Re. Death Tax versus Capital Gains Tax

[mrj]

For families that intend their ranches to continue in business for future generations of those families, I believe repeal of the Death Tax by HR8, the bill passed by the house which will come before the Senate early in September is better for our needs in virtually every circumstance.

Taking away the step up in basis and replacing it with a carryover basis that allows a married couple up to a mzximum of $5.6 million THEN capital gain rates above that. That gives ranchers a win unless the operation is in the $25million plus category. And even then, you choose when you pay the taxes.

Point: there is considerable mis-information about the current bill before Congress to eliminate the Death Tax aimed at scaring people into accepting a compromise that still allows congress to adjust rates and exemptions in the current law, rather than eliminating it altogether. Why should we trust the politicians with that power?

Capital gains are elective. Death tax is mandatory. Under Capital gains, you pay taxes on what you sell for......not the "best use" value. You can choose where to apply the carryover.....to cover the acres most important to you.

Ranch families wanting to save the ranch for future generations should consider that the Death Tax, if it continues, is subject to rule changes that can be used in the future to take away assets necessary for that ranch to continue. We might think rules changes offered in exchange for keeping the tax are going to keep all but the very largest ranches intact, only to find a few years down the road rules will change again at the whim of government.

Death should not be a taxable event, adding insult and injury to people owning small businesses, which most family ranches are, who have been heavily taxed all their working life, IMO.

MRJ

 

[rancher]

Yes, if you are forcing your kids, grandkids, great grandkids to stay in the ranching business the loss of the death tax is the way to go. But lets say 10 years down the road after they inherit they want out, sickness or whatever, then Uncle Sam smiles and holds out his hand and it is over for them as after taxes they won't have diddle. There has to be a compromise between the two, so future generations are not stuck ranching if they don't want to.

 

[Clarence]

MRJ:
And you believe that congress could not change the Capital gains tax as well. Look back and see what has happened to the social security tax. I have trouble accepting both the death tax and the capital gains tax.

I believe that taxing what the present generation has earned at their death is double taxation. We have already paid an income tax on it.

On the other hand, there are those who can set arround and do nothing but reap the returns on money or investments which were earned by past generations, and can use these earning to build up huge dynasties, sometimes at others expense. I don't know what is right, we will have to be willing to make some compromisees to find what is fair and just.

 

[mrj]

Yes, if you are forcing your kids, grandkids, great grandkids to stay in the ranching business the loss of the death tax is the way to go. But lets say 10 years down the road after they inherit they want out, sickness or whatever, then Uncle Sam smiles and holds out his hand and it is over for them as after taxes they won't have diddle. There has to be a compromise between the two, so future generations are not stuck ranching if they don't want to.

Has anyone posting here who ranches now been "forced into it" by family for whatever reason? Related question that would require very painfully honest soul-searching: has anyone stayed on the family ranch (or farm) because it was easier than facing the unknowns or leaving the operation and finding some other type of work?

Has anyone posting here been forced out of ranching because paying inheritance tax on top of buying out non-ranching siblings crippled the viability of the family ranch?

Has anyone posting here stuck with the ranch under a very heavy financial burden due to the above plus the costs of setting up the best possible Estate Tax Plan?

While I doubt many will answer these questions publicly, they sure do need to be considered by every family who is ranching or owns and operates another type of family business.

Clarence, I really believe that we desperately need to change out tax system. Little about the income tax is truly fair.

I especially do not like the use of envy of those who do, or are perceived to have more, that is so freely used to promote the Death Tax. Isn't it disturbing how many people are deceived into supporting such an unjust tax in that way?

Consider that the Death Tax has done virtually nothing to stop those of tremendous wealth from continuing to accumulate and build those "huge dynasties". Haven't we all heard and observed people like the young Kennedy's gloat that "I will never have to work a #*&!#*& day in my life" as young Patrick did when 'in his cups' a couple of years ago? Suppose that quote has been pretty well purged from the media by now. The Death Tax punishes hardest some of the families who work the hardest, while leaving those of greatest wealth to grow wealthier.

