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Assignment 4: Estate Tax - Essay Example

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Assignment 4: Estate Tax IRS’s current level of interest and audits in estate tax and need for tax planning IRS or the Internal Revenue Service is an agency or bureau that functions under the US federal government. The Internal Revenue service is controlled by the direction of the Commissioner of Interval Revenue…
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Assignment 4: Estate Tax
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Assignment 4: Estate Tax

Looking at the figure of 2010 fiscal, the estate tax returns amounted to 0.02% of the total tax return with huge losses in tax revenue. Currently, IRS has modernized tax collection methods and has three computerized tax collection centers apart from ten other tax collection centers. The centers receive returns over mail and compile the returns at their end. The current level of interest and audit has tightened like ever before. IRS is reconsidering the method of valuation of estate tax for wealthy individuals. In the process, the agency has also discarded some of its favorite methods of tax valuation. IRS is currently more concerned about the family limited partnerships and their tax-saving structure. Tough auditing by IRS has been recommended on the face of US Congress’ past failure to implement federal estate tax. The federal estate tax is back in vogue with higher tax rates of 55% for estates of 1 million dollars worth or more as compared to 45% tax on $3.5 million or more wealthy estates. As a result of increased focus on estate tax, IRS recommend on an average of $363149 million tax to estates after conducting due audit. This is increased earnings for the federal government as a husband and wife were not subject to estate tax with less than $7 million value of their estate. Increased interest and audit of estate tax by IRS has resulted in increase of returns by 50% over the last decade. The aggressive collection of tax by the IRS has raised concern for comparatively lesser wealthy estates that were exempt from estate tax in the earlier phase. Both the increase in rate of tax as well as limits for exemption has raised concern for tax planning in order to restore more wealth in their estates (Cch Tax Law Editors, 2008, p.744). Viability assessment: proposed changes to legislation related to estate taxes The proposed changes to the legislation of estate tax include portability of a deceased spouse’s unused estate and gift tax exclusion amount. The proposed change in legislation of estate tax is deemed to be viable as this would simply tax collection for IRS and would also benefit the taxpayers. Another proposal talks about the case of death of one of the partners and if another partner or spouse wants to opt out of estate tax and intends to carryover the estate tax to the assets of the estate. This proposal was not supported by the legislative members. Another proposed change is whether a transfer of irrevocable property from one estate to another is treated as a gift. The viability of the change in this legislation should be assessed by taking into account the change in the interests and objectives of the estate. Transfer of assets of the estate trust in case of death of a spouse to its grantor trust is another proposed change in legislation of estate tax. This would, however, affect the benefits of transfer that could be done by the couple to their children (Hunt and Hunt, 2004, p.12). Impact of estate tax on wealth of taxpayer: Tax planning tools The ways to avoid trouble in tax valuation is to get good appraisals and keeping clear documentation. In the earlier stages auditors of the IRS were not rewarded and several occasions of mathematical errors to mis-valuation of assets resulted in decline of overall estate tax by around 65%. This eventually raised concern in the federal gover ... Read More
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