Federal income tax calculator
Some tax reporters have noted the complexity of the new Act (e. federal income tax calculator Check status of irs refund. g. , from Richard W. Stevenson in the October 26, 1997 issue of The New York Times: " [The complexity] provides a good living for legions of accountants and tax lawyers,. federal income tax calculator Federal income tax calculator. . . ") Many of the articles attempt to cover the entire litany of changes effected by the Act. federal income tax calculator State-tax-forms. The scope of this article, however, is limited to the relief offered by several key estate and gift tax provisions of TRA 97: the qualified family-owned business estate tax exclusion, the reduction of interest on installment payments, the exclusion for qualified conservation easements, new limitations on charitable remainder trusts, and the prohibition against revaluation of gifts for estate tax purposes. Qualified Family-Owned Business Interest ExclusionJust as it sought to provide tax relief for families on the income tax side by way of the child tax credit, education IRAs, and other measures in the new Act, Congress sought to assist owners of family-owned businesses in the estate tax area. New Section 2033A of the Internal Revenue Code (the "Code") authorizes an estate to exclude a qualified family-owned business interest from the decedent''s gross estate to the extent that the exclusion plus the unified credit does not exceed $1,300,000. Thus, the maximum amount excludable under Section 2033A for a person dying in 1998 will be $675,000 ($1,300,000 minus the 1998 unified credit amount of $625,000). An unintended problem arises under Section 2033A because of lack of coordination between the new family-owned business exclusion and the increase in the unified credit. The unified credit, now termed "applicable exclusion amount" under TRA 97, increases in specified amounts over the nine-year period 1998-2006 from $625,000 in 1998 to $1,000,000 in 2006 and thereafter. While the family business interest excludable in 1998 is $675,000 ($1,300,000 minus $625,000), the maximum excludable amount in 2006 would be only $300,000 ($1,300,000 minus $1,000,000). To correct this anomaly, the Tax Technical Corrections Bill of 1997 (HR 2645) (soon to become the Corrections Bill of 1998, since Congress did not take action on it before adjourning for the year) will coordinate the increase in the unified credit with the decrease in the family-owned business exclusion so that there will be neither an increase nor a decrease in the total estate tax on estates holding qualified family- owned businesses as increases in the unified credit are phased in. There are very strict eligibility requirements for the use of the Section 2033A exclusion, including the following: The business interest must exceed 50% of the decedent''s adjusted gross estate; the business must pass complex "material participation" tests requiring operation by the decedent or members of the family during five of the preceding eight years; "qualified heirs" (including certain employees) must have acquired the business; qualified heirs must agree to pay an additional estate tax if, within ten years following the decedent''s death, certain disqualifying events occur (such as the sale of the business to outsiders); and the estate must affirmatively elect the exclusion. While the Section 2033A requirements may be strict, if the business is such that it can be passed on to family members or long- time employees, a very substantial tax saving opportunity has been provided. Reduction of Interest on Installment SalesSection 6166A of the Code as previously in effect has permitted an estate to elect to defer payment of estate tax attributable to a closely-held business for a period of up to fourteen years. If the election was made, the interest charged on the first $1,000,000 of value, including the unified credit amount, was 4% a year, with interest on additional sums due at the standard rate applicable to underpayment of taxes. Under TRA 97, the 4% rate has been reduced to 2%, and interest on value in excess of $1,000,000 is now at 45% of the underpayment of tax rate. The value upon which the 2% interest is due has also been increased to $1,000,000 over the unified credit amount. It should be noted, however, that accompanying the favorable reduction in interest rates and increase of the amount upon which the 2% interest is due are new provisions of the Act making the interest nondeductible for estate and income tax purposes. Exclusion for Qualified Conservation EasementsUnder new Code Section 2031(c), an executor may elect to exclude from the gross estate part of the value of land subject to a qualified conservation easement (in simplest terms, an easement which limits the developability of the property). The exclusion is limited to the lesser of (A) the "applicable percentage" of the land value, reduced by the amount of any charitable deduction allowed for a contribution of land exclusively for conservation purposes under Code Section 2055(f), or (B) the "exclusion limitation. " The "applicable percentage" is 40% reduced by two percentage points for each percentage point by which the value of the easement is less than 30% of the value of the land.
Federal income tax calculator
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