The Revenue Laws Study Committee of the North Carolina General Assembly is taking a look at reforming the North Carolina Gift Tax. I previously blogged about House Bill 235, describing the proposed changes. In general the NC Gift Tax would be made similar to the federal gift tax, with a $1 million lifetime exemption. The bill stalled last year, but is under study once again.
According to the IRS Commissioner:
As reported in the TaxProf Blog, Citizens for Tax Justice has released a state-by-state ranking of the number of estates owing federal estate tax in 2006. North Carolina ranked 13th, with 523 estates paying estate tax that year. Not exactly a large number! The estate tax exemption in 2006 was $2 million, as it is this year, so only estates valued over that amount owed tax. Assets passing to a surviving spouse or charity are tax-free regardless of the amount.
With proper planning, married couples can pass on up to $4 million to their heirs without tax.
A Greek study reported this month in the American Journal of Epidemiology found that retired persons had a greater death rate than employed persons of the same age.
That's good news for me, since with four kids to put through college, I'll be working a good, long time!
It would be interesting to see if the same thing holds true for Americans. Having spent a couple of months in Greece during Law School, my experience is that in general Greeks are not nearly as work-obsessed as we Americans.
Stimulus Payment Schedule for Tax Returns
Received and Processed by April 15
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Direct Deposit Payments |
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If the last two digits of your Social Security number are: |
Your economic stimulus payment deposit should be sent to your bank account by: |
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00 – 20 |
May 2 |
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21 – 75 |
May 9 |
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76 – 99 |
May 16 |
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Paper Check |
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If the last two digits of your Social Security number are: |
Your check should be in the mail by: |
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00 – 09 |
May 16 |
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10 – 18 |
May 23 |
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19 – 25 |
May 30 |
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26 – 38 |
June 6 |
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39 – 51 |
June 13 |
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52 – 63 |
June 20 |
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64 – 75 |
June 27 |
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76 – 87 |
July 4 |
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88 – 99 |
July 11 |
An online calculator is also available to determine eligibility and calculate the amount of the payment for those who are not eligible for the entire $300 or $600 payments. IRS Announcement IR 2008-44.
From this article in the New York Times yesterday:
Beginning next year, the federal estate tax exemption will increase to $3.5 million. This means that the tax would apply to only about 0.3 percent of people who die each year. Not exactly the average American.
However, as part of the 2009 budget resolution, Senator Max Baucus, Democrat of Montana and chairman of the Finance Committee, has proposed to keep the tax at those levels, with annual adjustments for inflation. The proposal is expected to pass.
Under current law, the estate tax will be eliminated in 2010 for that year only. In 2011 the exemption would drop down to $1 million. Republican senators,, however, feel that Baucus’s proposal is not sufficient. After it passes, Senator Jon Kyl, Republican of Arizona, is expected to propose further cutting the estate taxes.
The government would have to borrow to make up for the $200 billion tax loss, worsening the deficit and adding about $100 billion in interest to the nation’s tab.
The Kyl proposal needs a simple majority to pass. So if every Republican votes yes, just one Democrat would have to join them for the proposal to pass.
I personally feel that a $3.5 million exemption is quite generous, particularly given that married couples who do proper estate planning can pass double that amount to their heirs. If persons with estates over the exemption amount don't want to pay taxes, a good estate planning attorney can certainly help!
Tax scammers are creative - calling on telephone as well as sending emails. Heres a liink to a recent list of scammers' ploys from the IRS.
The elderly are particularly vulnerable, so if you have an aging relative, make sure you alert them.
For those folks who are not legally required to file federal income tax returns but want to get their tax rebates this Spring (who wouldn't?), the IRS offers free online filing.
This from Professor Chistopher Hoyt at the UMKC Law School, with good news for S Corporation owners:
The IRS released a revenue ruling that confirmed many of our hopes regarding charitable gifts of appreciated property by a Subchapter S corporation. Normally a shareholder's income tax deduction for an S corporation's business losses is limited to the shareholder's basis in the corporation's stock. The IRS confirmed that charitable gifts can qualify for better tax treatment. The IRS concluded that if an S corporation made a charitable contribution in 2006 or 2007 of appreciated property (such as real estate), the shareholder was entitled to claim a charitable income tax deduction that exceeded the shareholder's basis in the stock. This favorable tax treatment was a temporary measure contained in legislation that expired in 2007, but it is one of the "extender" laws (like "Charitable IRA rollover") and there is a good chance that it will be extended into 2008.
Rev. Rul. 2008-16; 2008-11 IRB 1
The U.S. Supreme Court, in Michael J. Knight, Trustee of William L. Rudkin Testamentary Trust v. Commissioner, 552 U.S. ___, 128 S. Ct. 782 (2008), ruled that costs paid to an investment advisor by a nongrantor trust or estate generally are subject to the 2% floor for miscellaneous itemized deductions under Internal Revenue Code Section 67(a).
Later this year, the Treasury Department will issue final regulations under Reg. 1.67-4 in keeping with the Supreme Court's decision in Knight. The final regulations on bundled fees that include a portion for investment management will most likely include safe harbors or methods to calculate the portion fully deductible.
Since the final regulations will not be published prior to due dates for the 2007 returns, bundled trustee and executor's fees will be fully deductible for 2007 and prior years (tax years beginning before January 1, 2008) IRS Notice 2008-32; 2008-11 IRB 1.
Notice 2008-32 does, for 2007 and prior year returns, require allocation of "readily identifiable" expenses that are subject to the 2% floor of Sec. 67.
This works to the disadvantage of trusts in which a "custodial' or "administrative" trustee is used, with relatively low trustee fees, with separate (and generally higher) fees paid to the investment advisor, who handles the investment management. But, beginning this year, the playing field has been leveled to some degree.
Click "Continue Reading" the text of Notice 2008-32.
The IRS has announced that it will soon propose new regulations governing 529 College Savings Plans, which will (I) contain an anti-abuse rule (to prevent using 529 Plans to skirt gift tax rules); (II) determine the estate, gift and GST tax results of contributions, transfers and withdrawals; and (III) create rules for making the 5 year election, address certain income tax issues, and create new record keeping requirements.
Here's the example the IRS gives as an abuse - quite a clever technique!:
Grandparents want to gift $1 million to a child without using any of their $1 million lifetime exclusion. So, the grandparents establish 529 Plan accounts for each of their 10 grandchildren, placing $120,000 in each (the $12,000 annual exclusion, times 2 for 2 grandparents, times 5 to use the 5 year averaging rule) times the number of grandchildren, and naming the child as the account owner. After the 5 years, the child designates a new beneficiary for each account, naming himself. Since Section 529 provides that no gift occurs if the new beneficiary is in the same family and at the same or a higher generational level, the grandparents have succeeded in giving the child $1.2 million without using any of their applicable exclusion.
The child would have to pay income tax and a penalty on any growth when withdrawals are used for non-educational expenses, but overall it would save the family a lot of tax.
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