Greenville Estate Attorney: “George Steinbrenner’s Final Showdown?”
July 14, 2010
First off, this Yankees fan would like to say thank you to George Steinbrenner for his successful stewardship of the New York Yankees over the past several decades. RIP The Boss. As a friend of mine said, somewhere in heaven Thurman Munson, Billy Martin, and George Steinbrenner must be having their long-awaited sitdown.
Now to blog business. From a purely estate tax point of view, George Steinbrenner picked a pretty good year to pass on. There is no federal estate tax this year. The estate tax savings can be measured in the hundred’s of millions of dollars, considering a net worth north of one billion dollars. I believe The Boss was domiciled in Florida, a state with no state estate tax, which results in additional estate tax savings. On the other hand, The Boss may have owned some real property in New York, a state that can take a fairly good bite out of an estate with its estate tax. But with no really good information as to his holdings and estate plan, it would be mere speculation to estimate what the New York estate tax might be.
It is more interesting to think about the possibility that the federal government will reenact the estate tax in 2010, and make it retroactive to January 1, 2010. It would be a good bet that the George Steinbrenner estate would be the first litigant to rise up against retroactive application of the law. With upwards of $500,000.00 in estate taxes potentially at stake, litigation over retroactive application of the estate tax would be well worth the cost.
I have heard a number of commentators state that this estate really avoided the tax bullet with The Boss passing away in 2010. Even if the estate tax is not made retroactive in 2010, the estate has not completely avoided the tax man. The estate will have to deal with the new modified carry over basis rules under Internal Revenue Code Section 1022. With no federal estate tax in 2010, an asset inherited from a person passing in 2010 does not get a stepped up basis, but instead retains the deceased’s basis. This means that upon sale of the asset, there will be a capital gains tax if there was a capital gain. Under IRC 1022(b), you can shield up to 1.3 million in capital gains from capital gains tax, and a surviving spouse can shield an additional 3 million in capital gains. Capital gains in excess of these amounts are subject to capital gains tax.
While the estate does not get away tax free, the estate is definately (for now) subject to less taxes because The Boss passed on in 2010. The capital gains tax is much less onerous than the estate tax, taking a much smaller bite. It will likely take a small army of lawyers and accountants to deal with the basis issues, but the tax savings should more than offset that expense.
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