• Please be sure to read the rules and adhere to them. Some banned members have complained that they are not spammers. But they spammed us. Some even tried to redirect our members to other forums. Duh. Be smart. Read the rules and adhere to them and we will all get along just fine. Cheers. :beer: Link to the rules: https://www.forumsforums.com/threads/forum-rules-info.2974/

IRS is making progress . . .

C

chowderman

Well-known member
from Associated Press:

"IRS leaders said they collected $38 million in delinquent taxes from more than 175 high-income taxpayers in the past few months."
so the IRS wants $81 _billion_ and is going to recover $38 million x 4 (past few months...) per year.

it'll take the IRS 533 years to recover the investment.

note to MBAs: don't try to sell that the Board....
 
This should make us all angry.

IRS Sends Out Warning to Millions of Americans​

12:34 min.


Facts Matter with Roman Balmakov
Facts Matter with Roman Balmakov
1.28M subscribers
-----------------------------------------------------------------------------------------------------------------------------------
IRS will no longer allow a stepped up basis for property you might inherit. This one change will raise billions of dollars
of revenue and cause small businesses not to be able to be continued by the next generation of family members who wish to carry on.
Irrevocable trust set up after March of 2023 will no longer shield family who inherit real estate or other assets from capitol gains taxes.
It will cause farm families to have to sell a big part of a farm to pay capitol gains taxes even though the farm is not going to be sold.
This is a travesty of monumental proportions that all of us should be contacting our State Representative and Senators to fight his IRS ruling today!!! :mad:
 
a few years back there was a huge stinkola in the farming arena - people who had inherited farm land purchased a million years ago for a nickel and acre, but current valued - as set by "developers",,, was tens of thousands per acre - had a huge Federal Estate Tax bill due.
farms had to be sold off because their burger flipping kids could not come up with millions to pay the Federal Estate Tax.
farmers were selling mega-acre farms to their kids, who continued to work the land, for $1 - but the IRS put an end to that . . .

the exempt size for Federal Estate Tax was raised, some glitchy exceptions added, but it did not resolve the problem.
the irrevocable trust came to the rescue. assets placed in an irrevocable trust are no longer part of your "estate."
as the name implies, be sure you know what you're doing setting up the irrevocable trust, because once established . . .
you can't change it.

the IRS now wants to insist that anything in such a trust - that is not included in your estate value for Federal Estate Tax... - is exempt from step up value, so far as Federal Estate Tax (and state taxes will follow that lead . . . ) - it's actually intended to catch the billionaires more so than farmers, but heh - the IRS is getting 87,000 new agents with guns so that's got to pay for itself.

the IRS will "succeed" only for 2-3 years, then the billionaire accountants will come up with a new avoidance scheme.

methinks the answer to this problem for the agricultural world is to use the local tax assessment for farm land versus what a developer would pay for the land. we live in the midst of lots of crop and dairy farms - with ~$1500 local property tax on a residential lot, I can assure you farms don't pay $3k - $6k per acre local property taxes . . .
it's common sense - if you own/operate a farm, and it's taxable value is $x, how is it suddenly worth 3000x the day after you die?
did the land "change?"
 
tax dodges are short term, ever changing tactics.
farm land should pass to heirs at 'stepped up' tax basis of farm acreage value.
if the heirs decide to sell it to a housing mega-developer, then capital gains tax is due.
the problem needs to be solved, not bandaged.

consider: you own a car. you paid $20,000 for the car.
you die, your will gives the car to your kid.
that same car now costs $60,000.
does your estate owe tax on the $40,000 increase in purchase cost?

granted . . .
a car has a "depreciation" issue.
acreage has an "appreciation" issue.
but zero persons can even think about buying farm acreages at '1/4 acre building lot' values.
 
chowderman said:
tax dodges are short term, ever changing tactics.
farm land should pass to heirs at 'stepped up' tax basis of farm acreage value.
if the heirs decide to sell it to a housing mega-developer, then capital gains tax is due.
the problem needs to be solved, not bandaged.

consider: you own a car. you paid $20,000 for the car.
you die, your will gives the car to your kid.
that same car now costs $60,000.
does your estate owe tax on the $40,000 increase in purchase cost?

granted . . .
a car has a "depreciation" issue.
acreage has an "appreciation" issue.
but zero persons can even think about buying farm acreages at '1/4 acre building lot' values.
Click to expand...
I think to be accurate, and for estate tax purposes, the tax would be on the $60,000 asset, not the $40,000 appreciation in the asset. The step up in basis is only used to reduce capital gains taxes heirs would pay if they sell the asset. Currently, the first 12.92 million of an estate is not subject to estate and gift tax.
 
