Hypothetical tax question

Shreddy · 12-11-2023, 04:33 PM

Being a tax attorney, I always enjoy when these questions pop up and seeing the answers of the general public. With that said, I'll also echo what's been previously been said...seek professional advice from a CPA/attorney who specializes in this area. The benefit will significantly outweigh the cost given the "hypothetical" fact pattern

LIforrelaxin · 12-11-2023, 05:09 PM

As all have discussed, the right thing to do is seek qualified advice. There are lots of in and outs that can be considered.

For the most part when a spouse dies there is very little to worry about, unless things are only in the name of the spouse that dies. Then it it can get interesting if there is considerable equity in only one name....

As for what type of Step up in value happens when the property passes on to the next generation, well it is all a mater of timing... My mother passed on a few years ago, just before the last round of unbelievable value increases around the lake... So well we got a step up in value, we still are left with considerable capital gains should we sell.....

John Mercier · 12-11-2023, 10:30 PM

Quote:

Originally Posted by Shreddy

Being a tax attorney, I always enjoy when these questions pop up and seeing the answers of the general public. With that said, I'll also echo what's been previously been said...seek professional advice from a CPA/attorney who specializes in this area. The benefit will significantly outweigh the cost given the "hypothetical" fact pattern

What is interesting is the mixing of the inheritance tax, with the capital gains tax, and the primary home exemption.
My understanding is these are all different.

Shreddy · 12-12-2023, 09:05 AM

Quote:

Originally Posted by John Mercier

What is interesting is the mixing of the inheritance tax, with the capital gains tax, and the primary home exemption.
My understanding is these are all different.

Very much so. The intricacies of the code are so unique but lend themselves to so many opportunities to be strategic. The Honorable Learned Hand said it best in several different cases...

"Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes...Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant."

camp guy · 12-12-2023, 10:03 AM

An extraordinarily high percentage of the population has, truly, no understanding of the immensely complicated Tax Code, both State and Federal, and yet, an extraordinarily high percentage of these people rattle on about taxes (of all types). In my humble opinion, the best answers you can get regarding Tax Code issues is from an attorney specializing in Tax Code law with whom you can sit down in a face-to-face setting and fully discuss your specific, personal issues. All other forms of information gathering will surely lead to a misunderstanding and misapplication of the Tax Code, and you, yourself will still have questions.

ITD · 12-12-2023, 10:53 AM

Quote:

Originally Posted by camp guy

An extraordinarily high percentage of the population has, truly, no understanding of the immensely complicated Tax Code, both State and Federal, and yet, an extraordinarily high percentage of these people rattle on about taxes (of all types). In my humble opinion, the best answers you can get regarding Tax Code issues is from an attorney specializing in Tax Code law with whom you can sit down in a face-to-face setting and fully discuss your specific, personal issues. All other forms of information gathering will surely lead to a misunderstanding and misapplication of the Tax Code, and you, yourself will still have questions.

And it's a very sad state of affairs that it is so complicated you need an attorney to explain it to you.

John Mercier · 12-12-2023, 11:57 AM

Be happy it is in the US and your a US resident.

Polyclad used to be owned by Cookson, traded on the London Exchange in British Pounds. Determining the value of your ESOP wasn't overtly difficult... navigating the sale and taxation was a uniquely trying experience.

Company made the buy-in experience pleasant, and the cash-out was on our own.

I am still wondering how intricate the ROTH/Traditional IRA system will be as they play around with the rules each year.

longislander · 12-12-2023, 12:47 PM

I'm probably going to be sorry for commenting. I'm not an attorney, but do have paralegal certification, since 1998. Only an attorney can legally give legal advice.

Quote:

If one of the owners dies…they are husband and wife.. does the surviving spouse now own the property ...

First, is the property deed in both husband and wife's name; hopefully, with joint tenancy with rights of survivorship? If yes, then the surviving spouse is sole owner of the property (homestead) and then, any other federal or state law applies accordingly.

Just noticed:

Quote:

We have gone the trust route,

How about a Trust attorney!

https://ansellpa.com/application/fil...RUSTS.2018.pdf

Sue Doe-Nym · 12-12-2023, 01:45 PM

At the risk of being labeled a smart###, I would depart for the pearly gates first, leaving the decisions to my husband….. the perfect scenario would be for the last survivor to leave the property upon his death to the next generation, thus avoiding lots of headaches and providing years of enjoyment. However, the down side of all that are potential disagreements among the heirs over almost everything pertaining to the property, which is sad.
Anyhow, interesting discussion.

