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“The
Boss” Leaves a Legacy, but No Estate Tax
By: Alex
Rechenmacher
Longtime
owner of the New York Yankees, one of the most widely-heralded franchises in
professional sports, and at times one of the most controversial figures in the
history of baseball, George Steinbrenner passed away on July 13, 2010 at the age
of 80. But while “the Boss” leaves
behind a baseball team and millions he made in his career in sports franchises
and the shipping business, his family will not have to pay estate taxes to the
government thanks to perhaps the biggest tax loophole since the formation of the
IRS.
When
wealth is passed from one generation to the next, the government typically taxes
the amount (minus a personal exemption) at a rate between 45 to 55 percent.
If George Steinbrenner had passed away last year, his family would have
owed several hundred million dollars to the IRS.
However, during the last decade, Congress had begun to “phase out” the
estate tax by lowering the tax rate and increasing the allowable personal
exemption until this year, when no tax would apply at all.
Because the current Congress has not acted to amend the tax code,
Steinbrenner will be one of many multi-millionaires to pass on his wealth
without the burden of a large bill since there is no estate tax in 2010.
This is
not the first time that the estate tax has played a large part in baseball
ownership. The Chicago Cubs
franchise was reluctantly sold to the Tribune Company in 1981 following the
death of P.K. Wrigley and his wife in 1977, ending 60 years of Wrigley family
ownership. Their children were
forced to sell the team in order to pay the estate tax. (Makes one ponder
comparative “luck” or “good fortune” with these two popular baseball franchises
beyond just the playing field).
Caution
should be noted! While the loophole is beneficial to those passing away in 2010,
the anomaly will not last. The estate tax is currently set to return to pre-2001
levels in 2011, meaning that any estate totaling over 1 million dollars in value
will be taxed at rates as high as 55 percent. Consult your estate planning
attorney to be certain you are prepared for the dramatic changes less than six
(6) months from now.
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