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Besides Death And Taxes
the other thing you can count on is change in the tax laws.
The next time you hear a politician use the words "billion" casually, think about whether you want that politician spending your tax money.
A billion is a difficult number to comprehend, but one advertising agency did a good job of putting that figure into perspective in one of its releases:
A billion seconds ago, it was 31.69 years ago or 1985 . . . A billion minutes ago, Jesus was had lived, the Apostles had all died and it was the year 180 C.E. (A.D.) . . . A billion hours ago, our ancestors were living in the Stone Age, crafting stone tools in the year 112,140 B.C.E. (B.C.).
A billion dollars ago was only 6 hours and 20 minutes, at the
rate President Obama's Washington spends it.
In Fiscal Year 2002; the United States Government collected an estimated $1.8 Trillion ($1,800,000,000,000) in tax revenues BUT did you know that not one penny ($ .01) that you paid through your Income Taxes went to your federal government; not one penny ???
If that isn't enough, Governor Brown and our California lawmakers are still looking for ways in 2016 to circumvent the State's Proposition 13 Constitutional Amendment and get more money to our "tax and spend" legislature. Why? Well, we live in a state where only a fraction of it's able bodied citizens work and pay taxes while the rest are on AFDC, operate in the underground economy, are illegal aliens and don't pay taxes, etc.; plus other groups believe that every Californian is constitutionally granted "entitlements" beyond those of life, liberty, and pursuit of happiness. "What a country!"
National Debt: As of 1:32:14 PDST on August 28th, 2016; the United States was a staggering $19.5 trillion in debt. To keep the math simple, let's use a meager $6 trillion figure at 6 percent interest (which we are paying) and divide it by 360 days. It comes out to over $1 billion a day n interest alone. So, how do you like taxation with representation now?
"The Federal Reserve System is not federal, doesn't have any reserves, and is definitely not a system." ~ Harry M. Cook, 1986 B.S. or Fact???
The Federal Reserve system is a central bank operating in the United States. It is an entirely private-owned, although it seeks to give the appearance of a governmental institution. The IRS also exaggerates it's history back to 1862 in an attempt to add a quasi-federal status to itself.
Who's gonna pay the bill?
One afternoon; ten men and women got together and started a neighborhood club. That evening they all went out for dinner to celebrate the inauguration of their new friendship. The total cost of the diner was $100.00. As everyone was figuring out who should pay for what; the newly elected club treasurer suggested that everyone pay according to their income. It was seconded and approved.
So, Four of the Ten people paid nothing; the Fifth person paid $1.00; the Sixth paid $3.00; the Seventh paid $7.00; the Eight paid $12.00; the Ninth paid $18.00; and the Tenth paid $59.00.
The club met every week for months on end always paying the same amount. One day the restaurant owner decided that since the club members were regulars that he would show his gratitude and give them a 20% decrease on their bill.
So the next time the Ten people came in to eat he announced that he was knocking $20.00 off the bill. Well, as might be expected some of them thanked the owner for the windfall while others just didn't say anything but you could tell they were seriously mulling the proposal over in their minds.
After everyone had ate and the bill came out as $80.00 instead of the usual $100.00; they now had to decide how to reallocate who paid what portion of the bill.
Everyone's income remained the same so the treasurer of the club came to the rescue again. She suggested that now the first Five members would pay nothing (the first Four unaffected while the Fifth got a 100% decrease); the Sixth would pay only $2.00 (a $1.00 decrease); the Seventh would now only pay $5.00 (a $2.00 decrease); the Eight would pay $9.00 (a $3.00 decrease); the Ninth only $12.00 (a $6.00 decrease); and lastly the Tenth person would once again pay the outstanding balance but this time only $52.00 (a $7.00 decrease).
As you can clearly see; the first Four were unaffected by the reduction; the Fifth ceased paying anything into the pot; the Sixth saved $1.00; the Seventh put $2.00 back into his pocket; the Eight saved $3.00; the Ninth man realized a $6.00 relief; and the Tenth man saved $7.00.
All of a sudden the Sixth person got very indignant and exclaimed "Hey, I only got a $1.00 reduction but member number Tenth gets back $7.00 and that's 700% more than I did!"
The Seventh chimed in with "Well I'm only getting $2.00 relief while Ten man is getting almost 300% more than me!"
Eight member complained "Fifth person is riding the gravy train!" and Ninth wanted to know "How come Fifth person isn't paying anything anymore?"
