spoke with Caplin & Drysdale's President Beth Shapiro Kaufman
concerning the possibility that the estate tax could be repealed. Ms. Kaufman comments on the case for repeal as well as the Administration's new proposal to tax capital gains at death. For the full article, please click on the link above to view a PDF. Excerpt taken from the article.
Revenue from estate tax is down considerably from its peak, which is helping to make the case for repeal, Beth Kaufman, Caplin & Drysdale member and former Treasury Department associate tax legislative counsel, said Jan. 20.
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Revenue from estate and gift tax is considerably less than 1 percent of the tax revenue from all sources, Kaufman said.
"Previously supporters argued that the fisc could not withstand the loss of revenue that would result from repeal, but these data points minimize the importance of that argument," she said. "Furthermore, the estate tax now only hits a handful of decedents, so the idea that we maintain the estate and gift tax structure to collect tax from 5,000 estates each year lends support to those who favor repeal."
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Obama's plan to tax capital gains at death could be a preemptive strike, Kaufman said. "He may have put this measure out there as a backstop so that if Congress passes a bill repealing the estate tax, the president can negotiate by agreeing to estate tax repeal only if Congress accepts his proposal to tax capital gains at death," she said.
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Dropping a 28 percent capital gains tax on the wealthy in addition to the 40 percent estate tax rate was described by Kaufman as "a huge amount of tax," that isn't likely to be considered by the current Congress.
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Amid the talk of repeal, some attorneys have already begun to revise their advice to clients. Kaufman said in the current environment, she isn't in favor of techniques that would require her clients to pay gift tax. "They would be paying gift tax to reduce an estate tax down the road when they die," she said.
While it would be fine for a couple to make gifts that use up their approximately $11 million joint exemption, she said, the possibility of repeal is significant enough in their lifetimes that she wouldn't want to see them pay gift tax.