joetaxpayer <joetaxpayer[at]nospam.com> wrote:
- quote -

You're right, but your calculation is wrong. What you did
was take $2,000,000 and subtract the $1,000,000 exemption
amount and then calculate the taxes on that million. But
that's not how it's done.

First you have to calculate taxes on $2,000,000, which is
$780,800. Then you subtract the tax on $1,000,000, which is
$345,800. The result is the tax, $435,000.

Stu

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Stuart Bronstein wrote:
- quote -

I saw multiple references to;
"For amounts over $1,000,000 but not over $1,250,000, the
tentative tax is $345,800 plus 41% of the excess over
$1,000,000."

So I thought this was the latest. Are you grossing that up
as any money coming out of the IRA has income tax due as
well?

JOE

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joetaxpayer <joetaxpayer[at]nospam.com> wrote:

- quote -

That's $435K by my calculation.

- quote -

You could even leave one million in trust for the spouse in
a Q-Tip trust, so that she has the power to manage it, get
the income and, if needed, principal. But it's still not
treated as belonging to her when she dies, so it escapes the
"marital penalty" in the estate tax.

Stu

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NadCixelsyd <nadcixel...[at]aol.com> wrote:

- quote -

The FMV of the IRA on the date of death is included in your
gross estate. Income tax is paid by the beneficiary when
withdrawn, or by the estate if there is no named
beneficiary. It can get complicated, so you should consult
Pub 590, with your particular set of facts, for a more
definitive answer.

If there is a taxable estate, the estate taxes paid may
result in a deduction for the eventual beneficiary.

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NadCixelsyd wrote:

- quote -

Agreed. Yes. No.

First, the estate tax doesn't begin until you have $2M (in
2007) at your death. It goes to $3.5M in 2009, is repealed
(i.e. no tax) in 2010, and back to a $1M limit in 2011.

If you die in 2011 with, say, $2M in IRAs and no spouse to
pick up the extra mil, your estate will have to liquidate
enough IRA money to pay the tax due, about $345K, if I read
the charts correctly. The estate would have to liquidate
more than that to pay the regular income tax due as well. It
should be clear that it's quite the tax burden to die with
huge, regular IRAs.

If one has a spouse, they could leave the first million to
the other heirs directly, or through a trust, and leave the
balance to the spouse. If no spouse, an aggressive program
of converting to Roth IRAs would be the best move if one's
goal is to reduce their estate's overall tax burden. The
$2M, once converted, would place nearly $1.3M in Roths, and
the estate tax would be ~$100K or so. So $1.2M to the heirs
with no further taxes ever due.

JOE

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NadCixelsyd wrote:

- quote -

If there are named beneficiaries, the money goes straight to
them (with a number of options on how they want it, such as
an immediate lump sum payment or distributions over some
period of time). They pay any taxes due at their tax rate
in the year of distribution, often through withholding.

-Mark Bole

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NadCixelsyd <nadcixel...[at]aol.com> wrote:

- quote -

If the estate is your IRA's beneficiary and it withdraws the
funds, the estate will pay the income taxes. More usually
the beneficiaries would pay the tax as they withdrew the
funds from the IRAs they inherit. The estate tax is
calculated before any distributions. Yes, that's double
taxation but no different than had the deceased taken the
distributions, paid the tax and left the cash in his estate,
but a smaller estate by the amount of the taxes paid by the
deceased.

ed

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NadCixelsyd <nadcixelsyd[at]aol.com> wrote:

- quote -

If your estate is large enough, they would be included in
your taxable estate tax.

For income tax purposes their distributions are taxable
to the beneifciaries.

--

ArtKamlet at a o l dot c o m Columbus OH K2PZH

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If I die with $100k in my IRA, obviously the $100k is part
of my estate. As income taxes have not been paid, are they
paid by my estate? If so, is the payment made before the
asset's value is computed for estate taxe purposes?

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ------------------------------------------------------- >