On the 13th, the “Tax Hike Prevention Act of 2010,” was introduced by a substantial group of leading Republican Senators, including Senator McConnell (R-Ky.) for himself, and Senators Grassley (R-Ia.), Kyl (R-Az.), McCain (R-Az.), Cochran (R-Ms.), Graham (R-S.C.), Roberts (R-Kan.), Cornyn (R-Tx.), Inhoffe (R-Ok.), Ensign (R-Nev.), Isakson (R-Ga.), Brownback (R-Kan.), Enzi (R-Wy.), Crapo (R-Id.), Burr (R-N.C.), Vitter (R-La.), Wicker (R-Ms.), Chambliss (R-Ga.), Bond (R-Mo.), Hutchison (R-Tx.), Hatch (R-Ut.), Bennett (R-Ut.), Risch (R-Id.), and Shelby (R-Al.). This bill, if enacted, would retroactively raise the estate tax applicable exclusion amount and GST exemption to $5 million, repeal the carryover basis rules, reunify the estate and gift tax exemptions, reduce the top estate and gift tax rate (and the sole GST tax rate) to 35%, permit a surviving […]

Thanks to Dan Evans, published on Liemberg Info Services, we provide the following: For the wealthiest Americans, allowing the Bush tax cuts to “sunset” will be quite a shock. A family of four with $500,000 of income filing a joint return with no itemized deductions would pay $136,208 in federal income tax in 2011 if the tax cuts continue to apply and there is no inflation for 2010. · The same family will have to pay $158,801 in 2011, a $22,607 increase, if Congress does not act and the tax cuts expire. If that $500,000 of income includes qualified dividend income, which is taxed at the capital gain rate of 15% instead of the maximum rate of 35% on ordinary income, the results are even […]

Representative Jim McDermott (D-WA) has proposed H.R.2023. This bill would set the estate tax exemption at $2 million per individual and $4 million per couple, indexed for inflation. The bill includes a graduated rate structure. Estates up to $5 million would be taxed at 45%, estates over $5 million would be taxed at 50%, and estates over $10 million would be taxed at 55%. This represents a middle ground between the 2009 and 2011 laws. The bill would raise $31 billion more in federal revenue over 10 years than the 2009 law, while improving the tax by indexing it for inflation and rebating money to the states for their state estate tax. Senators Bernard Sanders (I-VT), Tom Harkin (D-IA), and Sheldon Whitehouse (D-RI) have proposed […]

“The Hill” reports that: Sen. Chuck Grassley (R-Iowa) on Wednesday urged Senate Majority Leader Harry Reid (D-Nev.) to act on making changes to estate tax law before it reverts back to pre-2001 levels in 2011. The senator warned that no action would mean thousands of small business owners and farmers would be subjected to the tax. “I hope that the Democratic leadership will soon reveal their hand so that those thousands of small businesses and farmers aren’t hung out to dry,” he told reporters. The tax currently is repealed, but – barring congressional action – it returns next year to pre-2001 levels by socking estates worth more than $1 million with a tax that tops out at 55 percent. Sens. Jon Kyl (R-Ariz.) and Blanche […]

With Democratic leadership and Republicans blaming each other, it looks like negotiations to roll back the currently repealed federal estate tax to 2009 levels when it kicks back in next year have been stalled-and the fall elections are approaching. A staffer in Finance Committee chairman (D) Max Baucus’ office said that “Republican objections” had stalemated recent progress toward estate tax clarity. Since the deal would have given Republicans just about everything they’ve asked for, including a $5 million exemption (rising with inflation) and a 35% maximum rate, those objections may be more about Senate procedure and the political situation than the tax code. From the Republican camp, John Kyl of Arizona, Senate minority whip, threw the blame back across the aisle. “We no longer have […]

The House Ways and Means Committee reported favorably H.R. 4849, 111th Cong., 2d Sess. (March 17, 2010), a bill that, if enacted, would restrict the use of many favored forms of grantor retained annuity trusts (GRATs). The bill would (a) require that a GRAT have a minimum term of 10 years; (b) require that a GRAT have some minimum remainder interest; and (c) preclude the use of GRATs the annuity amounts of which decrease during the trust term. The bill, as reported by the Ways and Means Committee, would apply to transfers after the date of enactment. The Will Doctor Notes: There is a bit of a rush on, to create GRAT’s before the new legislation is passed. For the right client and the right […]

Senate Finance Chairman Max Baucus (D-Mont.) on Tuesday said action on a small business tax bill could occur soon and a fix for the estate tax may not be far behind it. “I’d like to do a small business bill soon,” Baucus told The Hill, adding that talks on the estate tax will soon involve members. “I’ll know more about the estate tax in a few more days,” he said. “It’s going on this week at the staff level and will on the [member] level later on this week.” Committee and floor action on the small business bill might occur before the Memorial Day recess, an aide said. Baucus said talks on the estate tax and the small business bill are happening simultaneously. “On substance […]

Thanks to Valuation Services, Inc., I can provide the following: The Internal Revenue Service is intensifying its scrutiny of wealthy Americans. The federal agency increased its audits of taxpayers who earned $1 million to $5 million by 33 percent last year compared with 2008, new I.R.S. figures show. The numbers, released late Thursday in the agency’s 2009 annual data book, also show that the I.R.S. increased its audits by 16 percent for those earning $5 million to $10 million last year. Audits of those who made at least $10 million rose by 8.5 percent, according to the data. The figures are the strongest evidence yet that the agency is honoring a vow by the I.R.S. commissioner, Douglas H. Shulman, to increase scrutiny of wealthy taxpayers. […]

Acting Ways and Means Chairman Sandy Levin (D-Mich.) has announced the Committee is contemplating a bill to allow the estates of individuals passing away in 2010 to choose between the law as in effect today or the 2009 estate tax rules. The repeal of the estate tax on January 1, 2010 substituted a capital gains tax that requires heirs pay rates of between 15 percent and 28 percent on any bequeathed assets they sell (subject to several exemptions). A number of organizations previously opposed to the estate tax have reversed their position and appear to back this option. If Congress does nothing, the estate tax law reverts to 2001 levels, an option universally seen as the worst of all possible options. The Will Doctor notes, […]

Congress passed House Joint Resolution 45, 111th Cong., 2d Sess. (Jan. 28, 2009), with an amendment that reinstates legislative pay-as-you-go rules, under which all tax cuts or expenditures must be matched with tax increases, to avoid increasing the deficit. A special exception was included for a two-year extension of the 2009 estate and gift tax rules. This is interesting news: Congress is still apparently (at least) awake enough to keep the possibility of extending the 2009 statute, or something similar, alive.