Major · 12-12-2023, 02:33 PM

Quote:

Originally Posted by John Mercier

Be happy it is in the US and your a US resident.

Polyclad used to be owned by Cookson, traded on the London Exchange in British Pounds. Determining the value of your ESOP wasn't overtly difficult... navigating the sale and taxation was a uniquely trying experience.

Company made the buy-in experience pleasant, and the cash-out was on our own.

I am still wondering how intricate the ROTH/Traditional IRA system will be as they play around with the rules each year.

Small world! I worked for Cookson Electronics, which was owned by Cookson Group plc and owned Polyclad, from 2000 to 2003. I cashed out my Cookson options in 2004. I don't remember a particular tax issue. Hopefully I did it correctly!

John Mercier · 12-12-2023, 03:32 PM

Quote:

Originally Posted by Major

Small world! I worked for Cookson Electronics, which was owned by Cookson Group plc and owned Polyclad, from 2000 to 2003. I cashed out my Cookson options in 2004. I don't remember a particular tax issue. Hopefully I did it correctly!

They were using ADRs by then.

The ESOP for us came in the mid-90s, and first round no one realized the limitations.

Major · 12-12-2023, 04:00 PM

Quote:

Originally Posted by John Mercier

They were using ADRs by then.

The ESOP for us came in the mid-90s, and first round no one realized the limitations.

Good to know. Did you know Joe S., Dick M., Steve O. or Bill V.? Very nice people there.

Mr. V · 12-12-2023, 04:37 PM

Oh what a tangled web we weave, when from taxes we seek relief...

How true that is.

John Mercier · 12-12-2023, 07:10 PM

All Polyclad employees knew the executive staff. Richard wanted it that way.
I think he may have gotten it from Mike. When Mike owned the company, and for the five year tenure that he led under Cookson, he would walk the Franklin plant about once a week and talk to everyone. Joe would hardly ever be seen. He would join the crews during holiday parties.

Even after taking the presidency, Joe was mostly seen during holiday parties; but by that time we had moved from the three small plants to international, so nobody really expected to see him as much as they had Mike; though most of the old timers would bring it up every so often.

Ostrow, I would see all the time... but that was mostly the interaction between engineering and quality control. Varnell only occasionally as I had to review the quality of some new processing changes that would come about under his tenure. He would usually come to me with Steve.

Not really sure who Dick M. is...
We had several Richard's that worked for us over the years... and I doubt it could be Dick McDonald. I don't remember him being with the company in 2002.

Major · 12-13-2023, 08:36 AM

Quote:

Originally Posted by John Mercier

All Polyclad employees knew the executive staff. Richard wanted it that way.
I think he may have gotten it from Mike. When Mike owned the company, and for the five year tenure that he led under Cookson, he would walk the Franklin plant about once a week and talk to everyone. Joe would hardly ever be seen. He would join the crews during holiday parties.

Even after taking the presidency, Joe was mostly seen during holiday parties; but by that time we had moved from the three small plants to international, so nobody really expected to see him as much as they had Mike; though most of the old timers would bring it up every so often.

Ostrow, I would see all the time... but that was mostly the interaction between engineering and quality control. Varnell only occasionally as I had to review the quality of some new processing changes that would come about under his tenure. He would usually come to me with Steve.

Not really sure who Dick M. is...
We had several Richard's that worked for us over the years... and I doubt it could be Dick McDonald. I don't remember him being with the company in 2002.

Joe was tight with Ray Sharpe, so that's probably why you didn't see him much. He spent a lot of time in Providence. Steve is a sweetheart. Unfortunately, Bill passed away about 7 years ago from cancer. Dick M. is Richard Mahoney. Great guy.

I never met Mike, but he was friends with my dad. Some legendary stories about him!

John Mercier · 12-13-2023, 12:14 PM

Forgot about Mahoney.

