CPAs seek estate tax certainty from Congress

Say uncertainty impedes proper estate planning, places undue burden on taxpayers

Jun 15, 2012 @ 12:48 pm

By Liz Skinner

The nation's accountants have asked Congress to set permanent estate tax rules “well before the current rules expire” at the end of 2012 because the ambiguity is creating chaos for clients and their advisers.

“The uncertainty of the tax law impedes proper estate planning for taxpayers, and the necessity to revise estate-planning documents multiple times places an undue burden on taxpayers and their advisers,” the American Institute of Certified Public Accountants wrote in testimony to a house small-business subcommittee.

President Barack Obama and Congress agreed to a two-year extension of generous estate and gift tax limits during the final days of 2010 and set a 35% estate tax rate that applies only to estates worth more than $5 million for singles and $10 million for couples. But as of Jan. 1, the so-called death tax is poised to jump to 55% with a $1 million exemption, or $2 million for couples.

Many believe there will be no serious tax legislation agreements until after the November presidential election, thus setting the scene for yet another last-minute legislative change to the estate tax rules.

Allowing the laws in effect before the 2001 tax cuts were first enacted “will create turmoil for gifts to multigenerational trusts to which the [generation-skipping transfer] exemption was allocated between 2001 and 2012,” according to the AICPA's May 31 testimony to the Subcommittee on Economic Growth, Tax and Capital Access.

The estate tax exemption is tied to the lifetime gift tax exemption, meaning the amounts given away as gifts will be subtracted from the estate tax exemption after death.

The AICPA asked that the $5 million exemption set in 2010 be maintained, and said that if it is reduced, those who made taxable gifts under the rules from 2001 to 2012 shouldn't be subject to tax in the future on the amount that had been covered by the exemption during that time.

Neil Katz, managing partner of Katz Bernstein & Katz LLP, told the House panel that the changes over the past dozen years have made planning especially difficult for clients who want to pass down small businesses and farms to their families. Sometimes these assets have to be sold by heirs just to pay the estate taxes due when they are inherited.

“If Congress could establish rules that business owners could be assured would survive for a period of 10 to 15 years, then they would at least have a chance (albeit a difficult battle) to plan for the tax burden,” Mr. Katz wrote in testimony.

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