TexasCHLforum.com

Jim Beaux wrote:Taxpayers are hoodwinked by paying taxes through payroll deduction and property taxes via mortgage payments. It's a case of "out of sight, out of mind"

One doesnt appreciate the high tax rate or the inordinate bureaucratic waste until having to write a check like any other household expense; a practice in itself that would regulate term limits.

I agree, ask ten people how much they paid in income taxes, 9 of them will tell you how much they got back (hint: because they overpaid). I can't speak to all homeowners who pay the property tax and insurance through an escrow account, but when I did, I knew exactly how much each cost.

The IRS found out a long time ago that if people never get the money in the first place, they don't miss it so much. Ta-da, withholding!

Jaguar wrote:

rm9792 wrote:It is not double taxed. Yes the money your parents earned was taxed as income to them when they earned it. However when they die and it goes to you then it becomes income to you as yet untaxed by you. You were not in posession of the money or property till their death so now that you have income you must pay taxes on it. However, that being said I think estate taxes are out of line and should be abolished. If it must be kept then the rate should simply be the same as your regular tax rate.

So you also support sales tax at garage sales?

No, I dont support the estate tax either. I merely pointed out it was not double taxed as the heirs had not paid tax on it. FYI, garage sales are income over and above the basis for the propperty sold so it is possible to tax them.

rm9792 wrote:It is not double taxed. Yes the money your parents earned was taxed as income to them when they earned it. However when they die and it goes to you then it becomes income to you as yet untaxed by you. You were not in posession of the money or property till their death so now that you have income you must pay taxes on it. However, that being said I think estate taxes are out of line and should be abolished. If it must be kept then the rate should simply be the same as your regular tax rate.

Well, sort of.

Income tax is not the same as estate or inheritance tax. What you inherit is not income to you, and in most cases, the tax is on the estate, not on the recipient. The current rules allow estates of up to $5.12 million to avoid all estate taxes, and that level can be effectively doubled for a couple. Large estates that do face taxes must pay a levy of 35 percent, which is low by estate-tax standards. Gift taxes have also been relaxed.

Unless Congress takes action, the $5.12 million exclusion will fall to $1 million effective January 1. And that 35-percent tax rate will jump to 55 percent. Financial advisers have been urging their wealthier clients to seriously consider using the current gift and tax rules to transfer assets to heirs this year.

If you had had the foresight to die before 12/31/10, there would have been no tax at all! This wasn't a completely good deal because the step up in basis is affected as I understand it.

I should confess that I am the 17th reason to use H&R Block, and my taxes are handled by my CPA brother. The foregoing reflects my perhaps crude understanding of how thing work.

sjfcontrol wrote:A prebate makes the effective rate progressive.

And consequently unfair.

Happily Ever After wrote:

sjfcontrol wrote:A prebate makes the effective rate progressive.

And consequently unfair.

How so?

I'm a big proponent of The Fair Tax, having been a taxpayer myself for more than 50 years, read the books, the Legislation and having a fairly decent background in business and law.

Happily Ever After wrote:

sjfcontrol wrote:A prebate makes the effective rate progressive.

And consequently unfair.

The prebate refunds the amount of tax that would be collected on the amount of sales that equate to the poverty level. This prebate is given to EVERYBODY. So nobody pays any tax on the first "poverty level" amount of spending. If that's all you spend (or less), you don't pay any taxes. Everybody is treated the same.

JALLEN wrote:

rm9792 wrote:It is not double taxed. Yes the money your parents earned was taxed as income to them when they earned it. However when they die and it goes to you then it becomes income to you as yet untaxed by you. You were not in posession of the money or property till their death so now that you have income you must pay taxes on it. However, that being said I think estate taxes are out of line and should be abolished. If it must be kept then the rate should simply be the same as your regular tax rate.

Well, sort of.

Income tax is not the same as estate or inheritance tax. What you inherit is not income to you, and in most cases, the tax is on the estate, not on the recipient. The current rules allow estates of up to $5.12 million to avoid all estate taxes, and that level can be effectively doubled for a couple. Large estates that do face taxes must pay a levy of 35 percent, which is low by estate-tax standards. Gift taxes have also been relaxed.



I should confess that I am the 17th reason to use H&R Block, and my taxes are handled by my CPA brother. The foregoing reflects my perhaps crude understanding of how thing work.

Never said it was the same tax. You have 2 types of income, earned and unearned. I am not talking Law here just theory. Income is any money or value incoming to you. Heirs did not have the money, then upon death they do, it is in fact unearned income. Now the IRS has it set at different rates and exclusions but I am strictly speaking high level that it is in fact income therefore as yet untaxed. My background is I am 6 classes short of my bull in Accounting/Finance. I am currently in Federal Taxation at UHCL and had this same discussion last week with the instructor, an IRS Auditor.
I still don't believe it should be taxed but the double taxation argument will not work to help end it as it simply isn't true. I for one would like to stop renting my property from the state and just pay higher sales taxes. At least then if I am ever in hard times I would never be homeless.

JALLEN wrote:

Happily Ever After wrote:

sjfcontrol wrote:A prebate makes the effective rate progressive.

And consequently unfair.

How so?

The handout (prebate) is socialist wealth redistribution. That makes it unfair.

Disclaimer: I'm from Texas, not California.

