Warren Buffett on the Estate Tax

[Brad_Edwards_Fan]

I'm not an idealist so I'm free to look at issues without absolutes. There is a difference between an estate of 100,000 and 100,000,000. I don't shed a tear for the sons and daughter of billionares getting less money they never worked a day in their lives to earn. The end result is that they are still rich purely because they won the universal lottery and were born to wealthy parents. That alone is more then most will every get and is enough to fight off any misplaced guilt at supportting taxation on this issue.

I don't care if I'm accused of class warfare or anything of the sort. I do not support laws that HELP the creation of aristocracy here in the US. I have no doubt that there will always be an undeserving wealthy elite class of people - but that doesn't mean I need to help them keep it that way.

But why should you have to pay a huge percent of what you parents leave you if they leave more than $X and I not just because my parents left me less than $X?

(for the record i think that SOME sort of estate should exist but it should be a universal burden, not a "targeted one")

[Predicto]

Im not claiming it's inequitable. I think it's unfair to everyone equally.

If you bought a bagel and paid tax, then got charged another tax for eating it, then a third for end result, that would be a valid comparison.

No, that is not a valid comparison, at least not for the capital gains part of it.

It is more like buying a bagel in the morning and then buying a bagel in the afternoon and saying "Hey, I already paid my bagel tax."

Then, I guess, dying before you get to eat it and passing the bagel on to your children, and they need to pay the Estate tax.

[DjTj]

Im not claiming it's inequitable. I think it's unfair to everyone equally.

If you bought a bagel and paid tax, then got charged another tax for eating it, then a third for end result, that would be a valid comparison.

Maybe if it was a $5 million bagel and you failed to include it in your will...

Let's say my aunts pay the tax on 8 mill. Then sell it next year for 8 mill exactly. They will have to pay tax on it again.

Actually, if your aunts paid an estate tax on the $8 million and then sold it for $8 million the next year, they would pay no tax on the sale because there was no capital gain.

Also, if they paid taxes on the $8 million and then sold it for less than that, they could write off the difference as a capital loss to offset other capital gains they might have.

The left loves the current income tax system, why doesnt he propose a higher tax percentage for people leaving estates over certain benchmarks?

Say, the first 3 mill is free, then the next 10 mill is 10 percent taxed, then the next 100 mill is 50 percent taxed, then anything else, the Govt gets 95 percent.

Think he'd still go for it?

I think Buffet would still be fine with it, since he has chosen to donate almost his entire estate to charity. I think I would actually prefer the income tax to be more like the estate tax, where there is only one bracket or maybe two...

[Larry]

Larry, where's the choice in the matter, if they have no other capital?

Are you suggesting they should have taken out a mortgage on the property to pay the taxes? And that by electing not to do that, they have made a choice to have the $6 million in cash?

They do have capital. They have $8M worth of Real Estate.

I'm supposed to feel sorry for somebody who won the lottery, because the government is making him pay taxes on it?

I think it's a pretty safe bet that there is more than one way to turn $8M worth of real estate (in a growing market) into $2M cash, while still holding on to most (if not all) of the property.

They could get a mortgage. Maybe (since it was pointed out that the Aunts are "not long for this world") one of the grandkids could put up a mortgage on the place, in return for him being named in Auntie's will.

(I'm not an attorney, but would that, in turn, reduce the size of Auntie's estate, so that, when Auntie dies, the estate is calculated as only $6M instead of 8 (because Junior already owns $2M of the property, via the mortgage)?)

(Again, IANAL, but could each Auntie, seperately, leave their share of the estate to Junior? That way, when Auntie 1 dies, Junior inherits 1/2 of an estate that (after allowing for Junior's mortgage) is worth $6M. Junior inherits $3M from Auntie #1 (and pays estate taxes on $1M), and then the same thing when Auntie #2 dies. Junior gets $8M worth of real estate, and it costs him $2M (for the first set of taxes), and taxes on two, $1M estates (for each Aunt.)

Heck, maybe Junior could loan Auntie the $2M (in return for a mortgage), then Auntie intentionally defaults on the loan, and Junior forecloses. (Or, Auntie simply doesn't pay on the mortgage, and Junior keeps claiming that the "balance on the loan" keeps going up. When Auntie dies, Junior claims that the estate now owes him four million dollars, because Auntie wasn't making mortgage payments.)

They could sell off part of the property. (Maybe. Depending on how things are laid out.)

