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[Devolution]

Saw "death tax" in title. Knew what to expect.

 

[reKon]

I'm a tax auditor, so here's my 2 cents on this:

Yes, we pull stuff totally bogus stuff/bills all of the time.

Why do we do this?
Cause either
1)Taxpayer doesn't want to give us any records, so I'm allowed to assume anything I want (ex: "You got nothing? I'll assume your entire tax return is wrong then.) or
2)Taxpayer doesn't agree to our assessments but have no evidence to disprove it. (in this case, the couple refuses to pay the original $17M assessment, probably with no good legal argument against it. That or the regulations are up to interpretation, which means it should be closed sooner and let it go to court anyway)

Obviously we can't go to our supervisor and say "Ok, I can't get anything out of them, so let's assess them with a $0 bill." If that's all we do all day, then every taxpayer/corporation will just do that and get themselves off the hook.

So in those cases we are either forced to:
1)Come to a compromise with the taxpayer (bad for everyone)
2)Force a big assessment based on the wildest assumption, to hope that taxpayers will comply/give records/ try to work with us.
3)Force a big assessment down, wait for the taxpayer to protest and hopefully give us something to prove someone wrong.
4)Force something down so the case can be closed sooner and just go to court and have them figure it out.

The last thing you want is some case staying open forever wasting everyone's money on a he-said/she-said battle.

Interesting (at the part I bolded). There have been a few past cases I've read where it seemed like the IRS would bring up an issue against the defendant in court simply because there was something that the IRS didn't like even with the code supporting the defendants arguments. I don't believe these cases had anything to do with the defendant providing insufficient records either.

I guess what you said brings more clarity to why the IRS acts the way it does in certain circumstances.

 

[shadowsdarknes]

You lied and got caught. But dont' fess up to it . . . just start with more bullshit.

Yeah, as if we don't have thousands of pages of tax code, thousands of judicial rulings on the tax code, and competent judicial branch where you can argue your case up to the supreme court. Nah . . . just whine that the gubmint' iz teh evil.

Your just the candidate the IRS targets. Have fun with your future audit!

 

[Allard]

If they win their case against the IRS and subsequently sell the piece, then they would presumably be doing so with a basis of $0, and would therefore be taxed on any income they received. The rub here, is that the amount of tax assessed in this situation would be significantly less than what is owed under the estate tax.

What's interesting, is that the IRS seems to be ignoring its own regulations when assessing this piece at such a high value. IRS regs state that:

The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. The fair market value of a particular item of property includible in the decedent's gross estate is not to be determined by a forced sale price. Nor is the fair market value of an item of property to be determined by the sale price of the item in a market other than that in which such item is most commonly sold to the public, taking into account the location of the item wherever appropriate.​

26 C.F.R. § 20.2031–1(b)

I would say that a very relevant fact is that it is against the law to sell the piece, which is why Christie's valued it at zero. Now, we know that the decedent obtained a waiver to possess the piece, but can the heirs obtain a similar waiver to allow them to sell it? If they cannot obtain this waiver, then I think the IRS's assessment of its value is on shakey ground. If, however, they could obtain the waiver but simply do not want to part with the artwork, then I think the IRS stands a strong chance of prevailing on the issue.

If anything a different way of looking at it is if its illegal to sell and thus can't be taxed, wouldn't it be illegal to even receive the item in the first place since its changing from one owner to another? Part of the reason IRS taxes at market value (even illegal value) is that the law can be changed down the line and suddenly they dodged the estate tax that originally gave them the item in the first place.

 

[Dreamgazer]

Your just the candidate the IRS targets. Have fun with your future audit!

Dude, read this please:

http://www.reddit.com/r/funny/comments/p69fd/the_irs_is_made_of_people/

We often go out of our way to give people money BACK

 

[shadowsdarknes]

Dude, read this please:

http://www.reddit.com/r/funny/comments/p69fd/the_irs_is_made_of_people/

We often go out of our way to give people money BACK

That's nice. Yet, an audit is hell for people, stressful and hectic. Although, the result is still a nice gesture.

I still believe y'all have more than enough power at your disposal and need no more.

Different stances on the issue.

 

[Dreamgazer]

That's nice. Yet, an audit is hell for people, stressful and hectic. Although, the result is still a nice gesture.

I still believe y'all have more than enough power at your disposal and need no more.

Different stances on the issue.