Mike was a character.

retired · 01-26-2024, 12:10 PM

Since the property is owned jointly, the surviving spouse gets a stepped up basis for only half of the value. He/she should consider living in it as their primary home long enough to get the $250,000 exclusion on the gain. If they plan on keeping it until death and passing it on to the kids, then they will get a full step up in basis.

jeffk · 01-26-2024, 01:29 PM

Quote:

Originally Posted by retired

Since the property is owned jointly, the surviving spouse gets a stepped up basis for only half of the value. He/she should consider living in it as their primary home long enough to get the $250,000 exclusion on the gain. If they plan on keeping it until death and passing it on to the kids, then they will get a full step up in basis.

As I previously noted, IF you are living in a COMMUNITY PROPERTY STATE, like NH, then it is likely the surviving spouse will get a FULL stepped up basis because the ownership in such a state is considered to be 100% BY EACH SPOUSE.

There may some nuances, such as when the property was purchased, etc. Therefore, as mentioned by many, if you want a definitive answer FOR YOUR SITUATION, CONTACT AN ATTORNEY in the state where you live. If the property is owned in a different state than where you live, you might want to talk to an attorney in the state where the property is as well.

phoenix · 01-26-2024, 02:53 PM

that's what my tax acct said also full step up and that's what i did on the estate tax return i filed.

longislander · 01-27-2024, 08:17 AM

Discuss "homestead property" and is the deed "joint ownership with rights of survivorship" with an attorney.

NH is not a community property state. Also confirm with an attorney.

jeffk · 01-28-2024, 05:04 AM

Quote:

Originally Posted by jeffk

As I previously noted, IF you are living in a COMMUNITY PROPERTY STATE, like NH, then it is likely the surviving spouse will get a FULL stepped up basis because the ownership in such a state is considered to be 100% BY EACH SPOUSE.

There may some nuances, such as when the property was purchased, etc. Therefore, as mentioned by many, if you want a definitive answer FOR YOUR SITUATION, CONTACT AN ATTORNEY in the state where you live. If the property is owned in a different state than where you live, you might want to talk to an attorney in the state where the property is as well.

Mea culpa! I apologize for incorrect information. It seems that NH is NOT a community property state. When I originally checked, several seemingly reliable sources indicated it was. Now I am seeming more sources that say it is NOT!

CHECK WITH AN ATTORNEY!

longislander · 01-28-2024, 07:19 AM

And ask about possible confusion with an "equitable distribution" state, which NH is.

Further clarification with the attorney that "equitable distribution" is not the same as "equal distribution".

12-11-2023, 04:33 PM	#1
Shreddy Senior Member Join Date: May 2009 Location: Moultonboro Posts: 510 Thanks: 179 Thanked 219 Times in 115 Posts	Being a tax attorney, I always enjoy when these questions pop up and seeing the answers of the general public. With that said, I'll also echo what's been previously been said...seek professional advice from a CPA/attorney who specializes in this area. The benefit will significantly outweigh the cost given the "hypothetical" fact pattern __________________

12-11-2023, 05:09 PM	#2
LIforrelaxin Senior Member Join Date: May 2006 Location: Texas, Lake Ray Hubbard and NH, Long Island Winnipesaukee Posts: 2,875 Thanks: 1,037 Thanked 892 Times in 524 Posts	As all have discussed, the right thing to do is seek qualified advice. There are lots of in and outs that can be considered. For the most part when a spouse dies there is very little to worry about, unless things are only in the name of the spouse that dies. Then it it can get interesting if there is considerable equity in only one name.... As for what type of Step up in value happens when the property passes on to the next generation, well it is all a mater of timing... My mother passed on a few years ago, just before the last round of unbelievable value increases around the lake... So well we got a step up in value, we still are left with considerable capital gains should we sell..... __________________ Life is about how much time you can spend relaxing... I do it on an island that isn't really an island.....

12-12-2023, 10:03 AM	#5
camp guy Senior Member Join Date: Apr 2004 Location: formerly Winter Harbor, still Wolfeboro Posts: 1,190 Thanks: 301 Thanked 527 Times in 294 Posts	Hypothetical tax question An extraordinarily high percentage of the population has, truly, no understanding of the immensely complicated Tax Code, both State and Federal, and yet, an extraordinarily high percentage of these people rattle on about taxes (of all types). In my humble opinion, the best answers you can get regarding Tax Code issues is from an attorney specializing in Tax Code law with whom you can sit down in a face-to-face setting and fully discuss your specific, personal issues. All other forms of information gathering will surely lead to a misunderstanding and misapplication of the Tax Code, and you, yourself will still have questions.

