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The purpose of the deferral is to avoid a forced sale of a family business in order to satisfy estate tax obligations. download free tax software Dallas county tax assessor. The Act changes aspects of the authorized deferral for estates of decedents dying after 1997. During the initial four-year period, when interest only is due, the interest rate on the first $1 million in value of the business interests previously was 4%. Beginning next year, the interest rate is reduced to 2% with the $1 million being adjusted for inflation starting in 1999. download free tax software Ask tax questions. As to the interest rate on the balance of the deferral, it has been reduced as well to 45% of the standard rate for underpayments of tax. In return for these benefits, the deferred interest is no longer deductible for either estate or income tax purposes. CommentBy disallowing the deduction for the deferred interest, it is unclear whether the reduction in the interest rates provides any real tax savings. download free tax software Free irs forms. At the same time, the Act does at least eliminate the administrative complexity and associated costs of claiming the annual deduction (which cannot be estimated in advance and changes the taxable value of the estate and therefore the tax which is due). 15% EXCISE TAX ON RETIREMENT PLANS AND IRAs FOR EXCESS DISTRIBUTIONS AND ACCUMULATIONS REPEALEDPrior law provided that when an individual received a distribution of more than $150,000 (as indexed) in one year from an IRA or a qualified plan, a 15% excise tax was imposed on the excess (in addition to the income tax due on the distribution). At death, the "excess accumulation" in an IRA or qualified plan was also subject to a 15% excise tax (in addition to the income tax, estate tax and any generation-skipping tax then due). The excess accumulation was calculated by taking the balance of the plan at death and reducing it by the present value of a benefit which would not be subject to the 15% tax on excess distributions. In 1996, some relief was provided from the tax on excess distributions by a law that repealed it for a three-year window period (1997-99). The Act, however, repeals both the 15% excess distributions tax and the 15% excess accumulations tax in their entirety. CommentIndividuals making large withdrawals from their qualified plans and/or IRAs to take advantage of the three-year window period need not do so anymore. They may revert to a smaller or even minimum distribution amount without concern for the 15% excise tax at death.
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