No one said anything about giving the IRS more power in this thread.
Your comments are being picked on cause your stance seems to be that the IRS are just out there preying on whatever "random naive citizen" their darts land on.

You're also accused of lying because the statue of limitation on auditing a "mistakenly misreported" return is only 3 years instead of your claimed "10 years". The 10 year SOL only applies to tax liabilities due, and unlimited SOL on returns not filed at all.

Seriously, first you got your facts wrong, then you made some odd statement about "people being painted as targets" and now you're trying to pretend....

oh why am I even bothering.

The only thing I can agree on is that the tax code needs to be simplified.

Interesting (at the part I bolded). There have been a few past cases I've read where it seemed like the IRS would bring up an issue against the defendant in court simply because there was something that the IRS didn't like even with the code supporting the defendants arguments. I don't believe these cases had anything to do with the defendant providing insufficient records either.

I guess what you said brings more clarity to why the IRS acts the way it does in certain circumstances.

There have been cases where we (from my experiemce) will delibrately try to get a case to court even if we know we'll lose/get nowhere:

1)To hopefully close/bring certain loopholes to attention -most of the time people are not going to fight an assessment if they know they're exploiting certain tax loopholes. They'll pay up the smaller amount, just so the issue won't escalate to technical advisory/lawyers/courts (in other words, a compromise). If you find some gung-ho, ill-educated taxpayer/lawyer who wants to fight it and "expose" themselves, then you usually try to play along just so the court will have to deal with it/set a precedent. Even if it means losing that case as a whole (we may not get our ridiculous assessment, but the court will having a ruling on whether taxpayers are allowed to exploit/interpret things in a certain way.)

2)Dissatisfaction with how the administration does things (ex: rushing audits, pressuring taxpayers). Yes, internal pressures may force a case into court just so certain rules/administrative. Auditors may want people to escalate cases, just so we can throw out unfair policies/rules from within the organization.

3)Cause we really want to know what to do ourselves.


P.S. Audit is hell for everyone, but especially so for the tax auditors.
You're not appreciated when you walk in the door, out door or even ended up helping getting money back.
Auditors/Fraud-examiners (non-public) fight the "evil corporations" but at the same time everyone want them to just go away.

 

[Cipherr]

if you take off zeros, it's like a story about normal people

lmao

 

[Stinkles]

Saw "death tax" in title. Knew what to expect.

Job creators shouldn't have to fund Obamacare Death Panel Democrat party.

 

[mre]

Part of the reason IRS taxes at market value (even illegal value) is that the law can be changed down the line and suddenly they dodged the estate tax that originally gave them the item in the first place.

The IRS can only assess under the law as it is written. The proper method for capturing the lost tax revenue should the law later be amended to make the it legal to sell the artwork, is to tax the income received by the heir when he or she sells that item. Since the FMV of the item is $0 at the time the decedent passed, then that is the basis the heir will have in the artwork.

And, again, I stand by my argument only to the extent that the heirs have been unable to obtain a waiver from the appropriate department to sell the artwork.

 

[Freshmaker]

Please. You guys think it's reasonable to charge $29 million in taxes for something, based on an appraisal by the same people (IRS) who are getting the money, that's actually worth $0? Get your heads out of your asses.

Death tax? Election scaremongering boogieman story. Zzzzz....

 

[elrechazado]

Please. You guys think it's reasonable to charge $29 million in taxes for something, based on an appraisal by the same people (IRS) who are getting the money, that's actually worth $0? Get your heads out of your asses.

But they are rich lol so it's ok!

 

[fizzelopeguss]

I dont understand art

29 mil for that?!

Contemporary art dealership is a masturbatory clique for the rich and the ignorant. There to sell mass produced tat and take millions from fools who'll never be able to own priceless works from the old masters.

 

[Stinkles]

Contemporary art dealership is a masturbatory clique for the rich and the ignorant. There to sell mass produced tat and take millions from fools who'll never be able to own priceless works from the old masters.

You could buy several old master works for 30 mill. Sketches and miniatures. And it's subjective.

 

[Devolution]

You could buy several old master works for 30 mill. Sketches and miniatures. And it's subjective.

I love how it's just modern art that's a rip off. Generally a lot of "collectibles" are rip offs. If people place value on them, oh fucking well.

 

[PS3GamerKyle]

I'm indifferent to this situation, but if the item cannot be sold, why is its value at $65 million? IRS just wants to make bank off this deal. Hopefully the courts clear this out.

