The gift tax is imposed each calendar year on the transfer of property by gift made during that calendar year. There are exclusions from gift tax in the amount equal to $12k per person per calendar year. The marital deduction excludes an unlimited amount to your spouse. Any outright gift or transfer to a spouse qualifies for the marital deduction. The property will be included in the spouse’s taxable estate and will be subject to tax when the spouse dies. Gifts made to qualified charities are also deductible. Payments of tuition and medical expenses are excluded as long as they are paid directly to the institution.
When valuing intellectual property for estate tax purposes, the taxable amount is generally accepted to be the fair market value of the intellectual property on the date of the creator’s death. For example, the fair market value of copyrights will generally be considered their income producing potential, discounted for net present value. A common method for determining a copyright’s fair market value is to determine the likely annual earnings for the intellectual property for a future period, often between 5 and 7 years. A multiple, often between 3 and 7 is then applied to that number for the current valuation. Much of the valuation analysis is largely subjective, so determining the accepted method with the lowest valuation is usually the best choice, at least in terms of estate tax purposes.
As of January 1, 2009, you can pass upon your death $3,500,000.00 to anyone without having any Federal Estate Tax imposed. This exclusion amount is an increase of $1.5 Million Dollars over the $2 Million Dollar exclusion available in 2008. Thus, it is now possible for a married couple to pass a total of $7 Million Dollars to their children without triggering the Federal Estate Tax. That is the good news.
Opinions on the estate tax range wildly. The major criticism that is often heard is that it is unfair to tax people twice for the money they have earned. When a person is paid, they are forced to pay an income tax on that money. However, for the wealthy, they are essentially taxed again on this money that they have accrued during their lifetime. Another issue with this tax is that some people see it as a punishment for dying. When someone dies, now the government will swoop in and swipe away their money.
A new ‘portability tax exemption’ applies to the estate tax. This simply means that the unused exemption of the first spouse to die can be added to the exemption of the second spouse to die. So if the first-to-die spouse uses only $2 million of his $5 million exemption, his wife can add his remaining $3 million exemption to her $5 million exemption when she dies for an $8 million exemption.
Unfortunately, it is probably too late in the year for the Senate to take any further action on the estate tax. However, Democratic leaders have made the issue a “top priority,” and promise to work on a solution in the beginning of 2010. There is even talk that they may attempt to make the tax retroactive, meaning anyone who inherits a large sum of property or assets could be vulnerable to the estate tax.
There are many forms of estate taxes, but the most common forms of estate taxes are taxes that deal duck the property that you have inherited or that has been given to you. This is something that varies from different states to different states, and also within the states. Also, you obtain to look at the type of property, what humanitarian of condition it is in, besides also where it is to determine what types of estate taxes you are alacrity to have to be paying on it.
If Democrats, who still have their big pre-election congressional majorities, had the power to get what they wanted, the law would already have been passed. But they did not have the votes to keep the estate tax from expiring a year ago, and it does not look like they have the votes to bring it back right now. It looks like the Republicans can hold their ground and win this fight.
Recently the Wall Street Journal did opinion piece on the amount of times that a dollar really gets taxed. This information opened Pandora’s Box with regards to real estate investing, and the level of taxation that is placed upon a real estate investor’s dollar.