At this point, the first Four (who were paying nothing to begin with) decried "We're being exploited and only the rich are getting a huge [tax] break!"
The club fell apart and nobody but Eight, Ninth and Tenth ate that good again.
The moral of the story: "As long as 96.09% of income taxes are being paid by the top 50% of wage earners in the United States; the lower 50% of wage earners that only pay 3.91% of the nations income taxes are not entitled to get any, or very little, tax reduction. This is not trickle down economics . . . it's common sense."
Our law makers are always willing to rob from Peter to pay Paul ~ usually with Paul's 100% approval.
FACT: The top 5% of income producers in American earn only 35% of all monies annually but pay over 56% of all income taxes collected by the IRS. Is that fair? I guess if you're Paul ~ it's fair.
Download "Who Pays Taxes?": PDF (66KB)
Most American taxpayers believe that the Internal Revenue Service was created to collect taxes in the fifty States to fund the federal government coffers and so voluntarily comply. This viewpoint is re-enforced by our government officials, tax prepares, talk show hosts, and of course the IRS itself. Well, according to Leigh Peterson, Waddell, author of the very telling historical informational document "IRS Exposed!"; he believes that the IRS has no jurisdiction over the fifty Several States and was actually formed to administer tax collections for Washington D. C, (a/k/a the "federal district"), Puerto Rico and other insular possessions of the United States ONLY! Please read and then you be the judge.
"Eight decades of amendments ... to [the] code have produced a virtually impenetrable maze ... The rules are unintelligible to most citizens ... The rules are equally mysterious to many government employees who are charged with administering and enforcing the law.” — Shirley Peterson, Former IRS Commissioner, April 14, 1993, in a speech at Southern Methodist University
Taxes at death
The United States has two tax systems that may affect an individual's assets at death.
1st. Federal Estate Tax
The Federal Estate Tax is a tax established in 1917 designed to tax assets owned by the decedent at death. Any assets left to a surviving spouse, if the spouse is a United States citizen, are exempt, as are any bequests at death to a qualified charity. Other assets are subject to this estate or death tax.
The exemption from the tax was $1,000,000 in 2002, increasing to $3,500,000 in 2008 (estate taxes were due to be abolished in 2010). The current 2016 estate tax exemption is $5,450,000,000 with rates starting at 31% to a maximum rate of 40%.
The tax is charged on all of the assets of the decedent located anywhere in the world. If the deceased was a United States citizen or resident of the United States this tax is imposed even though another country may tax part of the assets if the person who died was a citizen of another country or owned property in another country.
For an individual with a $5,450,000 of net worth, with no spouse, dying in 2016, the estate tax would be $0. A married couple can pass $10,900,000,000 to their heir provided they use a living trust instrument.
And if that doesn't get you ...
2nd. Generation-skipping transfer tax
The second tax system is the generation-skipping transfer tax ("GSTT") imposed on outright gifts and transfers in trust to or for the benefit of unrelated persons who are more than 37.5 years younger than the donor OR to related persons more than one generation younger than the donor, such as grandchildren. This tax was introduced in 1976 and codified by the Tax Reform Act of 1986. This was designed to prevent wealthy individuals and couples from setting up an irrevocable trust, after paying estate tax, to avoid having the assets in the trust taxed when the children and grandchildren died.
Under this tax structure, there is a separate exemption ($1,060,000 for someone dying in 2002) which is set up at the creation of the irrevocable trust. When the assets pass to the second generation, such as the grandchildren, the amount over the exemption is then taxed at the highest estate tax rate then in effect. There are no estate taxes payable.
However, John Doe can set up a trust or trusts containing $1,060,000 when he dies. The trust continues for his wife and his children. When it goes to his grandchildren it is worth $3,000,000. All of this amount is exempt since if it was exempt when the decedent died, all future earnings and appreciation are also exempt.
People sometimes ask what the Kennedy's and Rockefellers did to avoid these taxes. They paid the large federal estate tax when the family patriarch died, but then left the remaining assets in trusts for several generations, with the children, grandchildren, and great grandchildren receiving the earnings from the trust assets and payments of principal from the trust, if needed. Since the patriarchs died before the generation-skipping transfer tax was introduced and their trusts were irrevocable, these trusts were exempt from this tax. The next best thing to having $300,000,000 of assets is having the earnings on $300,000,000.
Future changes in these taxes
There has recently been a very strong movement in the United States to abolish the federal estate tax, gift tax, and generation-skipping transfer tax. People pay taxes all of their lives, so why should their children pay additional taxes on their wealth when they die?