 

[prwxv3]

Just because someone is rich and they can afford taking it up the ass from the IRS does not mean they should take it up the ass from the IRS. Personally if this happend to me and I was rich as fuck I would be giving the IRS as much shit as possible to overturn it.

 

[Zzoram]

No, I mean if:

Person A owns the property, passes away, leaves it to Person B
Person B owns the property, passes away, leaves it to Person C
Percon C owns the property, passes away...

within a short span of time.

Would the taxes be paid based on the full value of the property each time?

No. A to B on say an estate worth $10 million, lets say you lose 40%, so when it goes from B to C the tax is 40% on the remaining $6 million, and from C to D there is no estate tax since less than $5 million is left.

The value of the estate goes down with each transfer due to taxes paid, so the dollar amount of each successive tax decreases until you drop below the threshold and pay nothing more.

 

[Buttchin]

Maybe this has been answered already but why can't the family simply sell it overseas? Is the law you can't own it or take it out of the country?

 

[Ignatz Mouse]

They are not trying to dodge taxes, which is why they sold over $600M and have paid $471M in taxes on the collection.

In a more relateable example, you have long time farm owners who have their kids inherit the farm when they die - and the kids can't afford to even keep it because they are hit with a big inheritance tax and are forced to sell the farm simply because someone's heart isn't beating anymore.

http://www.faireconomy.org/news/estate_tax_faqs

What about farms and small businesses?Very few family farms and small businesses are affected by the estate tax. The Congressional Budget Office estimates that with a $2 million exemption, only 123 farms per year in the U.S. would owe any estate tax, and the number of small businesses is similarly small. In 2001, the New York Times reported that American Farm Bureau Federation (who was in favor of repealing the estate tax) could not cite a single case of a family farm lost due to the estate tax.

On average, those few small business and farm estates will owe only 14 percent of the estate, so it is unlikely they will have to sell the business or farm. Plus, they can spread any payments over 14 years. They also benefit from special use valuation, and minority interests and marketability discounts.

Moreover, gutting the estate tax would actually hurt family farms. The estate tax helps make family farms more competitive against mega-scale agriculture, because it moderates ever-larger concentrations of wealth and economic clout. Repeal of the estate tax or exempting farms completely will only encourage further concentration of farm ownership, which reduces competition. An unlimited exemption for farm assets could create a giant loophole from the estate tax because wealthy individuals who expect to owe estate tax could use much or all of their wealth to buy farms before they died.

 

[Kettch]

This particular example is certainly not fair, the IRS obviously needs to fix their evaluations. On the other hand, these people still have $400m worth of art they can sell, so I don't feel particularly sorry for them.

 

[SquiddyCracker]

Another way of looking at it:

Something might be unsellable atm, but what's to say that it won't gain value in a month or two?
Let this slip by and you set a precedent, enabling people to skip the tax because it "can't be sold" and then have it sell later on.

 

[mre]

Another way of looking at it:

Something might be unsellable atm, but what's to say that it won't gain value in a month or two?
Let this slip by and you set a precedent, enabling people to skip the tax because it "can't be sold" and then have it sell later on.

At which point they would then pay tax on the income they received by selling it...

 

[rCIZZLE]

Please. You guys think it's reasonable to charge $29 million in taxes for something, based on an appraisal by the same people (IRS) who are getting the money, that's actually worth $0? Get your heads out of your asses.

These people are rich so we must hate them and wish they get repeatedly ripped off.

 

[SquiddyCracker]

At which point they would then pay tax on the income they received by selling it...

Yeah, but then they only need to pay tax once instead of twice, despite their having been two transactions involved.

 

[this_guy]

Another way of looking at it:

Something might be unsellable atm, but what's to say that it won't gain value in a month or two?
Let this slip by and you set a precedent, enabling people to skip the tax because it "can't be sold" and then have it sell later on.

That's no different than a stock or mutual fund jumping in value down the line. If you inherit a stock, the stock is valued on the date of death, not some hypothetical future value because the value might increase.

 

[percephone]

This is essentially what happened to me. When my grandmother passed away all the farmland was split up for the grandkids. Each of us got 140 or so acres, which if we could have rented it would have been about 30 grand a year. And I would have gladly accepted paying taxes on that to help jumpstart my retirement savings. Instead, thanks to estate taxes and being cash poor, I ended up selling it all off for way less than it was valued at in the scramble to pay the taxes before I got hit with late penalties. All my cousins had to do the same, so in the end none of us got anything.

how much to pay on that 140 acres?

