However, I found the article below interesting not only because it challenges the typical arguments against the estate tax, but because it was written by someone whose inheritance was actually diminished by the estate tax.

Tax Mickey's Estate...but don't take away his Magic Kingdom!

USA Today op-ed, Mickey Mouse, the Estate Tax and Me, by Abigail Disney:

[T]he estate tax will automatically be reinstated after a year’s hiatus — in its 2001 form. … In a far stricter tax environment, my grandfather still managed to accumulate and pass on ample funds to make three subsequent generations very comfortable indeed. And as an inheritor I am here to tell you, the estate tax is not as much of a bogeyman as you’ve been led to believe. Let’s start with the facts:

• First, the estate tax is not a double tax. … People like me, who inherit assets such as Disney stock, can spend our lives watching those assets grow, and when we pass them along to our children, they have not been touched or diminished at all by the tax system. The only thing I have paid taxes on is the interest from these assets, not their increased value.
• Second, opponents of the estate tax claim family farms will have to be broken up to pay the tax, but good luck finding an example of this. …
• Third, the estate tax incentivizes people like me to do good with our wealth because there is no estate tax on donations to charity. My filmmaking and foundations rely on a tax code that supports a vigorous non-profit sector, a vital part of our society that is bigger and stronger because of the many millions of dollars that flow into it as a result of the estate tax and other tax provisions.

To those who believe the estate tax is unfair, I say that there is no tax more fair than this one. I recently signed the Call to Preserve the Estate Tax organized by United for a Fair Economy because the estate tax is an expression of our deepest American values: that we live in a meritocracy, not an aristocracy; that every generation is a fresh start; and that we choose to build a society in which wealth and opportunity do not accrue to people simply for being born wealthy. …

The estate tax is the cornerstone of a progressive system that leaves wealthy heirs with ample funds while providing the government with the resources it needs to build an environment for the common good. By preserving it, we not only restore billions in revenue to the national treasury — we also restore our most cherished collective ideals as a nation.

“Tax me” may be the least popular sentence in America, but it’s what I am asking, and I hope that our leaders are listening.

Give Momma one more year of jet-setting!

New York Times columnist Paul Krugman famously  dubbed the Bush 2001 tax cuts the “Throw Momma From The Train Act”, because the estate tax was eliminated for just one year—2010. But as 2010 grinds on without a federal estate levy, it’s becoming clear that Krugman got it wrong.  Any Momma who would ride the rails (even the pricey Acela) probably isn’t worth shoving to a grisly demise.  It’s the Mommas flying on their private jets who need to pack parachutes or watch their backs. Without a doubt, the one- year lapse in the federal estate is a boon to heirs of the superrich. (At  least four billionaires, including George Steinbrenner have died so far this year.)  But for ordinary families, it is creating all sorts of grief and unintended consequences and might even cost some of them extra federal tax, to say nothing of lawyers’ bills.

One set of problems relates to wills that were written assuming there would be a tax; provisions  in such documents could inadvertently disinherit children or a spouse, or could subject an estate to unnecessary state estate tax.  (For more on these issues, click here. For a map showing 2010 state estate taxes, click here.)

Another set of problems relates to a trade-off Congress made in the 2001 law: In return for eliminating the estate tax in 2010, it also did away with the full “step-up” in basis for capital assets for 2010. In other years,  the basis cost of a  decedent’s capital assets–stocks, bonds, jewelry, real estate, artwork and so on– gets adjusted to its market value at his death, or six months afterward.  (The executor gets a choice.) Conveniently, that allows heirs  to sell all the property immediately with no capital gains income taxes due. But for those dying in 2010, the step-up in assets going to non-spousal heirs is limited to $1.3 million, with another $3 million in step-up allowed for assets left to a spouse.   This means some heirs of estates worth several million could end up paying more in total federal tax than they would have had their benefactor died in 2009, when all assets got a step-up in basis and the first $3.5 million of an estate going to non-spousal heirs was exempt from estate tax. (Amounts left to a citizen-spouse aren’t subject to estate tax, since Uncle Sam figures to get his when the second spouse dies.)  These moderately well-to-do families get hit with extra capital gains taxes because their benefactor died in 2010 instead of 2009, but they don’t save much or any estate tax, compared to 2009

While an unknown number of families may pay more, a greater number of them are having to shoulder a big paperwork and administrative burden.  Assuming capital assets (including a home and stocks) total more than $1.3 million, family members and executors must locate old records showing what assets were purchased for (if such records even exist) and deal with all sorts of complicated and potentially divisive issues such as which assets, going to which heirs,  get allocated the limited basis step-ups…

Considering the complicated nuances, it might be wise to keep Momma – and her private jet – around for another year.

