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Source: (consider it)
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Thread: Inheritance Tax
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orfeo
Ship's Musical Counterpoint
# 13878
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Posted
I have just briefly come across an episode of the UK show Country House Rescue.
When these people inherited a castle - not a direct parent-to-child inheritance I think - they incurred an inheritance tax bill of 6 million pounds.
This just seems absolutely ludicrous. Inheriting a property, even a very nice, very large property, doesn't mean you suddenly have millions of pounds of liquid assets sitting around.
It seems positively designed to force the inheritors to sell. The couple in question in fact sold off part of the estate. They also used their pension funds because they didn't want to sell the whole lot.
But what benefit is there in forcing or pressuring a sale in these circumstances? Is there some benefit in seeing large properties go to people who have made money themselves rather than inherited??
I'm pretty sure that Australia no longer has any kind of death/inheritance taxes. Are they still in place elsewhere?
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Technology has brought us all closer together. Turns out a lot of the people you meet as a result are complete idiots.
Posts: 18173 | From: Under | Registered: Jul 2008
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Ad Orientem
Shipmate
# 17574
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Posted
I think inheritance tax is commonplace here in Europe. Here in Finland we have it and they have it in England too. Daylight robbery, of course.
Posts: 2606 | From: Finland | Registered: Feb 2013
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cliffdweller
Shipmate
# 13338
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Posted
But the thing is, to run a country obviously you have to raise capitol in some way, in order to provide the goods and services we need to survive. Liberals and conservatives will, of course, argue over whether there should be more or less of those services, which ones are important and which are expendable, but the fact is, we all want some and therefore taxes will and should be a necessary way of life.
So then the only question is, which taxes? Again, liberals and conservatives will argue over this. But inheritance tax seems like a fairly innocuous one because it is, in a sense, "found money"-- money you didn't earn and therefore presumably aren't depending on for your daily life in the same way an income, property or sales tax would be. There will be ramifications for investment, etc. which is why economists and politicians will continue to debate it. But on a basic moral level it's hard for me to get worked up over given the alternative is to raise other sorts of taxes that will impact lower classes more.
[ 22. August 2013, 09:03: Message edited by: cliffdweller ]
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"Here is the world. Beautiful and terrible things will happen. Don't be afraid." -Frederick Buechner
Posts: 11242 | From: a small canyon overlooking the city | Registered: Jan 2008
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Felafool
Shipmate
# 270
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Posted
AFAIK, many properties have been left derelict because of Inheritance Tax. Great Uncle leaves stately home to family, the roof gets ripped off, the building is instantly deemed uninhabitable, therfore no (or greatly reduced) inheritance tax, but guaranteed dereliction of mansion! ![[Frown]](frown.gif)
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I don't care if the glass is half full or half empty - I ordered a cheeseburger.
Posts: 265 | Registered: May 2001
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CL
Shipmate
# 16145
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Posted
Being well acquainted with inheritance tax through a previous job I find that a more accurate appellation is grave robbing.
Posts: 647 | From: Ireland | Registered: Jan 2011
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Albertus
Shipmate
# 13356
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Posted
Look, inheritance tax is the least problematic of all taxation. If viewed as a tax on the testator, it's painless because it doesn't arise until you're dead: if viewed as a tax on the inheritor it is, as was said upthread, a 'luck' or 'windfall' tax, on assets that you haven't earned and which you've lived without owning until you inherit them. People who object to inheritance tax IME generally object to all taxation (or at least to all taxation which might fall on them): people who accept that taxation is necessary for a civilised society - that is, grown-ups- don't generally object to inheritance tax.
Posts: 6498 | From: Y Sowth | Registered: Jan 2008
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Marvin the Martian
Interplanetary
# 4360
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Posted
My father was brought up in the same house that his father and grandfather had been brought up in - the house had stayed in the family for three generations. You couldn't do that today - each successive generation would have to sell up and move to a smaller house merely in order to pay the tax.
Is that fair?
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Hail Gallaxhar
Posts: 30100 | From: Adrift on a sea of surreality | Registered: Apr 2003
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Anglo Catholic Relict
Shipmate
# 17213
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Posted
It is in effect a tax on the dead, and in my view iniquitous. Something which Richard Hunne objected to, most strongly, and look where it got him.
Dead people cannot legally own anything so it makes sense for the state to rob any estate of a huge proportion before allowing their family to inherit.
In the UK at least, for relatively modest estates I think the way round it is to gift everything to one's heir, and then live another 7 years. For obvious reasons this is not always practicable.