 

[mre]

Yeah, but then they only need to pay tax once instead of twice, despite their having been two transactions involved.

That is incorrect.

Let's look at it this two ways. In the first way, we'll say the artwork has a FMV of $50m for estate tax purposes, and, in the second, we'll say it has a fmv of $0 for estate tax purposes, with both of these being the value of the artwork upon the date the decedent died.

In our first scenario, they owe and pay estate taxes on the artwork because they inherited it and because it has a value over the statutorily provided exemption amount. They now have a basis in that art equal to its FMV at the time the decedent passed, or $50m. They then sell the artwork for $50m. They pay no additional tax, because the amount they received for the artwork less their basis in it, is $0. Had the artwork increased in value since the decedent's death, then they would have paid tax on this increase in value over their basis in it, so if they sold it for $60m, they would only pay tax on $10m. Whether this is capital gains or ordinary income depends upon several other factors.

In the second scenario, they owe and pay no estate taxes on the artwork, because when they inherited it, it was assessed with a value of $0. This is now their basis in the artwork. If they later sell it for $50m, they then pay tax on the entire $50m because their basis in it was $0. If they later sell it for $60m, then they will pay tax on the entire $60m.

 

[GungHo]

The estate tax cracks me up. It can largely be avoided with good estate planning (just ask Mitt Romney). And less than 2% of the population will ever be subjected to it yet amazingly wealthy people are able to get idiots like Kosmos to feel sorry for them. LOL.

Welcome to the Republican Party.

 

[antonz]

Welcome to the Republican Party.

Except the only ignorant people in this thread are ones who certainly follow Obama.

 

[Cyan]

Except the only ignorant people in this thread are ones who certainly follow Obama.

So you're saying you haven't read the thread.

 

[antonz]

So you're saying you haven't read the thread.

Oh I have read the whole thing. Lots of fuck the rich comments and other ignorant statements

 

[Cyan]

Oh I have read the whole thing. Lots of fuck the rich comments and other ignorant statements

Yep. And a lot of people ignorant of how estate taxes work. Pretty confident those people are Republicans. *shrug*

 

[cametall]

I'm all in favor of abolishing the estate tax. What a joke. The IRS is relentless.

You have to talk to Congress about that one. They've screwed around with it so much in the last 3 years.

 

[Chichikov]

Contemporary art dealership is a masturbatory clique for the rich and the ignorant. There to sell mass produced tat and take millions from fools who'll never be able to own priceless works from the old masters.

That's a work from 1959, I wouldn't really call it contemporary (and it's most certainly not mass produced).

I think the term you're looking for is abstract or nonfigurative art.
But that would mean that you just called Rothko and Pollock a masturbatory clique, and you wouldn't do that, right?

 

[cametall]

That is not even what I'm talking about. You cannot give another individual in the United States more than $13,000 a year tax free.

If I wanted to say, give my brother $50,000 this year, to help him buy a house, I would have to pay taxes on that money, again.

You could always eat up part of your Unified Credit to avoid the taxes now.

But you could be screwing your beneficiaries at your death.

 

[-_-]

The 1%'s problems...

 

[yarden24]

I am honestly baffeled by all the people here that hate other human biengs just because they have more then they do.

if I may ask, is everyone here that expressed such opinions from the US?

 

[The Technomancer]

I am honestly baffeled by all the people here that hate other human biengs just because they have more then they do.

if I may ask, is everyone here that expressed such opinions from the US?

When you're working your ass off to live on (probably significantly less than) 100k a year its very hard to be emotionally sympathetic to people who's problems are that out of 600 million dollars worth of inheritance they may have some issues with a 39 million dollar chunk of it. Doesn't mean the IRS isn't wrong, mind you.

 

[Lambtron]

I think that the rich are paying too little in taxes at this point. I don't have issues with the estate tax. This is certainly an example of the IRS being pretty silly, but let's not act like the wealthy don't have the game strongly rigged in their favor. I don't hate rich people for being rich. I hate the fact that the government can be easily influenced by money, and that the very wealthy have things pretty easy because of it.