But no matter what technique is used, I refuse to believe that someone who's just received something worth $8M is humanly incapable of paying $2M in taxes.

[Destino]

But why should you have to pay a huge percent of what you parents leave you if they leave more than $X and I not just because my parents left me less than $X?

(for the record i think that SOME sort of estate should exist but it should be a universal burden, not a "targeted one")

Again, I don't believe in ideals or absolutes in government. I see a difference between 100k and 100m so viewing them as "X" doesn't work for me. I have no interest in promoting a permanent upper crust and I don't feel badly taxing massive amounts of handed down wealth heavily at all.

Let's also keep in mind that rich people spend a good bit of their lives avoiding taxes and are going to avoid much of estate taxes as well.

[iheartskins]

Larry--how are the aunts "choosing to let the home be sold" though?

You suggest some interesting tax games. You sure you're not a tax lawyer?

[Larry]

Larry, you're either being purposefully dishonest, or your comprehension skills are off today.

1- The land wouldnt sell for 2 million right now. Or do you really think that the Govt will give them the 8 mill they say it is worth?

If it won't sell for $2M. Then it isn't worth $2M. (That's the legal definition of "worth": Whatever someone is willing to pay for it.)

(And I'm willing to bet that, if the government forces the sale, then it will be sold at auction, and the taxes will be calculated based on what it fetches at the auction. If the government is able to claim that "well, it doesn't matter what the highest bidder paid for it. We're going to tax it based on some number we pulled out of our hineys", then I'm going to agree that something needs to be changed.)

(In fact, if you're certain that $2M will buy the place, then show up at the auction and bid $2M. If you're right, then you'll have to pay $2M to yourself, and you'll owe the government no taxes (because the estate was only worth $2M.))

2- They paid taxes on this property when they sold it to my uncle years ago. And they should (and would) pay taxes on it again if they sell it again. So why do you think they should have to pay it a THIRD TIME, simply because my uncle died?

For the same reason they would be taxed if the sold the property to anybody else? Or if they'd given any other wealth transfer to anybody else?

If your Uncle had given $8M to his gardener, the gardner would have to pay taxes on it.

If he'd paid it to his lawyer, the lawyer would owe taxes.

Why is it that, if he gives it to your Aunt (or to you), then suddenly people jump up and yell "it's being taxed twice"?

This whole, bogus, claim of "double taxation" is nothing more than a rhetorical smokescreen used to advocate a system of taxation in which the only financial transaction that is taxed is earned income, and all other forms of income are "special".

And, frankly, I don't really think it's in the interest of this country to create a system of taxation that punishes (if I can pull out the "taxation is punishment" rhetoric that's so favored by the "rich people shouldn't pay taxes" crowd) people for earning their income.

[Larry]

They've challenged the assesment twice. And lost both times. In fact, currently they Govt refuses to look at the property as farmland, instead they are classifying it as commercial because, this is a beauty, there is no farmer residing on the property. Nevermind that the farm is STILL being farmed through lease agreements.

Well, guess what? If that land is worth $8M to a developer, then it's worth $8M.

Again, that's the legal definition of "worth": Whatever one person is willing to pay for it.

[Kilmer17]

Once again.

NOBODY IS WILLING TO PAY THAT AMOUNT. So by your own definition, the land IS NOT worth that much.

However, the Govt is still going to tax them on that amount.

If it sells for a dollar, they will still owe the taxes on the 8 mill the Govt says it is valued at currently.

And I'd be happy to introduce you to my two autns if you still refuse to believe that there are people incapable of paying 2 million dollars.

Your vision of wealth leads to a near angry contempt for people in this thread Larry.

It's a farm. Nothing more than it was 2 years ago when my Uncle was paying little in property taxes. The only thing that has changed is he died. Which apparently makes some people think that the Givt is now entitled to what that farm might be worth.

That's the same dangerous thinking that leads us to Govts deciding a Wal Mart has imminent domain over a residence because it will make the Govt more money in taxes.

We should have frozen his body and never reported his death.

[Larry]

Once again.

THEN THIS ISN'T AN "ESTATE TAX" PROBLEM. IT'S A "PROPERTY ASSESSMENT" PROBLEM.

Needless to say, I'm not a lawyer. But somehow I suspect that the government isn't in the habit of simply inventing numbers from thin air, and then demanding that people pay up based on those numbers. (Although I will admit that, based on some things I've read about the IRS, I'm not 100% sure they don't either.)