[ 22. August 2013, 09:33: Message edited by: Anglo Catholic Relict ]
Posts: 585 | Registered: Jul 2012
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ButchCassidy
Shipmate
# 11147
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Posted
Inheritance tax is essentially a massive pit in the ground with signs all around it. It really hurts if you fall in it (the basic rate is 40%) but you are given plenty of warning.
The firm I work for assists very rich people to minimise the inheritance tax due on their estates. There are many ways to do so (a trust being a common example). It is possible to reduce the tax on even a very large estate to zero.
However, most of the tactics can only be used before death. It is not really possible to avoid the IHT as a beneficiary of an estate. This couple's situation is unfortunate (but what the Inland Revenue rely on).
Posts: 104 | From: London | Registered: Mar 2006
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Curiosity killed ...
Ship's Mug
# 11770
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Posted
Death duties / inheritance tax had even better wrinkles: widows used to pay inheritance tax and/or death duties (introduced 1894) on their husband's houses, back in the day when everything was owned in the husband's name. My widowed grandmother had to sell up and downsize to pay it, not on an estate, but on a stockbroker belt house, in early 1969. From something I tripped over on an tax site I suspect the law changed in April 1969 on that one, a couple of months too late. For a while it was pretty essential in tax planning that husbands and wives jointly owned property to avoid this tax pitfall.
I'd vaguely heard this one from family conversations and have found dates. Death duties were introduced in 1894. The First and Second World Wars meant that many estates had to pay several hits of death duties on properties in quick succession which crippled many country estates.
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Mugs - Keep the Ship afloat
Posts: 13794 | From: outiside the outer ring road | Registered: Aug 2006
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Sioni Sais
Shipmate
# 5713
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Posted
You've got to get tax from somewhere!
There's an alternative to have a once-in-a-lifetime sting on capital assets, namely a smaller, annual, wealth tax on assets over a certain amount. Schedule A Income Tax is based on imputed rent (the rent a property would be expected to realise) and was payable in respect of owner-occupied premises until some time in the 1950's when it was dropped because it was unpopular. Heck, if taxes were dropped simply because they were unpopular where would VAT, National Insurance contributions, income tax and fuel duty all be?
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"He isn't Doctor Who, he's The Doctor"
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Posts: 24276 | From: Newport, Wales | Registered: Apr 2004
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Offeiriad
Ship's Arboriculturalist
# 14031
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Posted
I seem to remember that UK income tax was introduced as a purely temporary measure around the time of Napoleon?
Posts: 1426 | From: La France profonde | Registered: Aug 2008
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Marvin the Martian
Interplanetary
# 4360
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Posted
It just baffles me that someone can spend a lifetime building up a legacy for their children - and being taxed on every penny earnt and every penny spent while doing so, remember - only for nearly half of that lifetime's effort to then be taken away by the government.
When my parents die - please God, not any time soon - why should so much of what they spent their lives building be lost? It just doesn't seem fair.
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Hail Gallaxhar
Posts: 30100 | From: Adrift on a sea of surreality | Registered: Apr 2003
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CL
Shipmate
# 16145
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Posted
Ultimately governments are junkies and taxes are their heroin. They always are looking for their next fix and will resort to everything up to and including criminality to get it.
Posts: 647 | From: Ireland | Registered: Jan 2011
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orfeo
Ship's Musical Counterpoint
# 13878
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Posted
quote:
Originally posted by Albertus:
Look, inheritance tax is the least problematic of all taxation. If viewed as a tax on the testator, it's painless because it doesn't arise until you're dead: if viewed as a tax on the inheritor it is, as was said upthread, a 'luck' or 'windfall' tax, on assets that you haven't earned and which you've lived without owning until you inherit them. People who object to inheritance tax IME generally object to all taxation (or at least to all taxation which might fall on them): people who accept that taxation is necessary for a civilised society - that is, grown-ups- don't generally object to inheritance tax.
Hello, I don't believe we've met. As I am apparently completely out of your experience.
It's iniquitous because the tax falls on someone who other than the person who conducted the activity. The dead person is the one who made decisions about where property would go. But it's the recipient who has to cough up.
And my objection to it is because it's so obviously going to have a deleterious impact on the property being passed, because it's precisely that property that the recipient is probably going to reason they can live without. If it's a choice between them suffering and the property suffering, most people - not the couple on the TV show - are going to decide the property should do the suffering.
[ 22. August 2013, 11:09: Message edited by: orfeo ]
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Technology has brought us all closer together. Turns out a lot of the people you meet as a result are complete idiots.
Posts: 18173 | From: Under | Registered: Jul 2008
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Albertus
Shipmate
# 13356
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Posted
quote:
Originally posted by Marvin the Martian:
My father was brought up in the same house that his father and grandfather had been brought up in - the house had stayed in the family for three generations. You couldn't do that today - each successive generation would have to sell up and move to a smaller house merely in order to pay the tax.
