One of the main arguments used by the defenders of retaining the Marxist estate (aka death) tax is that only the very richest (and thus most evil) among us have to pay it.  They like to cite statistics showing the small percentage of people having to pay estate tax.  This recent article by David Cay Johnston, a person who wrote an entire book decrying the tax breaks for the evil rich, is a perfect example. 

What I have never seen discussed is the number of people who are required to file estate tax returns (Form 706), and the exorbitant cost of having those prepared, even when no estate tax is due.  As I explain on my main website, estate tax is due on the net taxable estate, which is the gross fair market value of everything owned by the decedent, reduced by debts, charitable bequests, final expenses, and the unlimited bequest to the surviving spouse.  However, IRS requires anyone who has passed away (actually the survivors) to file a 706 if the fair market value of the gross estate is over the estate tax exemption amount, which is currently $1.5 million. With the current rise in real estate values, millions more Americans are being pushed into the realm of having to file 706s every day.  

Having prepared pretty much every kind of tax return there is over the past thirty plus years, the 706 is the one I most hate doing because it is definitely the most complicated and the most time consuming, especially when there are assets that are difficult to value with any precision, such as closely held corporations and artwork.  The fact that IRS audits an extremely high percentage of these returns requires much more diligence on the part of us preparers. The biggest fees I have had to charge clients for tax returns have been for these, often well over $10,000. 

While repealing the Marxist estate tax would obviously reduce the income of estate tax return preparers, it would save many millions of people huge sums of fees, to say nothing of the time involved in assembling the information for the 706 and in defending the values against IRS challenges.

Thanks to Ohio CPA Dana Stahl for passing along the Johnston article.  I have the same reaction as Rush has to the NY Times:

 "I must be honest. I can only read so many paragraphs
of a New York Times story before I puke." --Rush Limbaugh

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 7/11/2005 05:58:00 PM Send this post: