American Government Paper

American Government Paper - A Defense of the Federal Estate...

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A Defense of the Federal Estate Tax Oliver Barry American Government 218A Professor Fitzpatrick 4/16/08
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The Federal Estate Tax is a federal tax assessed upon the transfer of a “taxable estate” of a deceased person. This tax is assessed regardless of whether said estate is transferred via the will of the deceased party or through the state laws of intestacy. Whether or not to repeal this tax is an important debate in American politics today. It would be a mistake to repeal the Federal Estate Tax. This paper demonstrates why the abolition of this tax would not serve the interests of the American people, the economy, the government, or the United States of America themselves. The value of all the property interests in the estate are calculated, this figure is referred to as the gross estate. Then that figure is modified through a series of deductions before it arrives at the taxable estate. A certain amount of each estate is exempted from taxes, this amount changes with time but is currently, and has been since 2006, two million dollars. The 2001 tax act will raise the exemption rate in 2009 to three and a half million and then repeal it for 2010. Then it will readjust the rate to the 2001 level of one million dollars. The government also extends a variety of different credits towards the Federal Estate Tax. (Estate Tax 1-8) The estate tax is part of a grouping of taxes called the Unified Gift and Estate Tax. The other part of this system is called the Gift Tax. To understand the Estate Tax it is necessary to understand other parts of the United States tax system which are related to it. The most important of these related taxes being the Gift Tax. As of 2007 a gift or
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gifts made to a single person or entity of more than twelve thousand dollars in value must be reported to the IRS. The recipient of this gift does not need to report it to the IRS and does not have to pay either gift tax or income tax gift on the value of the gift. The donor however must report the value of this gift to the IRS and will have to pay taxes on the gift. Gifts are defined as money, property, transferring ownership or control of something. If you sell something below market value or give an interest-reduced or interest-free loan you might also be making a taxable gift. Gifts made under the annual allowance of twelve thousand dollars are not taxable. Furthermore the following gifts are usually not taxable; donations to charity, gifts made to your spouse, gifts made to political organization, or gifts made to assist in paying for tuition or medical expenses. Additionally with consent of their spouse someone can make donations to a single person or entity of up to twenty four thousand dollars. This pooling of annual allowances is known as splitting gifts between spouses and means that the gift is seen legally to be one half from each person. (Gift Tax) There are many merits to the Federal Estate Tax aside from the revenue that it brings to the federal government. One of the important functions it serves is to address a
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This note was uploaded on 04/27/2008 for the course POL 218.a taught by Professor Fitzpatrick during the Spring '08 term at Ursinus.

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American Government Paper - A Defense of the Federal Estate...

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