Inheritance taxes

Thanks for anyone who answered my question regarding 1099s for a probate situation. I am working on the forms now. Just one more question. Just want to be sure I am correct. I am executor of an estate. Atty,Acct is out of town. If the value of an estate should come in over 2 million, would federal taxes be due "only" on the amount over the 2 million. And, does this apply to NYS as well? I am thinking that it might be better in this case to sell some securities low. Thanks again Karen

Reply to
firenze5943
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Essentially yes. The calculation is more complicated - it includes all money in the estate, and then subtracts the tax that would have been imposed on the first two million.

I'm not familiar with NY law on this subject.

Securities, as all estate assets, are valued at market value on the date of death. If these are publicly traded securities the value will be pegged at the price they were traded at on the date of death. If you sell them low you will not reduce the tax.

Stu

Reply to
Stuart Bronstein

Thanks for the reply. I now understand about the tax calculation.

Somehow in my notes the attorney mentioned ( twice,) that it would be better if I were to sell the stocks at the lower price That the (loss) could be used on the form 706 I am confused and guess I had better wait for his return.

Reply to
firenze5943

I hate to say this, but when it comes to tax strategy listen to your accountant, not your attorney.

There is a thing called the alternate valuation date. The estate can elect to have the estate valued either on the date of death or on the date six months later. It's generally only better to use the alternate date if the entire economy has taken a dive and all the property is, in the aggregate, worth less.

To get the lower valuation the property only needs to be owned on the alternate date. It does not need to be sold.

If there's actually been a loss on the securities, they can be sold and the loss would probably be taken on the 1041, not the 706.

Others who know better will correct me if I'm wrong (I'm an estate planning and tax attorney who doesn't do returns), but I think either you misunderstood or your attorney gave you bad advice.

Stu

Reply to
Stuart Bronstein

Stu, Thanks. I think we had better hire an accountant. Our attorney who is also acting as our accountant may not be well versed in this issue. I asked my brother who was also at the meeting w/ the att'y and he also recalls the sell low advice. It may be because the dod of the decedent occurred when the market was at an all time high. K

Reply to
sedrickgm

Gee, depending on HOW low you want to sell I might be interested! If you're giving it away (my daughter invented the concept of "Selling it for FREE" with her lemonade stand when she was 7) I would also be interested. But seriously, when you wrote that

[the attorney mentioned ( twice,) that it would be better if I were to sell the stocks at the lower price That the (loss) could be used on the form 706]

did it make sense to you?

Reply to
BeanTownSteve

Yes, as a matter of fact it did. And it must to some accountants as well, because on another site and also in this post Stu mentioned that it is sometimes done and then the loss isapplied on the 1041. Secondly it would not be a loss. These securities are AAA stock and I can take them and put them directly into my personal brokerage account. I had planned to purchase some shares with some of the proceeds anyway.

Reply to
firenze5943

I would ask the attorney to explain *in step-by-step detail* and give an example. Get the example in writing - or make your own notes, which you can show to the atty to make sure you got it right. You might ask for the example as it will actually appear on the 706 or 1041. I'm guessing that as executor fulfilling your fiduciary duties you can act to preserve the value of the estate, which may involve some transactions such as accumulation of interest payments or dividend payments, and I believe these show up on the 1041. Presumably the cost basis would be either date of death or alternate, but following that, if securities are transacted, it may be that the gain or loss shows up on the 1041, where a loss could be used to offset divs and interest.

I'd be curious to know if my speculations are correct.

Reply to
dapperdobbs

The NY estate tax is a "pick-up" or "sponge" tax, equal to the credit allowed for state death taxes against the federal estate tax. The federal credit, of course, has gone away, but NY still conforms to the federal estate tax rules as they were in effect in 1998, i.e., before the EGTRRA changes that phased out the credit for state death taxes and replaced it with a deduction. In addition, the unified credit in

1998 was $345,800, representing the tax on the first $1 million of estate value, and NY still follows those rules. So for NY, you have to prepare a "pro forma" 706 on a pre-EGTRRA basis to compute the NY tax, which will equal the maximum credit allowed on the pro forma 706 for state death taxes.

Even if no federal estate tax is actually due, there may be a NY estate tax liability.

Katie in San Diego

Reply to
Katie

Good idea This I shall do.

Reply to
firenze5943

If you elect to use the alternate valuation date AND the property was sold before the alternate valuation date, then the sales proceeds determine the value on the estate tax return.

Reply to
NadCixelsyd

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