Don't know anything about how it works but I knew an older couple that started putting other people on joint warranty deed for different pieces of property. When they died there was not any worry about transferring the property as the person who was on the joint warranty deed was already the owner.
 
uhmmm, for state and Federal Estate Tax purposes - it is the current asset value.
that's a easy 'problem' for stuff like stocks and bonds, most real estate.

the problem for farmers - what "current asset" value is used, and how is that value determined.
as farm land or as thousand-home development land....

going the joint ownership route works - except that the joint owner does not get the 'step-up- value.
if the parents paid $5,000 for the farm and it is now worth $400,000, the child / joint owner still has a basis value of $5,000 - not $400,000 basis value as if it was 'inherited.'

which is why the IRS has 87,000 new knotted up knickers -
the irrevocable trust route keeps the value of the asset out of their estate for state and Federal purposes,
and
. . . previously . . .
the IRS also allowed the beneficiary of the trust to 'claim'/use the step up value.

with the increase in Federal Estate exemption, this issue is really more of a problem for the billionaire tech crowd.
they could put assets in an irrevocable trust, and have it pass to their heirs tax free and on a stepped-up basis.
I'm sure the lawyers will come up with a new flavor of trust that gets around the problem....
 
chowderman said:
uhmmm, for state and Federal Estate Tax purposes - it is the current asset value.
that's a easy 'problem' for stuff like stocks and bonds, most real estate.

the problem for farmers - what "current asset" value is used, and how is that value determined.
as farm land or as thousand-home development land....

going the joint ownership route works - except that the joint owner does not get the 'step-up- value.
if the parents paid $5,000 for the farm and it is now worth $400,000, the child / joint owner still has a basis value of $5,000 - not $400,000 basis value as if it was 'inherited.'

which is why the IRS has 87,000 new knotted up knickers -
the irrevocable trust route keeps the value of the asset out of their estate for state and Federal purposes,
and
. . . previously . . .
the IRS also allowed the beneficiary of the trust to 'claim'/use the step up value.

with the increase in Federal Estate exemption, this issue is really more of a problem for the billionaire tech crowd.
they could put assets in an irrevocable trust, and have it pass to their heirs tax free and on a stepped-up basis.
I'm sure the lawyers will come up with a new flavor of trust that gets around the problem....
Click to expand...
Eaxctly. That's what I was trying to say. :)

A thing about irrevocable trusts - when you contribute to them, you could be considered to be gifting. The federal estate and gift tax affords the taxpayer a "unified credit" toward payment of the estate and gift tax. For example, a trust creator puts a $1,000,000 asset into the trust. If they were to die this year, only $11,920,000 of their estate would transfer to heirs free of the estate and gift tax since they already used 1 million of the 12.92 million tax credit. Actually, they only used $985,000 since you can gift $15k per year without using the credit.
 
yup. timing is everything . . .
if I have my way in the end, I'll be spending lots of provable time in a casino, and there will be large lumps under the mattress . . . .
 
jpr62902 said:
Eaxctly. That's what I was trying to say. :)

A thing about irrevocable trusts - when you contribute to them, you could be considered to be gifting. The federal estate and gift tax affords the taxpayer a "unified credit" toward payment of the estate and gift tax. For example, a trust creator puts a $1,000,000 asset into the trust. If they were to die this year, only $11,920,000 of their estate would transfer to heirs free of the estate and gift tax since they already used 1 million of the 12.92 million tax credit. Actually, they only used $985,000 since you can gift $15k per year without using the credit.
Click to expand...
In our case we have a C corp that owns the land. Shares were divided up amongst 5 of us alive at that time.
Even with the rapid appreciation of the land, My fathers share was within the limits of inheritance tax.
Had he been a sole proprietor, there would have been issues. Now we are down to two owners, and we need to start the gifting process for the next generation. Meanwhile the C Corporation has been paying for our health insurance and long-term care insurance without tax consequences for any. As we age into Medicare age, we might consider rolling the C corp into an S corp. We will do that evaluation when the time comes.
 
You must log in or register to reply here.
Top