| Author |
Message |
Larry
Guest
|
 Posted:
Wed Oct 26, 2005 8:00 am Post subject:
Estate Tax versus Gift Tax |
|
|
Consider stock with a $10M market value and a $1M basis. I
understand how it would be treated in an estate. Would a
gift be the same or are the tax rates or rules different for
gifts?
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Rich Carreiro
Guest
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| Posted:
Thu Oct 27, 2005 8:00 am Post subject:
Re: Estate Tax versus Gift Tax |
|
|
"Larry" <Larry@larry.com> writes:
| Quote: | Consider stock with a $10M market value and a $1M basis. I
understand how it would be treated in an estate. Would a
gift be the same or are the tax rates or rules different for
gifts?
|
The rules *are* different. As you know, if the stock is
inherited the basis becomes $10M. But if the stock is
gifted the basis remains $1M.
--
Rich Carreiro rlcarr@animato.arlington.ma.us
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Stuart A. Bronstein
Guest
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| Posted:
Thu Oct 27, 2005 8:00 am Post subject:
Re: Estate Tax versus Gift Tax |
|
|
"Larry" <Larry@larry.com> wrote:
| Quote: | Consider stock with a $10M market value and a $1M basis. I
understand how it would be treated in an estate. Would a
gift be the same or are the tax rates or rules different for
gifts?
|
The rules are generally the same. However the exemption on
gifts is $1,000,000 before taxes are imposed. Until 2010
the exemption on estates is higher.
Stu
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Seth Breidbart
Guest
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| Posted:
Thu Oct 27, 2005 8:00 am Post subject:
Re: Estate Tax versus Gift Tax |
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|
Larry <Larry@larry.com> wrote:
| Quote: | Consider stock with a $10M market value and a $1M basis. I
understand how it would be treated in an estate. Would a
gift be the same or are the tax rates or rules different for
gifts?
|
The recipient's basis would certainly be different in those
two cases.
Seth
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Larry
Guest
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| Posted:
Fri Oct 28, 2005 8:00 am Post subject:
Re: Estate Tax versus Gift Tax |
|
|
"Rich Carreiro" <rlcarr@animato.arlington.ma.us> wrote:
| Quote: | "Larry" <Larry@larry.com> writes:
Consider stock with a $10M market value and a $1M basis. I
understand how it would be treated in an estate. Would a
gift be the same or are the tax rates or rules different for
gifts?
The rules *are* different. As you know, if the stock is
inherited the basis becomes $10M. But if the stock is
gifted the basis remains $1M.
|
Actually I thought it might be just the opposite!
I thought it kept it's original basis through the estate
tax, and the recipient would have CG tax when sold. Are you
telling me it jumps to $10M for estate tax and the recipient
would have no CG when sold.?? Does the estate also have to
pay capital gains tax?
I posted here because I had doubts about what my accountant
told me, but I didn't think he was completely wrong. Is
there a website somewhere that explains this?
Thanks.
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
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Stuart A. Bronstein
Guest
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| Posted:
Fri Oct 28, 2005 2:25 pm Post subject:
Re: Estate Tax versus Gift Tax |
|
|
"Larry" <Larry@larry.com> wrote:
| Quote: | "Rich Carreiro" <rlcarr@animato.arlington.ma.us> wrote:
"Larry" <Larry@larry.com> writes:
Consider stock with a $10M market value and a $1M basis. I
understand how it would be treated in an estate. Would a
gift be the same or are the tax rates or rules different for
gifts?
The rules *are* different. As you know, if the stock is
inherited the basis becomes $10M. But if the stock is
gifted the basis remains $1M.
Actually I thought it might be just the opposite!
I thought it kept it's original basis through the estate
tax, and the recipient would have CG tax when sold. Are you
telling me it jumps to $10M for estate tax and the recipient
would have no CG when sold.?? Does the estate also have to
pay capital gains tax?
|
When a gift is made, the property retains the same basis it had in
the hands of the donor. But when someone dies and his property
passes to someone as a result of that, the basis is increased to
the value at the date of death.