Is that fair?
Well, it depends what you tax and when. In that case, if I were writing the tax code I would defer liability for tax on such a property, if it was lived in as a main home, until it was sold- with the proviso that tax would be on the value of the property at sale rather than at the time it was inherited. Alternatively you could exempt a property that you actually lived in or into which you moved as your main home on inheriting it, but I'd compensate for this by taxing any asset in cash or kind that was freed up by you doing this (i.e. any house that you owned from which you moved back to the 'ancestral' home) and I'd put a covenant on the 'ancestral' home to the effect that you'd have to pay tax on your inheritance of it if you sold it or ceased to use it as your main home within a reasonably lengthy period of time.
Let me give you another scenario. My father and my stepmother live in a house which they own, I think outright, and which has hugely increased in value even in the dozen years they've been living there, simply because house prices in that town have shot up. I have a perfectly satisfactory house, in which I live, in another part of the country, and have no wish to move to the town where my parents live. If they were to die without other heirs I'd stand to inherit a house which could, I suppose, be sold for about £750,000. I would have done absolutely nothing to earn that inheritance: it'd be a pure windfall. My parents would be dead and so would have no further use for the house (which would have passed to me, anyway). Given that taxes have to be raised somewhere, wouldn't that be the least painful point at which to do so?
Interesting, Orfeo, that you say that IHT is iniquitous because it falls on someone other than the person who conducted the activity. Leaving aside the issue of whether accepting a bequest counts as conducting an activity (and you can always refuse a bequest, surely, at least in common law countries) many opponents of IHT do see it as a 'tax on the dead'. From that point of view, the a'activity' is acquiring assets which can be passed on after death. Perhaps, then, you prefer a substantial wealth tax? I have no problem with that but I suspect that it would produce rather more squeals of indignation than IHT ever does.
[ 22. August 2013, 11:16: Message edited by: Albertus ]
Posts: 6498 | From: Y Sowth | Registered: Jan 2008
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orfeo
Ship's Musical Counterpoint
# 13878
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Posted
quote:
Originally posted by Albertus:
Let me give you another scenario. My father and my stepmother live in a house which they own, I think outright, and which has hugely increased in value even in the dozen years they've been living there, simply because house prices in that town have shot up. I have a perfectly satisfactory house, in which I live, in another part of the country, and have no wish to move to the town where my parents live. If they were to die without other heirs I'd stand to inherit a house which could, I suppose, be sold for about £750,000. I would have done absolutely nothing to earn that inheritance: it'd be a pure windfall. My parents would be dead and so would have no further use for the house (which would have passed to me, anyway). Given that taxes have to be raised somewhere, wouldn't that be the least painful point at which to do so?
The obvious answer to this is to tax the sale, not the act of inheriting. Precisely because inheriting isn't really an 'act' and a decision to sell is.
And if you don't sell, then you should be paying nice high rates on a nice valuable property.
[ 22. August 2013, 11:17: Message edited by: orfeo ]
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Technology has brought us all closer together. Turns out a lot of the people you meet as a result are complete idiots.
Posts: 18173 | From: Under | Registered: Jul 2008
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Albertus
Shipmate
# 13356
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Posted
Which is effectively one of the things which I suggested. I'm all for levying Capital Gains Tax on profits from house sales (apart from anything else, it would damp down speculation in the property market and, thus, house prices) but again I suspect that few of those who agree with you about IHT would agree with you on this point.
Unless of course I've completely misunderstood you and your objection to IHT is that it doesn't squeeze the rich hard enough? ![[Smile]](smile.gif) In which case, I think we could be on the same side!
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My beard is a testament to my masculinity and virility, and demonstrates that I am a real man. Trouble is, bits of quiche sometimes get caught in it.
Posts: 6498 | From: Y Sowth | Registered: Jan 2008
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orfeo
Ship's Musical Counterpoint
# 13878
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Posted
My objection to it is fundamentally that it's not a tax imposed on a person by reason of that person's activity.
It also doesn't work as wealth redistribution mechanism, either. As mentioned above, rich people with lawyers create trusts and so forth. Also mentioned in this paper I dug up while scratching around for more information. Apparently Australia was the first Western country to get rid of death taxes. I wasn't aware we had been innovative.
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Technology has brought us all closer together. Turns out a lot of the people you meet as a result are complete idiots.
Posts: 18173 | From: Under | Registered: Jul 2008
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Marvin the Martian
Interplanetary
# 4360
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Posted
quote:
Originally posted by Albertus:
From that point of view, the a'activity' is acquiring assets which can be passed on after death.