Congress has wrestled with this for several years and the legislation passed in 2001 was a compromise with the immediate abolition of these taxes. The 2001 raised all of the exemptions, reduced the maximum tax rates by 10%, and abolished all of these taxes (except the gift tax) in 2010. However, because of uncertainties, Congress put a strange provision in the law. If subsequent legislation was not passed, the tax rates and exemptions in existence on January 1, 2001, would return on January 1, 2011. Thus, the taxes could only disappear for one year-2010, and then return at a much higher rate the next year.
At the time this legislation was passed the federal government was awash in money. This was before the economy took a large downturn, and before the extraordinary events of September 11, 2001.
With the government estimated surpluses in the future quickly turning into apparent deficits, the question arises as to where the federal government will get additional revenue. One simple alternative is to freeze the increased estate and other tax exemptions, extending the $1,000,000 or $1,500,000 exemption by five or ten years. Since the federal estate tax produces approximately $30 billion of revenue each year, it presents an easy target for additional revenue, especially since 95% of the individuals who die do not have sufficient assets to pay the tax.
In 1981 when Ronald Reagan became president he lobbied and got the federal estate tax changed. The exemptions from tax increased over a number of years, assets left to one's spouse were totally exempt from tax, and the maximum federal estate tax rate was cut from 70% to 50% over a period of years. It was due to drop from 55% to 50% in 1986. In 1986, federal revenue was not sufficient so Congress extended this reduction for several years, and continued to extend it. In 2002, 16 years after it was due to go into effect, the maximum estate tax rate finally went from 55% to 50%.
It is therefore quite likely that Congress will either extend the phase-out of these taxes or freeze the exemption and rates for a number of years so that the abolition in 2020 or 2030, or NEVER.
If you love something, set it free.
If it comes back, it will always be yours.
If it doesn't come back, it was never yours to begin with.
If it just sits in your living room, messes up your stuff, eats your food, uses your telephone, takes your money, and doesn't appear to realize that you actually set it free in the first place, you either married it or gave birth to it.
Either of which is probably tax deductible.
State Taxation Departments
Choose from the list below.
Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, D.C., Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming
A business trust is not only a separate person, it is a separate taxpayer. It must apply for an IRS Employer Identification Number (EIN), and file a 1041 Income Tax Return. However, it only files a tax return based on the UBO's income.
At the end of the calendar year, trusts have 65 days to issue a K-1 Statement to beneficiaries and to distribute excess Trust income as a K-1 dividend. Unlike a corporation, trusts are not subject to double taxation. A trust will only be taxed on the income it retains. It will not be taxed on income distributed to the beneficiaries.
The beneficiary receiving the dividend would enter the amount on their 1040, free from self employment tax. In this way the trustees may eliminate all income taxation at the trust level. Because the business trust is also "discretionary", the trustees may also allocate income to those beneficiaries in the lowest income tax bracket.
A major area of concern regards the income tax basis of property exchanged into the trust corpus. Essentially, the IRC dictates that each party in an exchange or trade keep the old income tax basis and apply it to the "new" asset received. This means that the "exchanger" receives the Units of Beneficial Interest with an income tax basis equal to that of his "old" property exchanged into the trust corpus. It also means that the trust receives the property at the same basis of the Units prior to the trade. Since the trade was made at full market value, and since the Units are new with no prior depreciation in value, the original basis of the Units. If a business trust holds beneficial interest in another business trust, the trustees must be different, meaning that at least one trustee must not be common to both.
Under some circumstances, the trustees may contract with the "exchanger" for management services. The manager is normally given day-to-day authority over the organization business and assets, where that power is delegated by the Board of Trustees. But, the Manager is only an agent of the Board of Trustees and may be discharged at any time, subject of course to the stipulations of any contract executed by the parties. There is no requirement that the trustees ever hire or continue to use the "exchanger" or any other person as the trust manager.
A business trust may also have a Protector appointed by the "exchanger." The Protector has only one function: he may remove any Trustee for valid cause. This means that if any Trustee is not acting in accordance with the trust Indenture, or in the best interest of the beneficiaries; the Protector may remove that Trustee from office.
It may also be stipulated in the trust indenture that a Church Board, Jural Society, or other body of trust may be called on to act as Protector in the case of dispute, or should the Board of Trustees become vacant they may appoint a new trustee. Any beneficiary may petition the Protector to have a trustee removed for cause.