The theory appears to be that it would be unfair to impose both an
income and an estate tax on the same thing, which is the equity in
the property. So when property is subject to estate tax (even if
no tax is actually due because the estate is too small), the basis
goes up so that no income tax is imposed on that equity.
Now, in the year that no estate tax will be due from anyone under
current law (I think it's 2009 but I'm not going to take the time
to look it up), there is no stepped up basis for property passing
to heirs. Which is completely consistent with that theory.
Stu
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
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Guest
|
| Posted:
Mon Oct 31, 2005 4:30 pm Post subject:
Re: Estate Tax versus Gift Tax |
|
|
Stuart A. Bronstein" wrote:
| Quote: | when someone dies and his property
passes to someone as a result of that, the basis is increased to
the value at the date of death.
|
*Or* it may decrease. Just depends. But yes, the new basis
is whatever the value was at date of death.
| Quote: | The theory appears to be that it would be unfair to impose both an
income and an estate tax on the same thing
|
Somehow, "fairness" and "tax code" in the same sentence is
more often an oxymoron ;-)
| Quote: | when property is subject to estate tax (even if
no tax is actually due because the estate is too small), the basis
goes up so that no income tax is imposed on that equity.
|
But if the value goes down before death, neither the estate
nor the individual's final return can claim the loss. The
loss is just... uh ... lost. And no, that's never been fair
imho.
| Quote: | Now, in the year that no estate tax will be due from anyone under
current law (I think it's 2009 but I'm not going to take the time
to look it up), there is no stepped up basis for property passing
to heirs.
|
aha! Soooo.... in the case of lower "Date of Death" value,
vs original basis, will the heirs be able to use the
original basis and take the loss? (I dunno, I haven't looked
it up)
| Quote: | Which is completely consistent with that theory.
|
I would hope it holds
Rick
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<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
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D. Stussy
Guest
|
| Posted:
Mon Oct 31, 2005 4:49 pm Post subject:
Re: Estate Tax versus Gift Tax |
|
|
Rich Carreiro wrote:
| Quote: | "Larry" <Larry@larry.com> writes:
Consider stock with a $10M market value and a $1M basis. I
understand how it would be treated in an estate. Would a
gift be the same or are the tax rates or rules different for
gifts?
The rules *are* different. As you know, if the stock is
inherited the basis becomes $10M. But if the stock is
gifted the basis remains $1M.
|
Or $1M + gift tax actually paid. [Someone giving that large
an amount might have exceeded his unified credit if there
were other gifts....]
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
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<< Copyright (2005) - All rights reserved. >>
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D. Stussy
Guest
|
| Posted:
Mon Oct 31, 2005 4:49 pm Post subject:
Re: Estate Tax versus Gift Tax |
|
|
Larry wrote:
| Quote: | "Rich Carreiro" <rlcarr@animato.arlington.ma.us> wrote:
"Larry" <Larry@larry.com> writes:
Consider stock with a $10M market value and a $1M basis. I
understand how it would be treated in an estate. Would a
gift be the same or are the tax rates or rules different for
gifts?
The rules *are* different. As you know, if the stock is
inherited the basis becomes $10M. But if the stock is
gifted the basis remains $1M.
Actually I thought it might be just the opposite!
|
Completely wrong.
- Estate tax provides a step-up to FMV at the time of death.
- Gift tax carries the original basis (+ gift tax paid).
| Quote: | I thought it kept it's original basis through the estate
tax, and the recipient would have CG tax when sold. Are you
telling me it jumps to $10M for estate tax and the recipient
would have no CG when sold.?? Does the estate also have to
pay capital gains tax?
|
An estate, if it is the seller, does pay CG tax, but here,
the gain is likely very near zero.
| Quote: | I posted here because I had doubts about what my accountant
told me, but I didn't think he was completely wrong. Is
there a website somewhere that explains this?
|
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
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D. Stussy
Guest
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| Posted:
Mon Oct 31, 2005 4:49 pm Post subject:
Re: Estate Tax versus Gift Tax |
|
|
Stuart A. Bronstein wrote:
| Quote: | ...
