Top-Earning U.S. Households Averaged $345 Million in ’07By BLOOMBERG NEWS
February 17, 2010
The 400 highest-earning households in the United States averaged nearly $345 million in 2007, up 31 percent from a year earlier, data from the Internal Revenue Service shows.
The figures for 2007, the last year of an economic expansion, show that average income reported by the top 400 earners more than doubled from $131.1 million in 2001. That year, Congress adopted tax cuts proposed by George W. Bush. Democrats say those cuts disproportionately benefit the wealthy.
Each of the top 400 earning households paid an average tax rate of 16.6 percent, the lowest since the I.R.S. began tracking the data in 1992, the statistics show. Their average effective tax rate was about half the 29.4 percent in 1993, the first year of the Clinton administration, when taxes were increased.
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http://www.nytimes.com/2010/02/18/business/economy/18irs.html?scp=9&sq=wealthy%20income%20tax&st=cse A Bizarre Year for the Estate Tax Will Require Extra Planning January 8, 2010
Most tax advisers thought that Congress would extend the estate tax before it was due to expire at the end of last year. But while the House did act, the Senate did not. So what few predicted would happen did happen: the tax is gone for one year but set to be revived in 2011 at a higher rate and a lower exemption, unless Congress acts.
It’s the first time since 1916 that rich Americans can contemplate dying without one last tax
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http://www.nytimes.com/2010/01/09/your-money/estate-planning/09wealth.html More Tax Chores for the Wealthy at Year-Endsnip
The biggest question — the one that overshadows all of the others and is still unresolved — is what will happen to the estate tax next year. While the House of Representatives has voted to make permanent the current 45 percent tax rate on all estates above $3.5 million, the Senate has yet to take up the bill. And it is not clear if it will have time to do so this year.
The uncertainty gives wealthy investors much to consider in the next few weeks. To address these concerns, I intend to discuss here what you should do before the end of the year and use the next column to look at what you should do at the beginning of 2010.
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SHORT-TERM TRUST For the wealthy, this was the year of the GRAT, for grantor retained annuity trust. Sam Petrucci, a director in the wealth planning group at Credit Suisse Private Bank, said he arranged more of these trusts this year than at any time in the previous decade.
GRATs are a fairly simple way to transfer money to an heir tax-free. A person puts a sum in the trust that will be paid back to him over a fixed period of time. The heir receives any appreciation in the trust above a “hurdle rate” — the interest the Internal Revenue Service requires to be paid to the person who set up the trust.
The reasons for the increased attention in these trusts were twofold: the hurdle rates were low all year, as were the prices of some securities. Mr. Petrucci said that someone who put $10 million into a two-year GRAT with the December hurdle rate of 3.2 percent, assuming an 8 percent return, would pay himself two payments of roughly $5.2 million and pass $760,000 to heirs free of gift tax.
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HOUSING ISSUES Two property-related benefits also need to be considered. The Mortgage Forgiveness Debt Relief Act was scheduled to expire at the end of the year, but it has been extended until 2012. Normally, a person has to pay ordinary income tax on the part of a mortgage the bank forgives. Under this law, up to $2 million will continue to be forgiven tax-free on a person’s primary residence.
The second issue is conservation easements. The wealthy use these to give part of their property to a local conservancy and get a tax break. Mr. Doyle said this is probably the last year that people can deduct an easement worth up to 50 percent of their adjusted gross income.
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http://www.nytimes.com/2009/12/12/your-money/estate-planning/12wealth.html?_r=1&fta=y