Yes, and that activity is already taxed. There are income taxes on earnings, and VAT on purchases.
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Hail Gallaxhar
Posts: 30100 | From: Adrift on a sea of surreality | Registered: Apr 2003
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Gee D
Shipmate
# 13815
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Posted
quote:
Originally posted by orfeo:
My objection to it is fundamentally that it's not a tax imposed on a person by reason of that person's activity.
Or inactivity.
Death duties wer e abolished here 40+ years ago. The real objection is that they amount to a tax upon after-tax savings. I cane see different considerations in the UK etc. Not that different to old feudal dues payable to the lord.
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Not every Anglican in Sydney is Sydney Anglican
Posts: 7028 | From: Warrawee NSW Australia | Registered: Jun 2008
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tclune
Shipmate
# 7959
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Posted
Let's see: There is huge disparity in wealth. The thing that is unfair is that there exists a tax that mildly interferes with making that disparity the birth right of those born into privilege. Yup, that seems about right...
--Tom Clune
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Posts: 8013 | From: Western MA | Registered: Jul 2004
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orfeo
Ship's Musical Counterpoint
# 13878
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Posted
quote:
Originally posted by tclune:
Let's see: There is huge disparity in wealth. The thing that is unfair is that there exists a tax that mildly interferes with making that disparity the birth right of those born into privilege. Yup, that seems about right...
--Tom Clune
It's rather a large assumption that they were born into it, though. For starters, that's an assumption that rich people always have children. It's also an assumption that rich people always pass on their property TO their children.
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Technology has brought us all closer together. Turns out a lot of the people you meet as a result are complete idiots.
Posts: 18173 | From: Under | Registered: Jul 2008
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tclune
Shipmate
# 7959
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Posted
quote:
Originally posted by orfeo:
quote:
Originally posted by tclune:
Let's see: There is huge disparity in wealth. The thing that is unfair is that there exists a tax that mildly interferes with making that disparity the birth right of those born into privilege. Yup, that seems about right...
--Tom Clune
It's rather a large assumption that they were born into it, though. For starters, that's an assumption that rich people always have children. It's also an assumption that rich people always pass on their property TO their children.
Way to keep your eye on the ball...
--Tom Clune
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Posts: 8013 | From: Western MA | Registered: Jul 2004
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orfeo
Ship's Musical Counterpoint
# 13878
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Posted
I also wouldn't describe a 6 million pound tax bill as mild interference. Even if you're asset-rich, coming up with 6 million pounds cash is not likely to be an everyday task.
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Technology has brought us all closer together. Turns out a lot of the people you meet as a result are complete idiots.
Posts: 18173 | From: Under | Registered: Jul 2008
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Marvin the Martian
Interplanetary
# 4360
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Posted
quote:
Originally posted by tclune:
Let's see: There is huge disparity in wealth. The thing that is unfair is that there exists a tax that mildly interferes with making that disparity the birth right of those born into privilege.
How are you defining "born into privilege", exactly? Should the recently-bereaved child of a cash-poor farmer who nevertheless owned the deed to his farm have to sell the place to some rich person in order to pay the inheritance tax? And if so, how does that do anything to fix the disparity?
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Hail Gallaxhar
Posts: 30100 | From: Adrift on a sea of surreality | Registered: Apr 2003
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Moo
Ship's tough old bird
# 107
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Posted
quote:
Originally posted by Marvin the Martian:
Should the recently-bereaved child of a cash-poor farmer who nevertheless owned the deed to his farm have to sell the place to some rich person in order to pay the inheritance tax? And if so, how does that do anything to fix the disparity?
The same applies to people who have established a prosperous small business, such as a restaurant. If the heirs have to pay a hefty inheritance tax, they will have to sell the business. This may result in the employees losing their jobs.
Moo
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Kerygmania host
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See you later, alligator.
Posts: 20365 | From: Alleghany Mountains of Virginia | Registered: May 2001
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Albertus
Shipmate
# 13356
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Posted
quote:
Originally posted by Marvin the Martian:
quote:
Originally posted by Albertus:
From that point of view, the a'activity' is acquiring assets which can be passed on after death.
Yes, and that activity is already taxed. There are income taxes on earnings, and VAT on purchases.
OK, so be prepared to whack up the taxes on earned and- crucially- unearned (so you catch things like rises in property values which often require no activity other than staying put while prices shoot up) income and wealth in people's lifetimes, and I might be prepared to listen to your argument against IHT.
