As much as it pains me to say, there may be only a $1 Million exemption in 2011 for estates. So, let’s look at Bruno who owns Bruno’s Shoe Store located in a condo retail park in Fredericksburg, VA. He also made the smart move in 2005 to add a web-site to sell shoes on-line. This has increased his sales greatly. At the end of 2010 his annual sales are $1 Million. He takes out of the store after paying salaries, inventory and usual operating expenses about $300,000 a year. He owns the business as a Sub-chapter S corporation per the recommendation of his accountant. The Condo is owned by an LLC which he and his wife own together. The condo is worth $125,000 and there is no debt. He and his wife own a home in Chancellorsville worth $300,000 and a cabin at Lake Louisa worth $200,000. His retirement account has $800,000 in it and it leaves everything to his spouse. On January 1, 2011, while he is doing inventory a shelf full of shoes falls on top of him, killing him instantly. When he doesn’t come home for dinner his wife calls the store, no answer and then calls the police who discover his body that evening at the store. They inform his wife who is so grief stricken that she has a heart attack and dies two hours later, leaving two adult children, Bruno, Jr. and Viggo. They both worked in the store th elast two years and want to continue the business. They appear at the offices of Slim Shades the noted estate tax attorney, to get advice about the tax effects of all of this.

Brian Peterson went to his Supervisor. “Sir, while this is probably a suicide, there is no note and no evidence of intent to defraud the government. My view is that we’d get our heads handed to us on this.” “Thanks, Brian, let’s call the General Counsel and see what he has to say.” The called the Chief Counsel, “If we can’t prove fraud and have no probable cause to search for a note, there is no sense in wasting our time on this, prepare a closing letter.”

Three weeks later.
Becky saw the envelope from the IRS. It was thin. She tore it open and saw that it was a closing letter. She closed her eyes and let fly a deep sigh and put it in a file. Her next call was to the Mercedes dealer. “Might as well stimulate the economy”.

Next Tax Tale will deal with some crazy questions involving deaths in 2010 and basis issues on capital gains. With that, one precautionary word. If we have another foot of snow here in DC and the power or phone lines get damages, I might be off line for 24 hours. So, don’t give up on me.
J

Brian Peterson looked at the return on his desk. It was cut and dried, the lady died in a car accident in 2010. He looked at the death certificate and saw Laura Holden’s signature at the bottom, he smiled and looked in the desk drawer at the diamond ring he had bought her when he proposed which was on Friday night. He noticed at that point the third contributing cause of death, suicide. He picked up the telephone and called her. “Hi, honey this is Brian, how’s the smartest most attractive coroner doing?” “Flattery will get you everywhere,” Laura cooed. “This is kind of a business call”, Brian said hesitantly. “What’s up?” Laura replied. “I’m looking at a death certificate for Bea Gooding and your signature is on it, could you pull your file on that case?” Brian asked. “Sure”, Laura answered. She pulled the file and came back to the phone, “Brian, yea, it was a single car accident, no witnesses, drove right into a concrete barrier, died of trauma shortly after the accident, never regain consciousness. I put suicide as a possible contributing cause, because single car accidents are almost always suicides. Why are you interested in my autopsy?” Brian cleared his throat. “Its possible, that her suicide could be grounds to assert tax fraud, we’ve never tried it, but it means about $150 Million of difference taxwise”. “Wow”, Laura replied. “The problem is that its only a hunch on my part”, Laura said. “For all I know she could have dozed off, it was late at night, or she could have been blinded by a car light, or dropped something on the floor and reached down to pick it up. How right do you want me to be on this?” Brian thought for a moment and asked, “Did anyone find a suicide note?” “No, not that I am aware of”, Laura replied. “You need to ask the family that question”.