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All Taxpayers Should Give Thanks Trump, GOP Will Approve Estate-Tax Reform

All Taxpayers Should Give Thanks Trump, GOP Will Approve Estate-Tax Reform

By    |   Monday, 20 November 2017 06:41 AM

Defying the political odds which were almost a certainty that the GOP would blow it, the House passed its version of tax reform on a party-line basis.

Thirteen RINOs voted against the House bill as a political show against eliminating the state and local tax. Except for one, all the rest were from New York, New Jersey, and California.

The Senate Finance Committee advanced its version of the tax reform bill.

The Senate version, which is expected to have only Democratic opposition to every provision, will be taken up for passage after the Thanksgiving recess and another round of sucking up more campaign contributions.

While there are differences in the tax reform proposals between the House and Senate versions, they are close enough that reconciliation between them should be easy.

The House bill and Senate version provides for an estate, gift, and generation-skipping transfer tax exemption of $11.2 million per individual. A married couple would have no tax on an estate of $22.4 million.

As the Trump administration reined in certain Treasury regulations proposed under the Obama administration, using valuation discounts will still be useable in calculated the gross estate value.

What this means that certain estate property, like closely held business interests, could be discounted from the gross value to properly reflect a real market value potentially subject to tax before the exemption is applied.

For example, if a decedent had interests in a limited partnership where the whole partnership value is $20 million, a partial ownership due to lack of control and other factors might receive a 30% discount.

Consequently, for estate tax purposes the fair market value subject to tax would be $14 million.

Valuation experts apply these discounts because those real-life buyers calculate the fair market value of purchasing a partial interest in a closely held business arrangement far differently than the Treasury only seeking to justify taking the maximum amount of tax.

Importantly, the basis for the property inherited would be adjusted to recognize this properly determined the fair market value.

The gift tax would remain, but the tax rate is lowered to 35%.

Combination estate and retirement planning techniques, like the stretch IRA, would continue to allow the inherited IRAs to be payable over the life expectancy of the beneficiary.

The big difference between the House and Senate versions is that the Senate would “sunset” in 2028 while the House version would become permanent in 2024.

And the Senate version also would end the individual and small business tax cuts for pass-through entities on December 31, 2025.

This political nonsense by the Senate is required because the Senate Majority Leader insists on maintaining the self-imposed Byrd Rule and filibuster rule.

When push comes to shove, so to speak, the House will adopt the Senate version and push for permanency of estate tax repeal after the 2020 election cycle.

Maybe by then the House and Senate will get around to taxing the income of the multi-billion dollar otherwise tax-exempt foundations and pick up some significant tax revenues.

Until then, all taxpayers should thank their good fortunes that Trump got elected President and able to bludgeon the Republicans who control Congress into passing estate tax reform.

Denis Kleinfeld is known as a strategic tax and wealth protection lawyer, widely published author and creative teacher.

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All taxpayers should thank their good fortunes that Trump got elected president and is able to bludgeon the Republicans who control Congress into passing estate-tax reform.
estate, tax, reform, trump
Monday, 20 November 2017 06:41 AM
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