I do not have a problem with people growing wealthy. I do have a problem with wealthy people setting up the rules (laws) to make it ever more difficult for "new" people to accumulate wealth by the sweat of their brow, or the work of their brain or investment, OR by inheriting from their family. There is tremendous good done by generous wealthy people, just as there is tremendous waste and even evil things done by people of wealth who are not so good hearted and generous.

We all need to work to make tax systems the fairest and most honest they can be, and to use the tax money more properly than some of the very large numbers of "pork" projects we hear about all too seldom. Throwing money at social problems does very little to cure them, as is proven over and over.

MRJ

 

[Mike]

Yes, if you are forcing your kids, grandkids, great grandkids to stay in the ranching business the loss of the death tax is the way to go. But lets say 10 years down the road after they inherit they want out, sickness or whatever, then Uncle Sam smiles and holds out his hand and it is over for them as after taxes they won't have diddle. There has to be a compromise between the two, so future generations are not stuck ranching if they don't want to.

Has anyone posting here who ranches now been "forced into it" by family for whatever reason? Related question that would require very painfully honest soul-searching: has anyone stayed on the family ranch (or farm) because it was easier than facing the unknowns or leaving the operation and finding some other type of work?

Has anyone posting here been forced out of ranching because paying inheritance tax on top of buying out non-ranching siblings crippled the viability of the family ranch?

Has anyone posting here stuck with the ranch under a very heavy financial burden due to the above plus the costs of setting up the best possible Estate Tax Plan?

While I doubt many will answer these questions publicly, they sure do need to be considered by every family who is ranching or owns and operates another type of family business.

Clarence, I really believe that we desperately need to change out tax system. Little about the income tax is truly fair.

I especially do not like the use of envy of those who do, or are perceived to have more, that is so freely used to promote the Death Tax. Isn't it disturbing how many people are deceived into supporting such an unjust tax in that way?

Consider that the Death Tax has done virtually nothing to stop those of tremendous wealth from continuing to accumulate and build those "huge dynasties". Haven't we all heard and observed young Kennedy's gloat that "I will never have to work a #*&!#*& day in my life" as young Patrick did when 'in his cups' a couple of years ago? Suppose that quote has been pretty well purged from the media by now. The Death Tax punishes hardest some of the families who work the hardest, while leaving those of greatest wealth to grow wealthier.

I do not have a problem with people growing wealthy. I do have a problem with wealthy people setting up the rules (laws) to make it ever more difficult for "new" people to accumulate wealth by the sweat of their brow, or the work of their brain or investment, OR by inheriting from their family. There is tremendous good done by generous wealthy people, just as there is tremendous waste and even evil things done by people of wealth who are not so good hearted and generous.

We all need to work to make tax systems the fairest and most honest they can be, and to use the tax money more properly than some of the "pork" projects we hear about all too seldom. Throwing money at social problems does very little to cure them, as is proven over and over.

MRJ
MRJ

Good post MRJ. I have often wondered what would happen to our income tax system if no money was withheld from paychecks and the ordinary working guy had to sit down at the end of the year and write ONE CHECK to pay his taxes for the entire year.

I believe a Tax Revolt would happen then and only then.

 

[mrj]

Yes, if you are forcing your kids, grandkids, great grandkids to stay in the ranching business the loss of the death tax is the way to go. But lets say 10 years down the road after they inherit they want out, sickness or whatever, then Uncle Sam smiles and holds out his hand and it is over for them as after taxes they won't have diddle. There has to be a compromise between the two, so future generations are not stuck ranching if they don't want to.

Has anyone posting here who ranches now been "forced into it" by family for whatever reason? Related question that would require very painfully honest soul-searching: has anyone stayed on the family ranch (or farm) because it was easier than facing the unknowns or leaving the operation and finding some other type of work?