Keep Prayin' Wesley, Prison is Scary... Just ask Lindsay Lohan

With the US Court of Appeals recent decision to affirm Wesley Snipes’ criminal tax conviction, it looks like Wesley Snipes may have to rely on the royalties from his cheesy “Total Gym” Infomercials to pay off his substantial legal fees and restitution incurred from his long battle with the IRS.  I wonder if the Federal Prison has a Total Gym??  Maybe he can shoot an updated Total Gym infomercial from prison…

This affirmation strikes close to home.  Not only was Snipes born in Orlando, Florida, on July 31, 1962, graduating from Jones High School in Orlando, but it was the Federal District Court out of Ocala, Florida that secured Snipes’ guilty verdict.

Despite residing in Windermere, Florida, Snipes filed multiple unsuccessfully motions in an attempt to move the trial location from the Federal District Court in Ocala, Florida to New York.  Snipes argued that Ocala, Florida was the “most racially discriminatory venue available, with the best possibility of an all-white jury,” and that the Ocala area was a “hotbed of Klan activity.”

Snipes was charged with multiple counts of criminal tax fraud.  Count One charged Snipes and his two co-defendents, Eddie Kahn and Douglas Sosile with conspiracy to defraud the Government by impeding the IRS and its collection of Income Taxes.  Count Two charged all three defendants with filing false claims of refund for income taxes Snipes paid in previous tax years.  Count Three through Eight charged Snipes alone with six counts of willfully failing to file his income tax return for years 1999 through 2004.

Snipes became involved with co-defendents Kahn and Sosile sometime in 2000 when he joined Kahn’s shady organization, “American Rights Litigators” (ARL), a subsidiary of Kahn’s other organization, “The Guiding Light of God Ministries.”  Despite having no legal training, Kahn, through ARL, taught Snipes how to could avoid paying taxes via Constitutional and Statutory arguments challenging the IRS’s authority to collect tax. With ARL assistance, Snipes sent voluminous letters to the IRS, challenging their authority to collect tax by asserting the “861 Argument.”

The 861 Argument (from IRC Section 861(a)) basically says that domestic earnings of Americans do not qualify as “taxable US income” because such is not specifically listed as a source of taxable income.  This is a horrible argument seeing that IRC Section 61 is the broad provision for income INCLUSION.  Without a specific provision EXCLUDING income from tax, the income will be included in taxable income.  Despite one of his arguments asserting his Constitutional rights as an US citizen, Snipes conversely argued that he was not and had never been a US citizen, therefore was a non-resident alien whose sole source of income came from sources wholly outside of the US.

Snipes did not stop at merely refusing to pay income taxes in 1999-2004 despite earning over $37 million, but he also sent multiple altered 1040X Forms to the IRS in an attempt to collect a refund for over $20 million from income taxes he paid in prior years.

On February 1, 2008, the District Court’s Jury found Snipes guilty on Counts Three through Five for willful failure to file individual income tax returns for years 1999-2001, sentencing him to 36 months of incarceration.  Although the convicted charges were only misdemeanors, the court was able to enhance Snipes’ sentence by the aggravating factors, including Snipes obstruction of justice (destroying evidence and hiding money in foreign accounts) and the substantial financial loss to the government (over $41 million in loss taxes).

Instead of his frivolous 861 Argument, Snipes should have claimed insanity for letting Kahn and  his “Guiding Light of God Ministries” brainwash him into thinking that he was never a US citizen.  Seriously, if he’s not a citizen of the US, where the heck does he reside…the “Guiding Light” in the sky?

The NCAA seems to be making an example out of USC’s violations by hitting them with severe sanctions, including revocation of championships, player record statistics, scholarships and essentially removing them from the BCS for the next couple years. With a substantial number of USC’s violations stemming from actions relating to individual players, the IRS is now chasing down former College All-Stars to collect tax on the multitude of gifts they received – complete with penalties, interest.

According to NCAA’s USC Public Infraction Report, Reggie Bush received over $300,000 of “gifts” and “benefits” from various agents.  Which leads us to the question, how can the IRS tax Mr. Bush on these “gifts?”

Generally, a gratuitous transfer of property will not result in tax consequences upon the recipient.   However, the IRS will consider the gift to be income if the recipient provides “consideration” or something of value to the donor of the gift. The problem with Mr. Bush’s situation was that EVERYONE wanted something of value from him…he was the one of the hottest commodities the NFL had seen in a while.

From the IRS’s standpoint, all the luxury gifts, limos, designer clothing, travel accommodations, as well as the rent-free living arrangements provided to him (and his entire family), were taxable items of “Gross Income.” The Internal Revenue Code broadly defines Gross Income as “all income from whatever source derived.”   Considering the items of income arose from events taking place over five years ago, the IRS will likely receive a generous “gift” of penalties and interest in addition to Mr. Bush’s income tax.

Although the extent in which the IRS will benefit from USC’s Sanctions is uncertain, I have no doubt that without stricter institutional governance, we will see the IRS stepping up their game to cash in on the college football fever.