Now, in the year that no estate tax will be due from anyone under
current law (I think it's 2009 but I'm not going to take the time
to look it up), there is no stepped up basis for property passing
to heirs. Which is completely consistent with that theory.
|
2010.
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >> |
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nanasue
Guest
|
| Posted:
Wed Nov 02, 2005 5:00 pm Post subject:
Re: Estate Tax versus Gift Tax |
|
|
| Quote: | The theory appears to be that it would be unfair to
impose both an income and an estate tax on the same
thing, which is the equity in the property. So when
property is subject to estate tax (even if no tax is
actually due because the estate is too small), the
basis goes up so that no income tax is imposed on that
equity.
|
About a year before my mother passed away she gifted me a
number of stocks and mutual funds. A gift tax return was
filed. If her estate were over 1.5 million, the value of
those stocks and mutual funds would be included in her
estate for estate tax purposes.
My question -- what is the cost basis for those stocks and
bonds -- her original cost basis or the value at her death?
Thanks in advance
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
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Larry
Guest
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| Posted:
Wed Nov 02, 2005 11:17 pm Post subject:
Re: Estate Tax versus Gift Tax |
|
|
| Quote: | Or $1M + gift tax actually paid. [Someone giving that large
an amount might have exceeded his unified credit if there
were other gifts....]
|
So if the unified credit has already been used up... The
Gift tax would be about 0.5M, so the basis would be 1.5M,
and the heirs (when they sell would pay capital gains on
8.5M. (in NYS, about 2m, so total tax paid is 2.5m)
But if left in an estate, the estate tax would be about 5M
and the heirs would have no capital gains tax. Total tax
paid is twice that of gifts.
Is that about right, using round numbers?
In round figures, is that about it?
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
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<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
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Herb Smith
Guest
|
| Posted:
Thu Nov 03, 2005 9:00 am Post subject:
Re: Estate Tax versus Gift Tax |
|
|
nanasue wrote:
| Quote: | About a year before my mother passed away she gifted me a
number of stocks and mutual funds. A gift tax return was
filed. If her estate were over 1.5 million, the value of
those stocks and mutual funds would be included in her
estate for estate tax purposes.
My question -- what is the cost basis for those stocks and
bonds -- her original cost basis or the value at her death?
|
The stocks received as a GIFT retain the giftors original
basis, those received as an inheritance from the decedent
get an adjustment to current FMV.
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
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<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
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Stuart A. Bronstein
Guest
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| Posted:
Fri Nov 04, 2005 9:00 am Post subject:
Re: Estate Tax versus Gift Tax |
|
|
"Herb Smith" <smithff33@aol.com> wrote:
| Quote: | The stocks received as a GIFT retain the giftors original
basis, those received as an inheritance from the decedent
get an adjustment to current FMV.
|
Even if the gift was included in the taxable estate for
being made within three years of death?
Looks like section 1014(b) (and in this case subparagraph 9)
says that property required to be included in the taxable
estate gets the stepped up basis even if it otherwise
wouldn't be entitled to.
Stu
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
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nanasue
Guest
|
| Posted:
Sun Nov 06, 2005 5:00 pm Post subject:
Re: Estate Tax versus Gift Tax |
|
|
"Herb Smith" <smithf...@aol.com> wrote:
| Quote: | The stocks received as a GIFT retain the giftors original
basis, those received as an inheritance from the decedent
get an adjustment to current FMV.
Even if the gift was included in the taxable estate for
being made within three years of death?
Looks like section 1014(b) (and in this case subparagraph 9)
says that property required to be included in the taxable
estate gets the stepped up basis even if it otherwise
wouldn't be entitled to.
|
Well....I have a need to know this info ... I recently sold
some of the so called gifted stocks to pay a tax bill.... I
was looking for section 1014(b) at the IRS site. I didn't
find much. I thought it would be nice to attach something
definitive from the IRS to my cost basis figures. Do you
know where I could find some official statement? All that I
have found in the past is gifted moneys get the original
cost basis.
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
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