Tax tips
Repeal of N. tax tips 2002 tax rates. C. Inheritance Tax "A Step In The Right Direction, But. . tax tips Tax. . . " Adams Kleemeier Hagan Hannah & FoutsBy Mike GodwinMany clients are aware that the General Assembly repealed the inheritance tax for estates of persons dying after January 1, 1999. tax tips Tax lien properties. What has not been as widely reported is that the inheritance tax was replaced by an estate tax which is equal to the federal credit for state death taxes paid. Clients also need to be aware of the fact that North Carolina is not in full conformity with the federal transfer tax system and it can be costly for North Carolina residents to effectively use the estate and gift tax system for lifetime gifts. New Estate Tax. Under federal estate tax rules, a decedent''s estate is given a "Credit for State Death Taxes" subject to limits contained in a schedule contained in the Code. This credit is not available unless the amount of the credit is actually paid to the state in question. Many states have abolished their separate estate and inheritance tax systems and have adopted a "pick-up" system that requires the estate to pay to the state the amount that is allowed as a credit by the federal system. While "arriving late for the dance" by doing this after most other states, North Carolina has now adopted a "pick-up" tax system. The effect of North Carolina''s new estate tax being tied to the state death tax credit allowed for federal estate tax purposes is that our residents will automatically receive the benefit of the federal applicable credit amount as it increases to $1,000,000 on January 1, 2006. As an example, if a North Carolina resident dies in 1999 with a taxable estate of $750,000, the tentative federal estate tax is $248,300, reduced by the applicable credit of $211,300 and by the credit for state death taxes of $20,400, for a net estate tax due to the I. R. S. of $16,600. Under the new North Carolina estate tax, the estate will owe North Carolina $20,400, the amount allowed on the federal return as a credit for state death taxes. Unified Federal Transfer Tax System. For federal tax purposes, the estate and gift tax systems are "unified", that is, the tax rates for transfers at death and for lifetime gifts are the same and the federal system provides an "applicable credit" which allows a person to transfer $650,000 by gift or at death in 1999. This "applicable credit" will increase yearly until January 1, 2006 when it will protect transfers of $1,000,000 from estate and gift tax. Other Related Gift Tax Rules.
Tax tips
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