They deserve it? What did they ever do to earn it? This country is about individuals, not some bizarre family/clan institution.
They deserve it? What did they ever do to earn it? This country is about individuals, not some bizarre family/clan institution.
This is a hypothetical...he said he believes inheritance should be taxed like income, and I was showing what would happen if it was. No kidding this wouldn't happen right now, but if his ideas got implemented it'd happen all the time.
Their father earned it, therefore he has the right to do whatever he wants with it, including giving it to his children if he so chooses. Or you can be like Bill Gates and Warren Buffet and give tens of billions of dollars to charity. How does everyone not hate rich people? They donate to charity, they pay most of the taxes...they're KILLING SOCIETY.
Figures, it appears the majority of your experiences revolve around what your professors have told you.
As this thread progresses, it's more and more clear that this has nothing to do with politics and everything to do with jealously of the rich.
I don't get the notion that estate tax is double taxation.
My parents buy a house in 1960 for $5,000. They die in 2005 leaving the house, now worth $800,000 to me. I sell the house in 2006 for $800,000 paying zero in taxes because the estate rules gave me the house at the stepped up 2005 value.
Scenario 2. My parents buy a house in 1960 for $5,000. They sell it in 2005 for $800,000 paying tax on the gain.
Where is the "fairness" there? Seems to me that eliminating the estate tax allows lots of assets to go untaxed as most gain in asset value, or net worth, is a result of untaxed increases in value, not a deposit of taxed income into a bank or brokerage account.
Why should heirs be treated differently than the person who made the wealth?
My parents buy a house in 1960 for $5,000. They die in 2005 leaving the house, now worth $800,000 to me. I sell the house in 2006 for $800,000 paying zero in taxes because the estate rules gave me the house at the stepped up 2005 value.
Scenario 2. My parents buy a house in 1960 for $5,000. They sell it in 2005 for $800,000 paying tax on the gain.
Where is the "fairness" there? Seems to me that eliminating the estate tax allows lots of assets to go untaxed as most gain in asset value, or net worth, is a result of untaxed increases in value, not a deposit of taxed income into a bank or brokerage account.
Why should heirs be treated differently than the person who made the wealth?
Starbuck1975
Lifer
- Jan 6, 2005
- 14,698
- 1,909
- 126
So what...all of the things you mentioned have to do with wise investment decisions...and if a child receives stocks, bonds, art or antiques as an inheritance, until they choose to cash in those assets, they should not pay a tax for simply receiving them as a transfer of said assets.
Life isn't fair. So your argument is more one of redistribution of wealth, or an appeal to some notion of equity. I am just as envious of trust fund babies as anyone else, but I also aspire to pass that sense of financial security to my children, and afford them the opportunities that I did not have at a younger age.
Hehe, you are quite funny. You called me communist-like, a label, as if it conveyed some meaning. Whether I admit or deny it has nothing to do with anything because your job would still be to tell me why communism is wrong. Secondly, why do you ask me about wills. You have yet to establish your right to own over my claim to what you have. Why would I believe you have a right to dispose of what you never had. All you have came from my family. This legal right you make up is a fiction. I am perfectly entitled to make up a counter-legal-fiction that returns what you have to to my family. You have simply been living a lie so long you take it for reality. Now again, why is your claim to own anything but a product of your imagination. For example, I own the sun and the stars and you owe me big time for the light.
Are we being deliberately obtuse? It's been pointed out, *repeatedly*, and without contention, that inheritance taxes are the only tax on assets transferred through inheritance. No other mechanism exists to tax appreciation on them. Selling them somewhere down the road doesn't make the income from such sale taxable, at all.
Nice backhanded attribution of envy, admitting it in yourself. You'd note, from my earlier posts, that I'm not attempting to impoverish heirs, at all, nor to deprive them of financial security and opportunities in any real sense. The functional day to day existence of somebody who inherits $100M vs $200M is pretty much non-existent, other than in the realm of power in politics...
Nor am I opposed to raising the value of exemption on estates to a considerably higher level, moving the "affected" estates further up the ladder, say to the top .1%, indexing it to inflation... The people who are fighting estate taxes the hardest are really in the top .01%, making any attribution of hardship or impoverishment of their heirs a rather trite attempt to gain sympathy where none is due... They'll still be able to buy and sell rightwing politicians, just not as many...