Posts: 6498 | From: Y Sowth | Registered: Jan 2008
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Marvin the Martian
Interplanetary
# 4360
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Posted
quote:
Originally posted by Albertus:
OK, so be prepared to whack up the taxes on earned and- crucially- unearned (so you catch things like rises in property values which often require no activity other than staying put while prices shoot up) income and wealth in people's lifetimes, and I might be prepared to listen to your argument against IHT.
I fail to see why that would be necessary. But then, I don't hate the idea of people getting richer, or insist that every time money changes hands the government should take a cut.
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Hail Gallaxhar
Posts: 30100 | From: Adrift on a sea of surreality | Registered: Apr 2003
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Penny S
Shipmate
# 14768
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Posted
When dealing with my father's affairs - and we were exempt because of his and my mother's IHT being put together - I did feel like turning up at the tax office with the cow which would have been the medieval equivalent, given to the lord of the manor.
Posts: 5833 | Registered: May 2009
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ButchCassidy
Shipmate
# 11147
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Posted
Actually, in the UK both the scenarios you guys have just set out - a farm, and a small business - would probably qualify for 100% IHT relief (using the Agricultural Property and Business Property reliefs respectively). There are many such exemptions and reliefs.
As I said above, IHT can really hurt you if it hits you, but there are many ways to avoid it.
Posts: 104 | From: London | Registered: Mar 2006
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Crœsos
Shipmate
# 238
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Posted
quote:
Originally posted by Marvin the Martian:
Yes, and that activity is already taxed. There are income taxes on earnings, and VAT on purchases.
The problem with this perspective is that it can be applied to any sort of economic activity. For example, if you work for a company your employer is taxed. Yet the fact that the company was already taxed on its revenue stream isn't seen as removing your obligation from paying taxes on a salary drawn from that revenue stream. Likewise, if you use some of that salary (on which you've already paid taxes) to hire a landscaper that landscaper is still obligated to pay tax on that income despite the fact that the money was already taxed when it was your salary.
Most modern tax systems apply a tax every time money changes hands. Why should money changing hands via inheritance be exempted in a way that's not true of money changing hands as salary or payment for services or any of the other ways money changes hands?
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Humani nil a me alienum puto
Posts: 10706 | From: Sardis, Lydia | Registered: May 2001
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Lucia
Looking for light
# 15201
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Posted
The main difficulty to me seems to be when someone is inheriting something that is not money but a whole "something" that you cannot just hand on a part of in tax, it has to be sold in it's entirety to raise the cash to pay the tax. Houses are the obvious example. I suppose the answer is to sell the asset and buy something else with the remainder but that is a hard answer if it is a family home or business that the person would love to take on and continue with themselves.
Hard cash is easier to part with emotionally than a family home with all the feelings and memories associated with it.
Posts: 1075 | From: Nigh golden stone and spires | Registered: Oct 2009
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Mere Nick
Shipmate
# 11827
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Posted
quote:
Originally posted by ButchCassidy:
Actually, in the UK both the scenarios you guys have just set out - a farm, and a small business - would probably qualify for 100% IHT relief (using the Agricultural Property and Business Property reliefs respectively). There are many such exemptions and reliefs.
As I said above, IHT can really hurt you if it hits you, but there are many ways to avoid it.
There's a lot that can be done here, too. In the US a couple can currently both shuffle the coil and pass on $10.5 million, combined, to their heirs without the estate taking a hit. There's that, and each of the couple can gift $14k each year to anyone they want. If there are ten descendants, that's $280k a year. Family farms get a bit of a special deal, too.
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"Well that's it, boys. I've been redeemed. The preacher's done warshed away all my sins and transgressions. It's the straight and narrow from here on out, and heaven everlasting's my reward."
Delmar O'Donnell
Posts: 2797 | From: West Carolina | Registered: Sep 2006
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orfeo
Ship's Musical Counterpoint
# 13878
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Posted
I agree with Lucia, that is one of the serious difficulties.
The other, which I know I've referred to already but it's very important, is that the tax is incurred by someone who is not responsible for the activity or event that is taxable. The reason that's important is that there is no capacity to prepare for the event.
Almost every other tax, you're engaging in some kind of activity and you can and probably will know there's a tax associated with it, and you can take that into account. When I bought a house, I knew about stamp duty and I could factor in the cost of stamp duty and consider that when making a purchase decision. (The government here in the ACT is actually getting rid of stamp duty as inefficient and inequitable, but I digress.) If you inherit a house, it's quite possible you didn't know it was going to happen, and even if you do know that it's very likely you didn't know when, and the whole thing is pretty much out of your control.
And this heightens the impact and makes it more likely that people are going to have sell property off in order to pay the tax on property. If people had control and were prepared, they might be able to ensure that liquid assets provided other options.
