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Subject:  Re: re post above estate tax avoidence Date:  11/19/2009  10:22 AM
Author:  synchronicityII Number:  107721 of 124497

With an objective of avoiding taxes, A is going to transfer 48 acres of developable land in Maryland to grandkid B for nothing, 1$ to make it a legal transfer.

My understanding is that the transfer would be "legal" even if it were for no money at all. However, that doesn't change the TAX implications, which is that an asset is being transferred to someone for far FAR less than market value.

A week or so later, they plan to make a private agreement among just the 2 of them, where B will pay A in cash $2000 a month for 15 years, amounting to $300,000 total.

Step transaction doctrine. IRS finds out this gets integrated into the previous transaction. And there's fraud, which is always fun.

- They know the basis for B will be zero.

Which makes it phenomenally stupid given their intended goal.

- I think family to family means paying no or a small transfer fee.

No, that's not the case. Only time it's the case is in a transfer to one's spouse. Related or not, it's either payment for services (income to recipient) or a gift. Doesn't matter if you give the property to your son or your garbageman.

(I'm using "your" in the general sense, as I understand YOU aren't doing this)

There's also potential GST tax issues with transfers to grandkids. In fact, they're taking something that would otherwise have almost no issues and totally screwing it up, for no good reason.

The objective is get the asset transferred before death to avoid inheritnce tax and avoid paying capital gains taxes as well. I know is it wrong and risky even for someone with patriotic limitations. Total estate oproior to this woul be ~ 1.4 million.

Then, with all due respect, they're paranoid morons. They're apparently too damn stupid or have convinced themselves that Obama's comin' to get 'em that they haven't bothered to look at the ACTUAL LAW. The current lifetime federal estate tax exemption is $3.5 MILLION, so there would be NO FEDERAL ESTATE TAX on an estate of 1.4 million, and assuming they don't intend to sell the lande before A dies, the heirs would take at a basis equal to Fair Market Value at the date of A's death. So, as Phil has already said:

are they so obsessed with sticking it to that Kenyan that they're willing to go to jail and/or pay huge fines? If A went to his dirt nap today there would be zero estate tax, and whoever inherited the property would inherit it with a basis equal to current fair market value. That translates into zero tax, but evidently that's not enough for, if I understand you correctly, these people who consider themselves patriots.

The only thing Phil left out of his response was "radical-islamist-commie-socialist-muslim-terrorist" in front of "Kenyan". :-)

Now, since this is land in Maryland, it would be subject to that state's estate taxe