In general, I tend to think of it like this: goods/assets/whatever aren't taxed. Transactions are.
Double or more taxation is not uncommon. For example: buying a used car. The orignial owner already payed taxes on the full value of the new car. But you get to pay taxes on it again.
Double or more taxation is not uncommon. For example: buying a used car. The orignial owner already payed taxes on the full value of the new car. But you get to pay taxes on it again.
CPA
Elite Member
- Nov 19, 2001
- 30,322
- 4
- 0
In your scenarios, it's quite possible that your parents won't pay any tax in either case. Don't forget there is a $500k exclusion on the gain of a sale of a house. And the gain is calculated by subtracting the basis from the sale price. Basis is NOT what you bought the house for, it's what you bought the house for plus additions, remodeling, etc. Your parents could have easily, and most likely, put in another 300k into the house before selling it, thus eliminating any tax at the sale.
And I don't know if you miswrote what you were trying to say but eliminating the estate tax would tax all gain on assets to the parents. The estate tax and unified credit is applied on the parents estate, not you.
Here is the way I see it: Leaving your estate to your children should be a God-given right (whether you believe in God or not). Now, there are two things they will do with the inheritance: 1) Spend it, thus putting the money back into the market or 2) Invest it, through various savings vehicles or businesses. Both of these are positives to a free market. What is the problem?
Fern
Elite Member
- Sep 30, 2003
- 26,907
- 174
- 106
While there are many interesting "personal" theories about inheretence *& gift tax expressed, they quite miss the mark as to answering your question.
Inheretence & gifts are so closely related that we (in the business) know that we must basically treat them the same. To tax one and not the other opens the door to all types of loopholes.
These loopholes existed until not long ago when inheretence & gift taxes were "unified" (treated similarly). Of course this was done to stop the loopholes.
Example: If inheretence is not taxed, but gifts are -
The heir gets the use of the money or property while the donor is alive. Upon donors death, the full title to the money or porerty passes. Net effect, there is very "gift" to tax, the property passes tax-free upon death.
When the rules were the other way around, there were a lot "gifts" made on the deathbed. And the "plug" wasn't pulled until the attornies finished up paperwork.
Fern
Inheretence & gifts are so closely related that we (in the business) know that we must basically treat them the same. To tax one and not the other opens the door to all types of loopholes.
These loopholes existed until not long ago when inheretence & gift taxes were "unified" (treated similarly). Of course this was done to stop the loopholes.
Example: If inheretence is not taxed, but gifts are -
The heir gets the use of the money or property while the donor is alive. Upon donors death, the full title to the money or porerty passes. Net effect, there is very "gift" to tax, the property passes tax-free upon death.
When the rules were the other way around, there were a lot "gifts" made on the deathbed. And the "plug" wasn't pulled until the attornies finished up paperwork.
Fern
Fern
Elite Member
- Sep 30, 2003
- 26,907
- 174
- 106
Original tax theory was that income earned over one's life would be taxed at a low rate, allowing the productive person the ability to enjoy money earned.
A higher tax kicked in upon death, this made up for the lower rates during life. It also prevented the unwarrented accumulation of large amounts of wealth by powerful families. By unwarrented I mean those hiers (ex. Paris Hilton) who had done nothing productive, merely were lucky enough to born unto wealthy profuctive parents.
The above model was the exact opposite of the European model at the time. Their model had current rates of taxation on income, seen as preventing the upward mobility of productive people. A low inheretence ( or even wealth) tax encouraged the concentration of wealth/capital into the hands of those with lucky genes.
Fern
SolMiester
Diamond Member
- Dec 19, 2004
- 5,330
- 17
- 76
No, I didn't label you anything. Read what I said. I said your post was bordering on communism. I didn't say YOU were bordering on communism, the idea you put forth is. And unfortunately for you, my legal claim is supported by the government and yours is not.
There should only ever be one tax on a particular dollar...when it is earned. After that it should belong to whoever earned it. Sales taxes (among others) are more abusive to those with lower incomes. Inheritence and gift taxes (among others) are just plain wrong to begin with.