People talk about redistribution of wealth, but I don't see any real benefit in redistributing tangible asset wealth to some other rich individual who happens to come along at the right moment when a family has to give up what was handed down to them. Possibly gaining it at a cheap price because the family really needs to sell.
I'm all for taxing wealthy people within their capacity to pay, but my objection to this kind of tax is it's impacting people when they DON'T have capacity to pay without losing something tangible and dare I say it meaningful. If the tax on a house can realistically only be paid by giving up the house, then there's something fundamentally wrong. The people on the program had to sell part of the estate in order to 'keep the estate'. In other words, they couldn't actually keep the estate. I don't think that's equitable taxation.
[ 22. August 2013, 14:16: Message edited by: orfeo ]
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Technology has brought us all closer together. Turns out a lot of the people you meet as a result are complete idiots.
Posts: 18173 | From: Under | Registered: Jul 2008
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Crœsos
Shipmate
# 238
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Posted
quote:
Originally posted by orfeo:
I'm all for taxing wealthy people within their capacity to pay, but my objection to this kind of tax is it's impacting people when they DON'T have capacity to pay without losing something tangible and dare I say it meaningful. If the tax on a house can realistically only be paid by giving up the house, then there's something fundamentally wrong.
How many estates consist of nothing except a house worth more than £650,000 (according to HM Revenue & Customs that's the current exemption for an estate left by a married or civilly unionized couple)? For context that's just over one million U.S dollars or about 1.1 million Australian dollars. Halve those values if the estate is that of an unmarried person. And how many inheritors would be unable to pay "in yearly instalments over ten years if the value of the estate is tied up in property such as a house"? If a beneficiary is unable or unwilling to pay tax under those conditions, I'm not sure "meaningful" is the term I'd use, and I'd question their ability to have the funds available to maintain such an asset.
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Humani nil a me alienum puto
Posts: 10706 | From: Sardis, Lydia | Registered: May 2001
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aumbry
Shipmate
# 436
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Posted
quote:
Originally posted by Marvin the Martian:
It just baffles me that someone can spend a lifetime building up a legacy for their children - and being taxed on every penny earnt and every penny spent while doing so, remember - only for nearly half of that lifetime's effort to then be taken away by the government.
When my parents die - please God, not any time soon - why should so much of what they spent their lives building be lost? It just doesn't seem fair.
This is a daft argument often trotted out against taxes on capital. On the basis that the state has to collect x pounds to pay for the things the state does (and whether the state does too much is a separate argument) then it is sensible that taxes are levied on capital transfers/gains as well as income. If there were no inheritance tax and no capital gains tax then there would have to be higher levels of income tax and therefore the estate on death would be reduced by these.
Aside from the fact that it is outrageous to tax quite poor people's income while allowing substantial windfalls in the way of inheritances to pass tax free.Compare the thresholds of income and inheritance taxes as an illustration. And these are not taxes on the dead but on the living who inherit.
As for the people living in a castle who had to stump up several million pounds to pay the inheritance tax on it, they had three options: (i) sell to someone who could afford the place (ii) conditionally exempt the property from inheritance tax which assuming this is a part of the nation's heritage (which a castle sounds like it would be) means that provided certain levels of public access are given the tax can be deferred until it is either sold or the access withdrawn or (iii) pay the tax.
The suggestion that these taxes be paid only when the asset is sold would not be in the public interest as this would not be an efficient use of the asset - imagine all sorts of derelict properties which people could not afford to maintain or did not need but still refused to sell to avoid paying taxes.
Posts: 3869 | From: Quedlinburg | Registered: Jun 2001
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no prophet's flag is set so...
Proceed to see sea
# 15560
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Posted
We don't have inheritance per se in Canada, but we do have capital gains tax. Thus: house bought 40 years ago for 130K might sell for 650K today, 520K would be the capital gain and that is taxed because owned property is deemed sold the day the owner dies.
The solution we've found is to buy life insurance to pay the tax. You could even have the kids buy it, so long as they don't want to bump off mummy and poppa, But 6 million £ is a lot of life insurance. Are you allowed to form a family-owned company and have it own property? This is what a number of my colleagues have done for vacation/recreational properties. The kids are also officers of the company. Of course this also means the kids might claim a share and go gallavanting, parents be damned.
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Out of this nettle, danger, we pluck this flower, safety.
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Posts: 11498 | From: Treaty 6 territory in the nonexistant Province of Buffalo, Canada ↄ⃝' | Registered: Mar 2010
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cliffdweller
Shipmate
# 13338
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Posted
quote:
Originally posted by leo:
Like Marvyn, I think inheritance tax is deeply unfair and unjust.
As a leftie, i might be expected to applaud the redistribution of wealth but it hits the poor as well as the rich.
