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Saturday, July 6, 2013

James Gandolfini's Will Is a 'Tax Disaster'

SopranosNew York Daily News:  James Gandolfini Will a Tax 'Disaster,' Says Top Estate Lawyer:

The taxman is coming after James Gandolfini's heirs. The late Sopranos star's will is "a disaster" that could see over $30 million of his estimated $70 million estate go to the government, a top estate lawyer told the Daily News.

"It's a nightmare from a tax standpoint," said William Zabel, who reviewed the document at The News' request. The 51-year-old's "big mistake" was leaving 80% of his estate to his sisters and his 9-month-old daughter, Zabel said. That made 80% of the estate subject to "death taxes" of about 55%, and the bill is due in nine months, Zabel said.

That means his family will have to start selling off his property and liquidating his assets soon in order to pay the tab, since it's unlikely the actor had tens of millions of dollars in cash on hand. ... The 20% of the estate that Gandolfini left to wife Deborah Lin isn't directly subject to the death tax, but even she'll take a big hit, Zabel said. The will calls for the shares to be divvied up after all the taxes are paid, which means Lin will get 20% of the $40 million left after taxes, instead of 20% of $70 million. "It's a catastrophe," Zabel said. ...

He said there are ways for the beloved actor's family to get out from under the enormous tax burden, but it would be tricky. One solution could be for the sisters and daughter to renounce their shares in the estate for payments later on down the road.

(Hat Tip: Bill Turnier.)

Update

http://taxprof.typepad.com/taxprof_blog/2013/07/james-gandolfinis-.html

Celebrity Tax Lore, Tax | Permalink

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Comments

55% tax rate? Only if there is a state death tax. Rate is only 40% tops federally.

Posted by: Steve | Jul 6, 2013 2:49:37 PM

You know you are getting a biased, suspect report when the speaker refers to the Estate Tax as the Death Tax.

Posted by: David R. | Jul 6, 2013 8:35:11 PM

So it's "unclear" whether the royalties, presumably part of the $70 million valuation and probably a large part of it, are going to the wife through a separate trust.

If the royalties are deferred, the estate tax payments likely can be deferred.

This speculation borders on libel of the decedent's estate planners. We don't know what they did, but we're going to accuse them of creating a disaster?

Posted by: Bob | Jul 7, 2013 12:45:45 AM

This is theft by the government. The whole tax system should be reformed and this death tax abolished.

Posted by: Linda C. | Jul 7, 2013 6:48:50 AM

It's a tax upon death, ergo - a death tax. Of course, that doesn't sell well so the dishonest left (but I repeat myself) prefer to sugarcoat their thieving policies.

Posted by: JB | Jul 7, 2013 7:44:34 AM

Steve, don't cast stones until you do the arithmetic.

The taxes are $30m/$70m which is about 40%. Apparently that $30m, though, gets paid out of the 80% that is to be divided up after taxes are paid. Apparently the other 20% of the estate gets paid out before taxes.

So, yeah, the 80% ($56m) people pay an effective rate of nearly 55% ($30m) because of the way the will was drafted.

Posted by: Anonzmous | Jul 7, 2013 7:49:50 AM

David, Death tax was in scare quotes.

Posted by: BM | Jul 7, 2013 8:01:16 AM

"You know you are getting a biased, suspect report when the speaker refers to the Estate Tax as the Death Tax."

Right, death has nothing to do with it. Just a complete coincidence that the government decides to confiscate a big chunk of your belongings at that particular time.


Posted by: willis | Jul 7, 2013 8:03:19 AM

David, well what else is it if not a death tax. Taxes on the original income were already paid, now the government wants the rest. What else is that if not a tax on your death. Maybe if liberals started calling things by their true name you wouldn't be so anxious to roll over for the government.

Posted by: John | Jul 7, 2013 8:18:12 AM

You know you are getting a biased, suspect comment when the commenter takes umbrage at the use of the term "death tax" to describe a huge tax imposed upon all of your stuff when you die.

Presumably, we'll react more passively when the IRS branch of the SEIU comes around with its sidearms and SWAT weapons to take its 40% of everything if we don't refer to "death" in the name of the tax. "Estate tax" makes it sound less like we're taking the money from the widows and kids than "death tax" does.

Perhaps we can compromise on "survivors' tax."

Posted by: bobby b | Jul 7, 2013 8:31:32 AM

Yes, because that's so misleading David.

Posted by: Chris | Jul 7, 2013 8:31:32 AM

David R., what else would you call it? And why should it be in existence?

