My new grandson Frank James was born on Feb. 17. Frankie is awesome. A beautiful 8.5 pound baby boy. Another tax accountant in the family. He received his first tax code on Feb. 18.
That makes 8 grandchildren; all under seven years old. What a blast. We were lucky enough to keep Frankie’s two sisters (Cami and Kiera) and his brother (Vinny) at our house while mom was delivering the new guy.
What a fantastic weekend. Nothing better than family.
The Green Book is Out
The U.S. Treasury Department released the “General Explanation of the Administration’s Fiscal Year 2013 Revenue Proposal” (The Green Book-because it has a green cover). It is 200 pages of the Obama Administration’s proposal for changes in the tax law in 2012 and beyond.
A few of the proposals are highlighted below:
- A tax credit for increased wages paid to employees.
- 100% bonus depreciation for 2012.
- Payroll tax reduction extension to the end of 2012.
- For years after 2013, repeal LIFO and lower-of-cost-or-market inventory valuation methods. LIFO reserves would be picked up in income over a 10-year period.
- Tax LLC and Partnership “profits interests” issued for services as ordinary income.
- Provides a variety of tax incentives for generating business and jobs in the U.S. and tax disincentives for transferring business and jobs outside the U.S.
Individual Tax Proposals beginning in 2013:
- Increase the highest-two tax brackets of 33% and 35% to 36% and 39.6%, starting when income equals $250,000 for a joint return and $200,000 on a single taxpayer’s return.
- Tax a portion of dividends at ordinary tax rates for high-income taxpayers.
- Increase long-term capital gains from 15% to 20% and add the Buffet Tax explained in my last BLOG post.
- Start itemized deduction and exemption phase-outs for high-income taxpayers.
- Limit the rate in which itemized deductions reduce taxes to 28% of the deduction for certain high-income taxpayers.
Estate and gift tax proposals:
- For taxpayers who die after 2012, the estate and gift tax rules would basically be what was in effect in 2009. A 45% tax rate with a $3,500,000 Estate Tax and Generation-Skipping Transfer (GST) Tax exclusion amount per person. Portability among spouses of the exclusion amount would still apply. The lifetime gift tax exclusion would be limited to $1,000,000. Currently, the exclusion amount for Estates, GST and gifts is $5,000,000 and tax rate is 35%.
- GRATs (grantor retained annuity trusts) would be required to have at least a 10-year term and generate some value in the remainder interest.
- New rules would greatly reduce the estate tax benefit of using Grantor Trusts, by coordinating the income tax and estate treatment of such trusts. This is a big deal.
The Green Book is truly a wish list by the Administration. Whether any or all of the items get enacted, will rest with the make-up and direction of Congress, after the election.
We will see. It will be fun being involved in the process.