Not really. Certainly not to the disproportionate degree that virtually every other tax (income, property, or sales) impacts the poor. So again, as said upthread, the objections really boil down to objections to all taxation in general. Once you accept that taxation is a necessary part of government, it seems the least objectionable/ problematic.
[ 22. August 2013, 15:06: Message edited by: cliffdweller ]
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"Here is the world. Beautiful and terrible things will happen. Don't be afraid." -Frederick Buechner
Posts: 11242 | From: a small canyon overlooking the city | Registered: Jan 2008
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aumbry
Shipmate
# 436
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Posted
quote:
Originally posted by leo:
Like Marvyn, I think inheritance tax is deeply unfair and unjust.
As a leftie, i might be expected to applaud the redistribution of wealth but it hits the poor as well as the rich.
true, I had tax reduction when paying my mortgage but i was still paying all the other taxes. Then it all gets taxed again upon my death.
More twaddle.
I would be interested to see an illustration of how inheritance taxes hit the poor. But lets take an example. I think it would be reasonable to say that in Britain the poorest first time buyer on the housing ladder would probably be able to stump up about £100,000. To pay tax of £100,000 on an estate would require the property inherited to be worth either £575,000 if inherited from an unmarried individual or £900,000 from the survivor of a married couple. Even if they had not a penny they could inherit properties worth £325,000 and £650,000 repectively without having to do a days work in the bargain.
In any case the reason family homes have to be sold on the death of a parent is rarely due to inheritance tax but usually because the proceeds have to be split between various siblings.
Posts: 3869 | From: Quedlinburg | Registered: Jun 2001
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Adeodatus
Shipmate
# 4992
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Posted
Has anybody noticed that in order for the people mentioned in the OP to incur a tax bill of £6million, they would have had to inherit an estate worth £15million?
So they had to sell the castle, and found themselves homeless in the gutter with only £9million to keep them warm.
Boy, am I going to lose sleep over that. ![[Roll Eyes]](rolleyes.gif)
(Adeodatus, whose family weren't what I would call poor, but whose inheritance, after all the bills had been paid, probably amounted to a couple of thousand quid; and who is glad that my parents were able to enjoy their earnings and small savings while they were alive.)
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"What is broken, repair with gold."
Posts: 9779 | From: Manchester | Registered: Sep 2003
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orfeo
Ship's Musical Counterpoint
# 13878
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Posted
quote:
Originally posted by Adeodatus:
Has anybody noticed that in order for the people mentioned in the OP to incur a tax bill of £6million, they would have had to inherit an estate worth £15million?
So they had to sell the castle, and found themselves homeless in the gutter with only £9million to keep them warm.
Boy, am I going to lose sleep over that.
Putting aside the assumption that they would actually be able to sell for the supposed on-paper value (as I have already raised this as questionable in circumstances where a sale is forced), and even acknowledging that they might, if selling the entire property, have lots of money at the end of the process, you're missing the point.
The government has forced the loss of an asset. Do you not see the problem with that? I'm a left-leaning descendant of poor factory workers, and I still think there's something wrong with taxing an item to the point where the item must be given up.
The particular VALUE of the item in question is quite beside the point as far as I'm concerned. If it'd be wrong to tax my birthday presents (NB, taxing me, not the person who bought me the present) to the extent that I need to sell the presents, then I can't see any reason why it suddenly becomes right to tax gifts to that level when the present becomes large.
As I said, I'm left-leaning. Do I believe in redistribution of wealth? Sure, in the sense of getting people with more capacity to pay to contribute a larger percentage of the money used to fund services and infrastructure. Do I believe in redistribution of tangible property? No.
[ 22. August 2013, 15:47: Message edited by: orfeo ]
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Technology has brought us all closer together. Turns out a lot of the people you meet as a result are complete idiots.
Posts: 18173 | From: Under | Registered: Jul 2008
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Mere Nick
Shipmate
# 11827
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Posted
quote:
Originally posted by no prophet:
We don't have inheritance per se in Canada, but we do have capital gains tax. Thus: house bought 40 years ago for 130K might sell for 650K today, 520K would be the capital gain and that is taxed because owned property is deemed sold the day the owner dies.
Do the heirs get some of that 520k tax free? Here the estate sized I mentioned earlier can pass estate tax free and the beneficiaries also get a step up in tax basis to the fmv.
quote:
The solution we've found is to buy life insurance to pay the tax.
We have a few clients that are looking at a taxable estate so they have set up irrevocable trusts that they put money into that is used to buy life insurance. Since it is in the irrevocable trust the insurance proceeds are not part of their taxable estate.