12-12-2023, 04:37 PM	#13
Mr. V Senior Member Join Date: Jun 2004 Location: the left coast (Portland)and West Alton Posts: 1,412 Thanks: 65 Thanked 259 Times in 177 Posts	Oh what a tangled web we weave, when from taxes we seek relief... How true that is. __________________ basking in the benign indifference of the universe

01-26-2024, 12:10 PM	#17
retired Senior Member Join Date: May 2020 Location: Belmont, NH Posts: 131 Thanks: 1 Thanked 59 Times in 34 Posts	Answer Since the property is owned jointly, the surviving spouse gets a stepped up basis for only half of the value. He/she should consider living in it as their primary home long enough to get the $250,000 exclusion on the gain. If they plan on keeping it until death and passing it on to the kids, then they will get a full step up in basis.

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12-12-2023, 11:57 AM	#7
John Mercier Senior Member Join Date: Jun 2021 Posts: 3,422 Thanks: 3 Thanked 600 Times in 496 Posts	Be happy it is in the US and your a US resident. Polyclad used to be owned by Cookson, traded on the London Exchange in British Pounds. Determining the value of your ESOP wasn't overtly difficult... navigating the sale and taxation was a uniquely trying experience. Company made the buy-in experience pleasant, and the cash-out was on our own. I am still wondering how intricate the ROTH/Traditional IRA system will be as they play around with the rules each year.

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12-12-2023, 01:45 PM	#9
Sue Doe-Nym Senior Member Join Date: Jul 2009 Posts: 1,434 Thanks: 751 Thanked 792 Times in 415 Posts	At the risk of being labeled a smart###, I would depart for the pearly gates first, leaving the decisions to my husband….. the perfect scenario would be for the last survivor to leave the property upon his death to the next generation, thus avoiding lots of headaches and providing years of enjoyment. However, the down side of all that are potential disagreements among the heirs over almost everything pertaining to the property, which is sad. Anyhow, interesting discussion.

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12-12-2023, 07:10 PM	#14
John Mercier Senior Member Join Date: Jun 2021 Posts: 3,422 Thanks: 3 Thanked 600 Times in 496 Posts	All Polyclad employees knew the executive staff. Richard wanted it that way. I think he may have gotten it from Mike. When Mike owned the company, and for the five year tenure that he led under Cookson, he would walk the Franklin plant about once a week and talk to everyone. Joe would hardly ever be seen. He would join the crews during holiday parties. Even after taking the presidency, Joe was mostly seen during holiday parties; but by that time we had moved from the three small plants to international, so nobody really expected to see him as much as they had Mike; though most of the old timers would bring it up every so often. Ostrow, I would see all the time... but that was mostly the interaction between engineering and quality control. Varnell only occasionally as I had to review the quality of some new processing changes that would come about under his tenure. He would usually come to me with Steve. Not really sure who Dick M. is... We had several Richard's that worked for us over the years... and I doubt it could be Dick McDonald. I don't remember him being with the company in 2002.

12-13-2023, 12:14 PM	#16
John Mercier Senior Member Join Date: Jun 2021 Posts: 3,422 Thanks: 3 Thanked 600 Times in 496 Posts	Forgot about Mahoney. Mike was a character.

01-26-2024, 02:53 PM	#19
phoenix Senior Member Join Date: Apr 2004 Location: phoenix and moultonboro Posts: 1,554 Thanks: 61 Thanked 275 Times in 193 Posts	that's what my tax acct said also full step up and that's what i did on the estate tax return i filed. __________________ it's tough to make predictions specially about the future

01-27-2024, 08:17 AM	#20
longislander Senior Member Join Date: Jun 2007 Location: Moultonborough Posts: 546 Thanks: 49 Thanked 100 Times in 75 Posts	Discuss "homestead property" and is the deed "joint ownership with rights of survivorship" with an attorney. NH is not a community property state. Also confirm with an attorney.

01-28-2024, 07:19 AM	#22
longislander Senior Member Join Date: Jun 2007 Location: Moultonborough Posts: 546 Thanks: 49 Thanked 100 Times in 75 Posts	And ask about possible confusion with an "equitable distribution" state, which NH is. Further clarification with the attorney that "equitable distribution" is not the same as "equal distribution".