Both the size of the figure and the gift and estate tax parity were huge surprises.
It is important to note that the tests for income tax residence and transfer tax (gift and estate tax) residence are quite different.
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Such expenses, however, are in essence deductible from another American tax, and the largest single one facing the Romneys: the gift and estate tax.
Here's the key: Under current law, the limited partnership interests are valued for gift and estate tax purposes at what a hypothetical, unrelated buyer would pay for them.
The charitable gift and estate tax deductions remain the same.
On July 6 it released a "revenue ruling" that clears up long standing gift and estate tax issues relating to an estate-planning tool--irrevocable grantor trusts--widely used by wealthy families.
Its gift and estate tax audit force has been shrinking, even as the number of taxable estates has more than doubled -- to an expected 45, 000 in 1998 from 19, 000 ten years ago.
Taxpayers have been socking all sorts of assets -- including cash, stock and real estate -- into limited partnerships, and then claiming their stakes are worth 25%, 50% or even 90% less than the underlying assets for gift and estate tax purposes.
Without looking at the individual adjustments to the artwork cited, it strains credulity to have results where the taxpayer valuations are wrong 49% of the time, that of that 49%, 90% of the Gift and Estate Tax Valuations go up (so increasing tax) and 90% of the charitable deductions go down (again increasing tax).
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Note: If you die within three years of making a taxable gift, the original value of the gift and the gift tax get added back to your estate and the gift tax paid is credited toward your estate's tax bill.
And in a gimme to the rich, it includes unifying the gift tax and the estate tax.
There are income, gift, and estate tax considerations with each of these strategies.
The Federal income tax and the transfer tax (i.e. estate, gift and GST tax) systems are separate and distinct.
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The only estates and trusts negative of ATRA is the increase of the top gift, estate and GST tax rate from 35% to 40%.
Because of your substantial wealth you must now consider short and long term income, gift, estate and generation skipping tax planning.
As 2012 drew to a close, Congress passed a law raising the top gift- and estate-tax rate to 40% from a maximum of 35%.
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The ceiling could fall back down again in 2013, they say, or the government could decide to "claw back" gift- and estate-tax savings from this year and next.
Nonetheless, the gift of a profits interest could violate special estate and gift tax valuation rules for freeze transactions (section 2701).
The increase in other federal government tax revenue would more than offset the decline in the estate tax portion of the estate and gift tax.
Last year, Tennessee Gov. Bill Haslam signed into law legislation repealing the state gift tax and phasing out the state estate tax.
So will both the estate tax and the gift tax be repealed ?
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For more on the year-end rush to make gifts and how a proposal by Senator Baucus would chill it, see Ashlea Ebeling, Estate And Gift Tax Bombshell (The Best Revenge).
Even when gift and estate taxes carry the same nominal tax rate, paying the gift tax works out to be cheaper than paying the estate tax.
Usually people gift if the gift tax and income tax on the carry over basis is less than the estate tax.
Then there is the estate and gift tax mess, making it almost impossible to plan.
Different rules apply for federal estate and gift tax purposes, as well as state law.
JCX-1-11 also provides an informative table summarizing the estate and gift tax rates and exemption amounts from 1975-2011.
FORBES: JCT Summarizes Federal Estate And Gift Taxes From 1975-2011
Still other experts write on estate and gift tax strategies and asset protection.
After the three years, any appreciation over the hurdle rate goes to your kids, free of estate and gift tax.
For advice on rewriting your will in line with the new federal estate and gift tax laws, click here.
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