loopholes that I'm getting ripped off while everyone else (even if the reality is that they're paying a higher percentage of their income in taxes than I am) is playing the system and getting a better deal. If the tax code were simplified, I think we'd be a bit happier, as a nation, with the amount of taxes we personally pay. But I can't prove that with a cool graph or anything.
http://www.bloomberg.com/politics/a...-wealth-as-u-s-house-votes-to-kill-estate-tax this guy is right. http://cooklaw.co/blog/current-historical-federal-estate-tax-structure-exemptions-rates look at that chart. the years when middle class was worst like 1910 and 1920s it was 10-20%. in 1942-1976 which most folks think were america's best years for normal people and not the stupid rich the estate tax was 77%.. but now its 40% with a deduction of $5 million dollars and change per person so $10 million for married couple. the moment the 80s come the exemption climbs higher and higher. my family back home keeps worrying about the "death tax" and everyone thinks its communist but they wont ever have to worry about it. i think our estate might be $70k tops. no way they ever hit $10 million dollars. dumbasses all of them http://www.washingtonpost.com/blogs...s-pushing-estate-tax-repeal-its-their-nature/ http://www.reuters.com/article/2015...3C20150416?feedType=RSS&feedName=domesticNews https://www.govtrack.us/congress/votes/114-2015/h161 Republican Yes:233 No:3 Democrat Yes:7 No:176 my whole life i grew up supporting one party thinking it was for the middle class. those numbers dont lie. they both may be on corporate payroll but one party is worse than the other. this has been a long time coming but the republican party is for the top 0.5% of this country only. i finally realize that. idk if i could be democrat but i like what the green party has to say. im an independent now i guess
