The estate tax is very controversial in some quarters, and those who decry the tax often mention the fact that it is an instance of double taxation. You pay taxes all of your life on your income, and whatever you have left over at the time of your passing is the after-tax remainder. The critics ask why this after-tax remainder should be taxed again.
The above makes sense, but the death tax is a fact of life at the present time regardless of how you feel about it.
To get an idea about just how much the estate tax can erode your legacy look no further than the case of the deceased art dealer Ileana Sonnabend, who died back in 2007.
Her children were forced to pay some $471 million in state and federal estate taxes.
But that was not enough for the IRS. A particular work of art that the children inherited called “Canyon” is built around a stuffed bald eagle. This sculptural combine is the work of Robert Rauschenberg.
Because of the fact that there is a stuffed bald Eagle embedded in the sculpture, it can never be sold because of laws that are on the books protecting eagles.
Should a work of art that can never be sold be subject to the estate tax?
Originally the IRS certainly thought so, and they valued the work at $65 million. They were looking for an additional $29 million in taxes plus $11 million or so in penalties from the heirs to the Sonnabend estate.
In the end a settlement has been reached that will spare the family from this added tax bill. They have donated the painting to the Museum of Modern Art in New York, and as part of the agreement the Internal Revenue Service has agreed to relent.
- Understanding the Benefits of an Intentionally Defective Grantor Trust - October 20, 2021
- 5 Things You Might Not Know About What Happens After Your Death - October 13, 2021
- Estate Planning Lessons the Covid Pandemic Has Taught Us - October 6, 2021