It sure would be nice to have to be concerned about how estate taxes would nail me and mine.
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"Well that's it, boys. I've been redeemed. The preacher's done warshed away all my sins and transgressions. It's the straight and narrow from here on out, and heaven everlasting's my reward."
Delmar O'Donnell
Posts: 2797 | From: West Carolina | Registered: Sep 2006
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orfeo
Ship's Musical Counterpoint
# 13878
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Posted
ADDENDUM: And the main reason I don't believe in the redistribution of tangible property is that it can't be shared in a meaningful way. And it isn't shared here. The property doesn't go to the State or to the poor, it goes to some rich person. In a competition between a rich person who inherited a property and has historical ties to it and another rich person who just has some money to buy a property, it's mystifying to me why anyone should think the government should be assisting the rich person who has some money to buy a property to win out.
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Technology has brought us all closer together. Turns out a lot of the people you meet as a result are complete idiots.
Posts: 18173 | From: Under | Registered: Jul 2008
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Mere Nick
Shipmate
# 11827
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Posted
quote:
Originally posted by orfeo:
The government has forced the loss of an asset. Do you not see the problem with that? I'm a left-leaning descendant of poor factory workers, and I still think there's something wrong with taxing an item to the point where the item must be given up.
If they were still at the factory and it had to sell because someone died it is not inconceivable that their jobs could be at risk.
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"Well that's it, boys. I've been redeemed. The preacher's done warshed away all my sins and transgressions. It's the straight and narrow from here on out, and heaven everlasting's my reward."
Delmar O'Donnell
Posts: 2797 | From: West Carolina | Registered: Sep 2006
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Crœsos
Shipmate
# 238
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Posted
quote:
Originally posted by orfeo:
Putting aside the assumption that they would actually be able to sell for the supposed on-paper value . . .
Wouldn't that allow them to argue that the as-assessed value is too high?
quote:
Originally posted by orfeo:
The government has forced the loss of an asset. Do you not see the problem with that?
No, the government forced the conversion of an asset. Forcing its loss would mean no value received at the end. And I'm afraid I don't see the problem. Or rather, I don't see a problem that isn't associated with any other form of taxation. If high-priced physical assets were held to be tax-exempt I think we can easily foresee the development of a barter-like economy wherein people (especially those in high paying positions) are paid in cars or jewelry or other commodities. Why get paid in cash which will be taxed when you can get tax-exempt in-kind payments?
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Humani nil a me alienum puto
Posts: 10706 | From: Sardis, Lydia | Registered: May 2001
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orfeo
Ship's Musical Counterpoint
# 13878
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Posted
quote:
Originally posted by Crœsos:
If high-priced physical assets were held to be tax-exempt I think we can easily foresee the development of a barter-like economy wherein people (especially those in high paying positions) are paid in cars or jewelry or other commodities. Why get paid in cash which will be taxed when you can get tax-exempt in-kind payments?
But I'm not suggesting the asset is entirely tax-exempt. Capital gains tax on a sale has been mentioned (and we have that in Australia). Rates are calculated based on the value of a property. Those are just the first two that pop into my head. There are plenty of ways of taxing the holders of assets that don't distinguish between the methods of acquisition of those assets.
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Technology has brought us all closer together. Turns out a lot of the people you meet as a result are complete idiots.
Posts: 18173 | From: Under | Registered: Jul 2008
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Albertus
Shipmate
# 13356
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Posted
quote:
Originally posted by Adeodatus:
So they had to sell the castle, and found themselves homeless in the gutter with only £9million to keep them warm.
You could make a thick blanket of £50 notes with that much.
Posts: 6498 | From: Y Sowth | Registered: Jan 2008
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aumbry
Shipmate
# 436
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Posted
quote:
Originally posted by orfeo:
ADDENDUM: And the main reason I don't believe in the redistribution of tangible property is that it can't be shared in a meaningful way. And it isn't shared here. The property doesn't go to the State or to the poor, it goes to some rich person. In a competition between a rich person who inherited a property and has historical ties to it and another rich person who just has some money to buy a property, it's mystifying to me why anyone should think the government should be assisting the rich person who has some money to buy a property to win out.
Your horror of the Nouveaux Riches and love of the Old Order might have been considered slightly old hat even in the time of Good Queen Anne. But you seem to fail to understand the basis of the transation: the property is bought by the entrepreneur at full market value the proceeds are then divided between the Exchequer and the descendants of the Sixth Duke according to a formula. The money is then used by the Exchequer for kidney machines or rockets and guns depending on the prevailing mood. The government does not insist on the transaction to favour one bread head over another.
Posts: 3869 | From: Quedlinburg | Registered: Jun 2001
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