Happily Ever After wrote:

JALLEN wrote:

Happily Ever After wrote:

sjfcontrol wrote:A prebate makes the effective rate progressive.

And consequently unfair.

How so?

The handout (prebate) is socialist wealth redistribution. That makes it unfair.

Disclaimer: I'm from Texas, not California.

You are merely getting back the same amount of tax that you paid (will pay) on the first X dollars of spending. You are "redistributing" it to yourself.

sjfcontrol wrote:You are "redistributing" it to yourself.

If that was true, they could simply lower the tax rate for everyone, making the Fair Tax [sic] actually a fair tax by charging everyone the same nominal and effective tax rates. There's no need to pass it through the government's hands at all, if the goal is to redistribute my wealth to myself. Just let me keep it.

But that's not their plan. Instead, they intentionally put a handout into their plan, and do a lot of hand waving to distract people from the fact that it's a handout. That's socialist weath distribution no matter how hard they try to spin it.

rm9792 wrote:
Never said it was the same tax. You have 2 types of income, earned and unearned. I am not talking Law here just theory. Income is any money or value incoming to you. Heirs did not have the money, then upon death they do, it is in fact unearned income. Now the IRS has it set at different rates and exclusions but I am strictly speaking high level that it is in fact income therefore as yet untaxed. My background is I am 6 classes short of my bull in Accounting/Finance. I am currently in Federal Taxation at UHCL and had this same discussion last week with the instructor, an IRS Auditor.
I still don't believe it should be taxed but the double taxation argument will not work to help end it as it simply isn't true. I for one would like to stop renting my property from the state and just pay higher sales taxes. At least then if I am ever in hard times I would never be homeless.

So, this is one of those, "It is impossible in theory, but works well in practice" issues that theorists like to debate, high level theorists, like IRS auditors?

What's a "bull" in Accounting/Finance? Maybe an abbrev., like U.N. for "utter nonsense?"

What's UHCL?

JALLEN wrote:

rm9792 wrote:
Never said it was the same tax. You have 2 types of income, earned and unearned. I am not talking Law here just theory. Income is any money or value incoming to you. Heirs did not have the money, then upon death they do, it is in fact unearned income. Now the IRS has it set at different rates and exclusions but I am strictly speaking high level that it is in fact income therefore as yet untaxed. My background is I am 6 classes short of my bull in Accounting/Finance. I am currently in Federal Taxation at UHCL and had this same discussion last week with the instructor, an IRS Auditor.
I still don't believe it should be taxed but the double taxation argument will not work to help end it as it simply isn't true. I for one would like to stop renting my property from the state and just pay higher sales taxes. At least then if I am ever in hard times I would never be homeless.

So, this is one of those, "It is impossible in theory, but works well in practice" issues that theorists like to debate, high level theorists, like IRS auditors?

What's a "bull" in Accounting/Finance? Maybe an abbrev., like U.N. for "utter nonsense?"

What's UHCL?

"Bull" is what the net-nanny changes the abbreviation for "B"atchelor of "S"cience to. I'm not going to comment on it's appropriateness...

Happily Ever After wrote:

sjfcontrol wrote:You are "redistributing" it to yourself.

If that was true, they could simply lower the tax rate for everyone, making the Fair Tax [sic] actually a fair tax by charging everyone the same nominal and effective tax rates. There's no need to pass it through the government's hands at all, if the goal is to redistribute my wealth to myself. Just let me keep it.

But that's not their plan. Instead, they intentionally put a handout into their plan, and do a lot of hand waving to distract people from the fact that it's a handout. That's socialist weath distribution no matter how hard they try to spin it.

It is generally recognized that it is inappropriate to tax those who are truly poor, for the necessities of life such as food and shelter.
It appears, perhaps, that you disagree with that. If that's the case, then enjoy your current "non-progressive" system. How many tax brackets are there now? I lose count.

Since it would be problematic to eliminate a sales tax only for the poor, and only on necessities -- they "prebate" to everybody (not just the poor) the taxes that would be paid by somebody spending at the poverty level. That way nobody needs to prove they qualify, because everybody does. If they were to eliminate the prebate, and lower the rates, then the poor would still be paying taxes on their necessities. Instead, everybody avoids payment of tax on the poverty-level necessities.

Seems a pretty slick way to do it to me.

Sorry, was thinking local. Uhcl is university of houston clear lake. Yeah i agree with the bull part. Wish they would get some other term.

rm9792 wrote:It is not double taxed. Yes the money your parents earned was taxed as income to them when they earned it. However when they die and it goes to you then it becomes income to you as yet untaxed by you. You were not in posession of the money or property till their death so now that you have income you must pay taxes on it. However, that being said I think estate taxes are out of line and should be abolished. If it must be kept then the rate should simply be the same as your regular tax rate.

Is your professor (the IRS auditor) telling you this? Is he/she maybe talking about tax deferred vehicles (like 401(k) beneficiary payout - 1099R) or how certain states in the U.S. have an inheritance tax?

If I'm gifted or inherit $50k in cash, how much income do I have to report & pay tax on? If I inherit a house that has a FMV of $250k (as valued @ estate) and then sell it for $200k six months later, how much would be taxable? If I give you a pistol that has a FMV of $1k, do I have to send you a 1099 (so you can pay tax on it)? If I had any doubt about how to answer these, I just might ask the federal tax professor to cover the treatment of gifts & inheritance again.