Remembering Robert Bork

Robert Bork died this morning at the age of 85.  He was nominated by Ronald Reagan to serve as a Justice of the US Supreme Court but faced fierce opposition (albeit, unjustified) in the Senate.  He was not confirmed and ultimately resigned as an appellate justice.

After retirement he wrote several books.  Two of which are on my top ten list of favorite books:  Slouching Towards Gomorrah and the Tempting of America.  Despite the unfair attacks he suffered he was reportedly always good-natured and upbeat. 

Gerard Depardieu Fires Back at Critics Attacking His Tax Saving Move to Belgium

Recently, Gerard Depardieu, France's most famous actor, announced that he would be moving from France to Belgium in response to the ever increasing French tax rates on the wealthy.   This announcement was not met kindly and Depardieu was vilified by the French press, with Prime Minister Jean-Marc Ayrault calling Depardieu “pathetic” and “unpatriotic”. 

Depardieu didn't take the attack lying down and fired back a letter to the Prime Minister, returning his French passport and social security card.  “We no longer have the same country. I’m a true European, a citizen of the world,” Depardieu wrote.  The actor said his 2012 tax bill – 85 percent of his revenue – is fully paid.  Depardieu said he’s been working since age 14. In the last 45 years he claims to have paid €145 million ($190 million) in taxes. The letter finished with “I hand over my passport to you and my social security card, which I have never used.”

Should I Really Make a Large Gift Before the End of 2012?

Many estate planners, CPAs and valuation experts are busy right now assisting clients who are making extremely large gifts in an effort to maximize the current $5.12MM gift tax exemption.  For those with large estates, the prospect of the gift/estate tax exemption amount defaulting back to the $1MM level as a result of the fiscal cliff is nausea inducing. 

However, for many estates that are on the margin, serious consideration should be given to NOT making the gift.  The reason why is that when the owner passes away, the value of the property owned will get a full date of death step-up in basis.  So if farm property was bought or even inherited years ago (which means it has a low basis), is gifted now to children, the children would receive this property and will still have this low basis.  That means that if the children turn around and sell the property they will be hit with a significant taxable capital gain. 

Traditionally, it was much better to take the hit on capital gains in order to avoid the estate tax, but if one's estate is around $5MM and there is an intention to liquidate holdings after death, it may be better to only give away part of the property so that the other properties can get a step-up in basis at death.

If Congress keeps the estate/gift tax exemption high (as opposed to reverting back to the $1MM level) then there will be many instances where the 2012 gift giving was unnecessary and resulted in the loss of a step-up basis upon the owner's death.

While hind-sight is always 20/20, a little strategic planning can go a long way.

Income Tax Rates Rise...Revenues Fall: The UK's Vanishing Millionaires

From the WSJ editorial page, Britain's Missing Millionaires: Income tax Rates Rise but Revenues Fall:

A funny thing often happens on the way to soaking the rich: They don't stick around for the bath. Take Britain, where Her Majesty's Revenue and Customs service reports that the number of taxpayers declaring £1 million a year in income fell by more than 60% in fiscal 2010-2011 from the year before.

That was the year that millionaires became liable for the 50% income-tax rate that Gordon Brown's government introduced in its final days in 2010, up from the previous 40% rate. Lo, the total number of millionaire tax filers plunged to 6,000 in 2010-2011, from 16,000 in 2009-2010.

The new tax was meant to raise about £2.5 billion more revenue. So much for that. In 2009-2010 British millionaires contributed about £13.4 billion to the public coffers, or just under 9% of the total tax liability of all taxpayers that year. At the 50% rate, the shrunken pool yielded £6.5 billion, or about 4.4%....

Politicians would love to lay the whole burden of their policies on a tiny minority of the rich, but you can't finance the welfare state on the shoulders of the 1%. That's something for the U.S. to remember as President Obama pretends he can fill a $1 trillion budget hole with tax hikes on "millionaires and billionaires."

(Hat Tip: Tax Prof Blog)