If they say it's worth $8M, then they've got something to base that number on. And there's a procedure for disputing it. Up to and including taking them to court.

And I don't doubt that you were paying little in property taxes. Every place I've lived has had all sorts of rules to give special treatment to farmers. Which is why, here in Florida, every single real estate developer has people they hire to "farm" the land they bought to build shopping centers on, but they don't want to build it yet. People who made $500K last year in their jobs, and who own 25 acres of lakefront property, who have two cows that have never been milked or sold, so that they can claim that they're farmers, and therefore their property should be taxed as though it's worth $120K (but if you offer them a million for it, they'll turn you down.)

Not accusing you or your relatives of cheating. (Although I'm certain that bunches of people in Florida are.) Just saying that it's not hard for farm land to be paying property taxes based on a property value that's grossly less than actual market value. Especially if it hasn't been sold on the open market (only transferred within a family) for a long time.

Have you actually asked an appraiser how much the property is worth on the open market? (Not how much it's worth as a farm.)?

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(And yes, I'm absolutely certain that there are people incapable of paying $2M. I'm one of them. What I have trouble believing is that there's anybody who owns an $8M house, who can't pay $2M.)

[Fergasun]

Isn't that land worth $0 since there is no mortgage being paid on it?

Kilmer's case illustrates the evil of government abuse that our founding father's were inherently and strongly against. Why doesn't this bother more people? Seems like this is a clear violation of property rights and unconstitutional, at least on the basis of our founding fathers. Shouldn't we demand that property taxes should be used to provide inherent services that protect property? Maybe we can try to get a flat property tax (and make sure it doesn't fund everything under the sun).

Seriously, I read 3 pages and it seems like you guys are all missing the true point and illustration of this example.

[DeanCollins]

Isn't that land worth $0 since there is no mortgage being paid on it?

Kilmer's case illustrates the evil of government abuse that our founding father's were inherently and strongly against. Why doesn't this bother more people? Seems like this is a clear violation of property rights and unconstitutional, at least on the basis of our founding fathers. Shouldn't we demand that property taxes should be used to provide inherent services that protect property? Maybe we can try to get a flat property tax (and make sure it doesn't fund everything under the sun).

Seriously, I read 3 pages and it seems like you guys are all missing the true point and illustration of this example.

Fergasun,

I own several properties that aren't mortgaged and the tax man doesn't see it that way.

this whole estate tax problem could've been easily avoided by creating a real estate trust that could've past the use and benifits of the property to multible generations within his family without paying any estate taxes, but aparently Kilmer's Aunts were not interested in doing that. So that's who's fault?

[Fergasun]

I'm not going to argue about the wisdom of having an estate lawyer help navigate the laws. We already had 3 pages of that, didn't we? My problem is with the tax man, property assessment and the fact that we put up with it. Why?

[chomerics]

Sad to tell you this, but it's too late.

Your aunt would have needed to utilize the loopholes before she passed.

Your dad now gets taxed for your aunts death.

Aint America great!?!?!?!

Yea, his dad just made 10 million dollars because someone in his life passed, it IS great.

I find it completely hilarious that the people who despise "free handouts" and aspire for people to learn themselves have absolutely no problem when wealthy people who are completely ignorant about US tax code have to pay taxes on something they did not earn. . .don't you think it is just the slightest bit hypocritical?

[chomerics]

Fergasun,

I own several properties that aren't mortgaged and the tax man doesn't see it that way.

this whole estate tax problem could've been easily avoided by creating a real estate trust that could've past the use and benifits of the property to multible generations within his family without paying any estate taxes, but aparently Kilmer's Aunts were not interested in doing that. So that's who's fault?

It's the US governments fault for their stupidity LAMO. . .since when did Kilmer become a democrat?

[chomerics]

I'm not going to argue about the wisdom of having an estate lawyer help navigate the laws. We already had 3 pages of that, didn't we?

So you are in agreement here??? If you are STUPID enough to do absolutely nothing about protecting your money in a trust then you DESERVE to have Uncle Sam take the 1/3rd of money away right???

[Predicto]

I'm not going to argue about the wisdom of having an estate lawyer help navigate the laws. We already had 3 pages of that, didn't we? My problem is with the tax man, property assessment and the fact that we put up with it. Why?

Ummm... because we need government services and we need to pay for them?