The Real Deal New York

House to vote on repeal of “death tax”

Obama has threatened to veto the measure
By Tess Hofmann | April 16, 2015 08:00AM

The House of Representatives will vote Thursday on a measure to repeal the controversial estate tax, or, as it’s dubbed by opponents, the “death tax.” The tax has a big influence on how real estate assets are held by owners. 

Republicans at large, including the bill’s sponsor, Rep. Kevin Brady of Texas, argue that the policy unfairly double-taxes wealth that was already taxed as income.

But while the bill is expected to pass in the House, it is highly unlikely to make it through the Senate, where just 54 of 60 needed Senators supported it in a nonbinding vote last month.

President Barack Obama also threatened this week to veto the measure if it is passed.

The existing law levies a 40 percent tax against the estate of a deceased person with over $5.43 million in assets, including real estate holdings.

For married couples, the threshold is $10.86 million, pursuant to the 2010 Tax Relief Act, which allows an estate of under $5.43 million to be transferred to a deceased person’s spouse without pushing them over the threshold for exemption.

High-net-worth individuals frequently use LLCs or partnerships with family members to mitigate the effect of the tax on real estate, by decreasing the value of their interest, according to Kathleen McCormack, a partner specializing in trusts and estates at law firm Cullen and Dykman.

“I think eliminating the estate tax is not going to happen… There have been so many concessions already,” McCormack said. “[The U.S. has] the highest concentration of wealth in the world, and eliminating the estate tax perpetuates that.”

In January, Obama proposed getting rid of the stepped-up tax basis, which would raise taxes on inheritances by imposing capital gains taxes on transferred assets. The proposal is opposed by most Republicans.

Rep. Brady’s office did not immediately respond to a request for comment.

Closer to home, Mayor Bill de Blasio and the New York City Council have brought up the idea ofa pied-à-terre tax, or a tax on homes worth at least $5 million whose owners are not full-time residents. Real estate players are, unsurprisingly, vehemently opposed to such a plan.