Posted by: Allan Grant | Jul 7, 2013 8:52:10 AM

David, why does using an accurate and descriptive term ("Death Tax") instead of a euphemism ("Estate Tax")make the report suspect and biased? Do you disagree with the numbers presented? Then say so, and provide an alternative set.

Posted by: alanstorm | Jul 7, 2013 9:02:40 AM

Our tax system is basically set up to tax transfers of wealth. When someone dies there is a transfer which is subject to tax. We could tax the beneficiaries/heirs on their accession to wealth but that would be burdensome from a procedural standpoint - instead we tax at the source. The trade-off being we give the recipients a stepped up basis. I wonder how many commenters here have actually studied our tax system.

Posted by: Micah | Jul 7, 2013 9:18:19 AM

Well, now I'm wondering whether his will left a large tip to the waiter at that restaurant in Rome.

Posted by: Bob | Jul 7, 2013 10:27:23 AM

"Our tax system is basically set up to tax transfers of wealth. . . . I wonder how many commenters here have actually studied our tax system."

Well, some of us have, and we understand that our tax system was designed to tax instances of income, not "transfers of wealth." Subtle difference, maybe, but certainly deserving of note when we've been tweaked about our ignorance.

Posted by: bobby b | Jul 7, 2013 11:22:49 AM

Steve Forbes said it best, "No taxation without respiration."

Posted by: Diplomad | Jul 7, 2013 12:32:49 PM

The term "death tax" is the derogatory term used by opponents of the tax imposed by IRC sec. 2001. The term "estate tax" is the term generally used by practitioners to describe the tax imposed by section 2001 and is used in a number of places in Subtitle B of the Code. The term "inheritance tax" is used, generally in the context of state taxation, to describe the tax imposed on the legatees and beneficiaries of estates. Note the technical difference: the Federal estate tax is imposed on the "taxable estate" and the executor or administrator of the estate is personally liable, not the legatees, etc. unless by way of transferee liability (which is another set of sections in the IRC). From a policy standpoint it doesn't matter because the taxable event is someone's death. Note that many countries do not have a death/estate/inheritance tax but rather a wealth tax that is imposed annually at a much lower rate, e.g., 2 or 3 percent. From a policy standpoint the question remains whether death should be a taxable event. I generalize when I say that those in favor of such a tax are often of the "eat the rich" crowd and those opposed generally oppose all types of taxation. The point that the accretion of wealth on which the death/estate/inheritance tax is imposed may have already been subject to income taxation highlights the differing perspectives of those for and against this type of tax. I recall an almost intense discussion with a tax policy professor many years ago when I pointed out that the "taxable estate" was mostly after tax income; his viewpoint then reflects what I read here about the overwhelming tendency of the tax professoriate to believe that having more and different types of taxes is inherently better.

Posted by: TexEcon | Jul 7, 2013 2:43:04 PM

You know you are getting a biased, suspect report when the speaker refers to the Estate Tax as the Death Tax.

You know you are getting a biased, suspect comment when the commenter would prefer to use a euphemism in order to legitimate government theft for the reason that the wealth owner had the temerity to die and leave his own wealth to people of his choosing rather than to government bureaucrats and politicians.

Posted by: Ken | Jul 7, 2013 5:38:44 PM

What David really objects to is that the state doesn't get everything once a person dies. After all, according to veep Biden, paying taxes is the highest form of patriotism; therefore, everyone should rest in peace knowing that the government will take 100% of all assets once a person assumes room tempature.

Posted by: Cannon Asesrb | Jul 7, 2013 7:14:59 PM

"Well, some of us have, and we understand that our tax system was designed to tax instances of income, not "transfers of wealth." Subtle difference, maybe, but certainly deserving of note when we've been tweaked about our ignorance."

Um, no. There is, in fact, a different tax regime for transfers of wealth, rather than income. You might as well admit that you don't know much about how federal taxes work.

Posted by: G.E. Moore | Jul 8, 2013 1:19:54 AM

Why should the amount of estate tax owed on Gandolfini's estate vary depending on how he wrote his will, or even if he wrote a will? The fact that his particular will is a "catastrophe" suggests to me that the estate tax is applied in an entirely corrupt fashion. All the more reason to abolish it.

Posted by: BeenThruIt | Jul 8, 2013 11:30:55 AM

The way he drafted his will matters because Congress has provided different ways to reduce or delay estate tax. Mr. Gandolfini simply failed to take advantage of those tools. That would be a very silly reason to abolish the estate tax.

Posted by: G.E. Moore | Jul 10, 2013 7:08:17 AM