You and Al Capone May Have Something in Common
Last week marked the eighty-first anniversary of the conviction of Al Capone. As you may remember, Mr. Capone avoided prosecution for a lifetime of crime only to fall to charges of ignoring his taxes. I imagine him in his cell, bewildered and amazed at the high cost - not to mention the irony - of not paying closer attention to the tax laws.
Though not facing prison, many successful individuals today are at risk of paying a very high price for failing to be attentive to tax laws. I am not speaking of evading taxes, but of costly changes about to occur in the law. After December 31, some taxes will escalate and some exclusions will decrease. For those who fail to plan and act carefully, the financial cost could be very high. This includes taxpayers with appreciated assets and those who might consider gifting for estate planning
One publication I have seen noted that an individual with a $6 million estate who made a gift of $1 million prior to January 1, 2013 then died would leave an estate with an estate tax liability approximating $2.6 million. If the same individual were to gift $5 million by year’s end, the comparable tax would be roughly $435,000. That is high cost indeed!
Other changes set to occur include increasing rates applicable to capital gains and to dividends.
You should consider consulting your tax advisor, particularly paying attention to how you're valuing your assets. While inattention might not land you in jail, you could certainly shake your head over the increased tax bill you might owe. And, I'm a valuation specialist. Should your transactions include private interests for which valuations are required, keep me in mind.
Accredited Valuation Analyst