This isn't me being envious. I'm not too lazy. I am not wealthy, and therefore have fewer opportunities granted to me to amass additional wealth. It's a rigged game. If you want to carry water for this bullshit system be my guest, but it's really ridiculous and most of us are hurt by it.

 

[yarden24]

When you're working your ass off to live on (probably significantly less than) 100k a year its very hard to be emotionally sympathetic to people who's problems are that out of 600 million dollars worth of inheritance they may have some issues with a 39 million dollar chunk of it. Doesn't mean the IRS isn't wrong, mind you.

why? I am a student, and I assure you I make much much less then 100k a year, yet I can sympathize with the couple, paying 65 million dollars for something that can not be sold is a 65 million dollar loss, thats huge, no one, no matter how rich wouldnt mind just losing that sum, can they affored it? probably, I dont see how thats relevant,

these people have been screwed, and I dont see how the fact that they can afford it changes anything

 

[Keru_Shiri]

When you're working your ass off to live on (probably significantly less than) 100k a year its very hard to be emotionally sympathetic to people who's problems are that out of 600 million dollars worth of inheritance they may have some issues with a 39 million dollar chunk of it. Doesn't mean the IRS isn't wrong, mind you.

No no, we're not calling for the total establishment of the IRS so clearly we hate success.

(I don't think the IRS is 100% in the right about this either, I'm just not as outraged at this as I am about other things.)

 

[The Technomancer]

why? I am a student, and I assure you I make much much less then 100k a year, yet I can sympathize with the couple, paying 65 million dollars for something that can not be sold is a 65 million dollar loss, thats huge, no one, no matter how rich wouldnt mind just losing that sum, can they affored it? probably, I dont see how thats relevant,

these people have been screwed, and I dont see how the fact that they can afford it changes anything

I wouldn't. Oh I'd fight against it like this couple are doing and the IRS is in the wrong in this case, but its not like if I lost that money my financial comfort has been in any way impacted. If I'm operating on the scale of wealth that involves an inheritance this big than that amount of money falls below my resolution of concern. At this point it really just becomes a numbers game.

 

[Beerman462]

I think that the rich are paying too little in taxes at this point. I don't have issues with the estate tax. This is certainly an example of the IRS being pretty silly, but let's not act like the wealthy don't have the game strongly rigged in their favor. I don't hate rich people for being rich. I hate the fact that the government can be easily influenced by money, and that the very wealthy have things pretty easy because of it.

This isn't me being envious. I'm not too lazy. I am not wealthy, and therefore have fewer opportunities granted to me to amass additional wealth. It's a rigged game. If you want to carry water for this bullshit system be my guest, but it's really ridiculous and most of us are hurt by it.

I don't hate rich people. I hate people that pretend they do not benefit from our government and at the same time exploit it.

 

[yarden24]

I wouldn't. Oh I'd fight against it like this couple are doing and the IRS is in the wrong in this case, but its not like if I lost that money my financial comfort has been in any way impacted. If I'm operating on the scale of wealth that involves an inheritance this big than that amount of money falls below my resolution of concern. At this point it really just becomes a numbers game.

sigh, ill give an example similar to one that was given to you before, say a friend of mine dies, as a result the goverment decides the best course of action is to fine me 100$, now I can certainly live with 100$ less, how would you feel about that?

 

[Snowman Prophet of Doom]

But that would mean that you just called Rothko and Pollock a masturbatory clique, and you wouldn't do that, right?

Well, somebody gets something out of masturbation, so no.

 

[Beerman462]

sigh, ill give an example similar to one that was given to you before, say a friend of mine dies, as a result the goverment decides the best course of action is to fine me 100$, now I can certainly live with 100$ less, how would you feel about that?

Did he also leave you $2068.

 

[yarden24]

Did he also leave you $2068.

sure, lets say he did , generally 2000$ would be tax exempt, but in this particular case, they take 100$

 

[Beerman462]

sure, lets say he did , generally 2000$ would be tax exempt, but in this particular case, they take 100$

Man your friend died and your worried about money???j/k. It would be shitty, but I'm not going hold a vigil and start a kickstarter.

 

[yarden24]

Man your friend died and your worried about money???j/k. It would be shitty, but I'm not going hold a vigil and start a kickstarter.

sure, but if that were the case, maybe a lot of people still would not care, and I have no problem with that, but I would not get any hate for it,

these people which have a similar situation (although on a much larger scale) are getting grief simply because they are rich, that is what I do not understand