have always admired the guy in Minnesota ...When he retired, he turned the entire company over to the employees, with shares distributed on a basis comensurate
from the IRS
Who pays the gift tax?
The donor is generally responsible for paying the gift tax. Under special arrangements the donee may agree to pay the tax instead. Please visit with your tax professional if you are considering this type of arrangement.
What is considered a gift?
Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money's worth) is not received in return.
Gifting isn't going to stop the taxing...
And the gift is to the IRS...The owner of the Estate paid the tax on it once. If you can afford it, great. But think farm. Farmers have LOW incomes and HIGH assets. They get WHACKED on the value of the ASSET, not their INCOME. So perhaps they inherited the farm. great. No basis (they pay on the full market value)...their children are forced to sell the family farm to pay the tax...or a big portion of it. If it takes 1,000 acres to make a living, and you have to sell off 350 acres, does it remain profitable??? And very often this is a farmer with a 10th grade education who may have a son or son in law working for peanuts over the years with the promise of owning the property once the old man kicks the bucket. Time and again that goes to L in a handbasket. Sis who lived 1000 miles away wants her share, the IRS wants its share up front and the chosen one ends up with huge debts and no land.
While my father was still in the army, my grandfather bought him a farm for $10 per acre. Dad moved an old house onto the place and started a family. I inherited a portion of the place. My bro and I added land to the place at $500 and $670 an acre. Did we ever think it would be valued at $1,000,000? Nope but even today, that isn't an unreasonable amount. 5 years ago it would have been worth 50% more.
And that brings up issue 2. In the estate above I mentioned, the land values have continued to fall. The highest priced parcel of land was priced due to speculation near the subject. The speculators are gone. The land value has fell perhaps nearly 50% and a big chunk of that since the death of the individual in 08....see the problem? They paid taxes on HIGH land prices and ultimately may be literally buying their own farm back. At 45% rate, $1,000,000 worth of land (08 prices) is $450,000 tax. and now the land is worth about $650,000....what will it be worth in another 3 or 4 years if this continues?
The estate tax has been imposed several times in our history but it was a low tax that applied only to the wealthiest individuals... Today it applies to $5 million estates, half what it applied to in the 1920s when it only applied to estates over $10 million and was 25%. In other words, from perhaps a few dozen folks paying it, it has gone to thousands of Americans...33,000 by one estimate.
Yes, if you knew exactly when and how to avoid that tax, then it becomes a sort of "voluntary" tax. It generates a negliable amount of money in the scheme of things and prays mostly upon people who suddenly inherited money late in life, widows who know little about estate planning, and the less educated or the stubbon like elderly farmers who think that since they are poor (earning little money annually), the estate tax won't apply to them. Trust me. I know how stubbon old men are. We (my cousin and I) couldn't convince our fathers to deal with the mineral rights they owned in Colorado. When they both passed away, we did convince our mothers that it needed done, and we got it done less than 18 months before my mother passed away. Without it we would have had to run probate on 3 generations of individuals and have an appraisal performed. As is, when I return to room temperature, the minerals transfer seamlessly to other members of the partnership.
