Organizational Tax Research and Planning - Estate Tax Paper

Organizational Tax and Planning - Estate Tax - Research Paper Example The total value of estate tax is referred to as Gross Estate, while the tax itself is estimated by taking the Fair Market Value of the total taxable estate. If the estate is associated with any Mortgage or fees payable for setting the estate, then the Gross Estate is adjusted to that amount. The Net Value of Estate, which is reduced by the value of exemptions stipulated in the Laws, is the net amount after allowing for all the possible deductions. Case advise In the current case, a wealthy couple owns a farm and a number of businesses that they would like to bestow to their three children. They would like to be advised how to minimize tax against this property, so their children can enjoy the maximum benefit. In order to effectively bequeath the property to their descendants when they die, the couple should exercise proper estate planning, and particularly focus on matters of he estate tax. Looking at the provisions of Estate Tax, it appears that Estate Tax is a must pay tax that is imposed on the transfer of property following the death of the transferor. While it is not possible to avoid this tax, there are a number of ways that the couple can use to evade or legally minimize the impact of this tax. The couple should ensure that they choose the most efficient method of transferring property to their descendants by minimizing estate tax. This includes use of techniques that guarantees minimization of estate tax, which will be discussed later in this paper. Question 2 The current IRS’s provision is that Estate Tax is taxable up to a maximum rate of 35% and exempted up to $120,000. When computing the amount of taxable estate amount, some specific deductions are also available, which are valid up to the end of 2013 only. Beyond this exemption, the value usually reduces to $1,000,000 while the Estate Tax increases to 55%. Some of the significant changes, which have been suggested by the US President, include increasing the tax rate to 45% and introducing an exemption of up to $3,500,000. Certainly, this proposal will not go down very well with the taxpayers and if it is implemented in its current status, it is likely to cause more harm than the benefit it is intended for. The suggestion will impose a heavy burden on the US public, and hence it is important for the congress to device ways of making estate tax provisions friendlier to the taxpayers. In this regards, different congress groups have suggested a number of proposals, which include the following. i. The Extenders group from the farming estate has suggested that the status quo should be upheld in the future, which means the tax collector should continue exempting up to $5,120,000 and imposing tax at the rate of 35%. ii. The conformers support the president’s proposal, which will reduce the amount of exemption to $3,500,000 and increase tax rate to 45%. Therefore, their wish is that this proposal is incorporated in the Estate Tax laws. iii. The Reversers group demands th at the 2001/2002 tax provisions should be reinstated. This provision puts exempted amount at $1,000,000 and the Estate Tax at 55%. Ideally there are five options open to the current estate tax. These include: (i) amendment of the estate tax, (ii) passing of a compromise bill, (iii) extension of TRUIRJCA, (iv) maintaining of the status quo, and (v) implementing of the new suggestion in its current st