3chordcharlie
Diamond Member
- Mar 30, 2004
- 9,859
- 1
- 81
I see your point on distinction, but I stand by the theory. Someone who pays you money in exchange for something is different than money received for other purposes...and a tax is something specifically outside of the value of the exchange itself.
I build someone a computer. I charge the person the price of parts plus my labor. I will claim the income as taxable. (following amounts are made up) I then put $50 in my safe for savings, buy a weeks food, give my daughter $5 for allowance, loan my brother $25 till payday, pay the maid $25 for the weeks work, and give my niece $25 for her birthday. I see no right nor reason in any of those subsequent amounts to be taxed, except the maid's $25 which she should claim on her income tax, and the money spent on groceries which is too complicated to follow. The reason is that only those two amounts were a direct payment for a good or service. The savings is mine and has already been taxed and is earning no interest. The allowance is not payment for a job directly, but instead a moral lesson. The loan will be paid back and the gift is just that. None of those escaped taxation when I initially earned it.
Now, these amounts are small, but the size is irrelevant, only the underlying principle matters.
Specop 007
Diamond Member
- Jan 31, 2005
- 9,454
- 0
- 0
And you have documented, legal proof of ownership correct?
I have a deed to my land, I have a title to my car, reciepts for what I own.
Whip out a title that has your name for my car and we'll talk. Until then....Your still just Moonbeam.
Specop 007
Diamond Member
- Jan 31, 2005
- 9,454
- 0
- 0
I believe that was clearly laid out in the original Rum Tax laws. Of course the greedy government wasnt happy to stop there, and of course getting the lazy in this country (Who far outnumber the motivated) gives you majority control to do what you want. So offering to rob from the rich to share it among all the poor irresponsible people was a win win situation for almost everyone. The .gov got to rob you of more money, the lazy and worthless got a free hand out and kept the votes pouring in for those who would continue to rob the motivated.
And we wonder why the rich want to leave this land of "milk and honey"........
3chordcharlie
Diamond Member
- Mar 30, 2004
- 9,859
- 1
- 81
Your answer makes a lot of sense.
As a general rule, if the money is traceable as taxed income, and is given in return for nothing, it shouldn't be taxed.
But this is easily abused (I work as an executive in the family business, earn $25k a year, live in a family owned house, drive a family owned car and collect my real pay when Daddy (or Granddaddy) dies). Now my income never has to be taxed at all. When you're talking about millions or billions of dollars, elaborate schemes like this become worthwhile.
To me, there are a lot of additional questions and wrinkles, and they become extremely relevant when you consider that inheritance and gift taxes are both applicable only to high-value accounts.
Investments earn income, and this is taxable (and should be, if any income is to be taxed). When investments change hands through inheritance to a family member, this should remain true - upon sale, the profit is taxed as if they had not changed hands. I would suggest that gains be realized and taxed in the year of transfer for inheritance to non-family members, because this is an obvious route for serious abuse.
Specop 007
Diamond Member
- Jan 31, 2005
- 9,454
- 0
- 0
If I remember correctly investments were not taxed. Only compensation for work performed was taxed as I recall.
3chordcharlie
Diamond Member
- Mar 30, 2004
- 9,859
- 1
- 81
I disagree with this as an effective system - passive income is still income, and the more you have to play with, the easier it is to turn one kind of income into another, and avoid taxes. I could easily create for myself a job in which I earn a small salary, and then lend my company money at an exorbinant interest rate to make up the rest of my income.
Basically, if you're going to have taxes, you'd better make sure it's not possible to avoid them by manipulating your income into another form, or the wealthiest people will not pay tax. Ever.
I don't blame the irch for avoiding as much tax as possible, I do the same. I'm saying make sure the system doesn't let a group who can afford some overhead costs (like hiring an accountant) if it means saving millions.
Money earned has already been taxed. Then you make interest, and the government taxes the interest. I say let people keep their hard-earned money. A famer has to save money their entire life, so the next generation can afford to pay the inheritance tax. only about 2-3% of people make over $80,000.00 per year. Where did you learn to hate someone for earning money? Do you hate yourself also?
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