Has anyone posting here been forced out of ranching because paying inheritance tax on top of buying out non-ranching siblings crippled the viability of the family ranch?

Has anyone posting here stuck with the ranch under a very heavy financial burden due to the above plus the costs of setting up the best possible Estate Tax Plan?

While I doubt many will answer these questions publicly, they sure do need to be considered by every family who is ranching or owns and operates another type of family business.

Clarence, I really believe that we desperately need to change out tax system. Little about the income tax is truly fair.

I especially do not like the use of envy of those who do, or are perceived to have more, that is so freely used to promote the Death Tax. Isn't it disturbing how many people are deceived into supporting such an unjust tax in that way?

Consider that the Death Tax has done virtually nothing to stop those of tremendous wealth from continuing to accumulate and build those "huge dynasties". Haven't we all heard and observed young Kennedy's gloat that "I will never have to work a #*&!#*& day in my life" as young Patrick did when 'in his cups' a couple of years ago? Suppose that quote has been pretty well purged from the media by now. The Death Tax punishes hardest some of the families who work the hardest, while leaving those of greatest wealth to grow wealthier.

I do not have a problem with people growing wealthy. I do have a problem with wealthy people setting up the rules (laws) to make it ever more difficult for "new" people to accumulate wealth by the sweat of their brow, or the work of their brain or investment, OR by inheriting from their family. There is tremendous good done by generous wealthy people, just as there is tremendous waste and even evil things done by people of wealth who are not so good hearted and generous.

We all need to work to make tax systems the fairest and most honest they can be, and to use the tax money more properly than some of the "pork" projects we hear about all too seldom. Throwing money at social problems does very little to cure them, as is proven over and over.

MRJ
MRJ

Good post MRJ. I have often wondered what would happen to our income tax system if no money was withheld from paychecks and the ordinary working guy had to sit down at the end of the year and write ONE CHECK to pay his taxes for the entire year.

I believe a Tax Revolt would happen then and only then.

Thanks Mike. Isn't is surprising that it took so long for the fact that the "powers that be" at the time it was implemented actually plotted that deception and that they were powerful enought to make it take so long for that information to get out?

I believe a similar scheme putting the health insurance premiums in a withholding situation is also what has made the costs so high. People who have insurance paid largely by "the company" have not had the reality of escalating medical costs hit them till they lose such coverage. The businesses with that set-up get the tax breaks, and we fools who have paid our own insurance get the additional costs. The very least any moral Congressman should do is insist that ALL insurance premiums are fully deductible, treating the family as well as the business buying insurance.

MRJ

 

[Cal]

Excellent post MRJ!

We've set up 2 LLC's. A land company and a ranch company. My only heir, besides my wife, is our not yet 11 year old boy. We've got to get the ball rolling and make the yearly gifts to him, as we have, but how risky is that? It would be a godsend if the inheritance tax was repealed.

 

[Faster horses]

Mike, I am with you whole-heartedly on a tax revolt happening if everyone had to pay their income taxes once a year. I have had that thought many times. Most know how much income tax they get BACK, but have no idea how much they pay in.

Pretty sad. :?

 

[Cowpuncher]

One of the best things congress could do with the tax code is

LEAVE IT ALONE!!!

For several years, I was Tax Compliance Manager for one of the largest companies in the US. The IRS had two employees in our office full time and our returns for the past 15 years were still unresolved. One day, I looked back at the changes that had occured and found that the rules for no two years were the same and that they were in the process of changing the rules again. I took early retirement.

Taxpayers can adapt to almost any tax system by changing their businesses. Constant change is untolerable. Special interest groups have pressured congress to do stupid things. Instead of undoing them, another set of unworkable rules appear.

By the way, when the income tax was originally enacted into law, there was no withholding. The result was what you predict plus massive evasion. That is why congress passed the withholding law. Plus it gave them two years of taxes to spend when the change was made.

CP