Death Tax Stories

Tax Reform ‘Big Deal’ to Mom Who Wants to Keep Cattle Ranch in Family

Daily Signal Rachel del Guidice / @LRacheldG / September 19, 2017

What lawmakers do in Washington to overhaul the tax code is a “big deal” for a fourth-generation cattle rancher in North Dakota, she says.

“Tax reform is a big deal for families like mine and others across North Dakota and across the United States,” Julie Ellingson told The Daily Signal in a phone interview.
“Farmers and ranchers are small business people, and so the importance of being able to pass on a family business to the next generation is intrinsic to our businesses [and] our goals,” said Ellingson, 43, who co-owns Ellingson Angus, with her husband Chad.

Founded in 1995 near the town of St. Anthony in the south central part of North Dakota, Ellingson Angus breeds bulls, heifers, and cows to sell to other ranchers.
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Ellingson says action by Congress and President Donald Trump on tax reform, and specifically eliminating the death tax, is essential for her to be able to pass on the family business to her children.  

“The estate tax, or the death tax as it is probably more appropriately called, along with capital gains taxes certainly impairs the ability of many families in creating the opportunity for the family business to continue, without some very significant burdens,” Ellingson said.  
The estate tax is a tax on a person’s lifetime accumulated property, Heritage Foundation scholars Rachel Greszler, John Ligon, and Patrick Tyrrell wrote in a 2014 report, while the capital gains tax is applied when an asset is sold for more than its original purchase price.
Ellingson, who also is vice president of the North Dakota Stockmen’s Association, an 88-year-old cattle trade organization, said some families have to sell parts of their livelihood in order to meet tax obligations.  

“In some cases, families are required to sell off significant portions of their operation just to cover their tax liability,” Ellingson said, “And so the elimination of the death tax, a full and permanent repeal, has long been a priority of Stockmen’s Association here in North Dakota.”
The cattle rancher said she also wants to see the preservation of stepped-up basis.

This provision “allows inheritors to revise upward the basis on which they pay capital gains taxes on future increases [in capital gains],” said Adam Michel, a tax policy analyst at The Heritage Foundation. “The value of the inheritance is reset at the current market price, as opposed to carrying over the price paid by the deceased owner.”
Ellingson said it is important for her to be able to pass the family business to her children.
“My great-grandparents are those that homesteaded here from Russia; they were Germans from Russia, so very similar to many of the [other] farm and ranch families in North Dakota,” Ellingson said, adding:

So they came to our home area, and it was my grandfather and grandmother that started the registered cattle business. This has been very much a part of our family for many generations.
Ellingson lives in the house and on the ranch where she was raised by her parents, as was her father, “so certainly our family business has been a legacy,” Ellingson said.
That legacy is threatened, according to Ellingson, if comprehensive tax reform does not address the death tax:
Families that are faced with significant estate tax burdens, they need to come up with the cash in order to cover the tax liability. And so where do you come up with the most dollars? Again, cattle ranching and much of agriculture really isn’t … a cash-based kind of business.
Your land and your cattle, your equipment, are all critical components to your business. But that’s where you come up with cash, so some families are forced to sell key components … in order to cover pretty extreme tax liability, if they are saddled with that in their situations.
The former Julie Schaff married Chad Ellingson, her high school sweetheart, in 1995, and the two merged their cattle herds to establish Ellingson Angus. They eventually bought the ranch, including some land and facilities, from her parents.

The couple had met six years earlier at the state Future Farmers of America convention.
“We share a passion for agriculture and this way of life,” she said.
The Ellingsons have five children: Stetson, 19; Jameson, 18; Sierra, 16; Medora, 12; and Sheridan, 9.
“Our story isn’t unique,” Ellingson said. “The death tax [repeal] and comprehensive tax reform is important for agriculture across the board, so it is important that it is done right—and certainly the death tax elimination is a big piece of the puzzle.”

Michel agrees that the death tax is detrimental, especially for small business.
“One of the worst features of the death tax is how it hurts family-owned businesses,” Michel said, adding:
Many estates subject to the death tax are small or family businesses that are asset rich but cash poor. Their wealth is not in cash, but is instead in physical form, things like buildings, land, and machinery. When the owner of a business dies and the heirs are slapped with a 40 percent tax on the value of the business, they often have to sell off assets, or even the entire business, to pay Washington. This hurts small and family-owned businesses as well as local workers who work for these businesses.
The implications of tax reform reach far beyond her own family, Ellingson said.
“That’s not only important to the families who are living there and working in those industries, but for the broader U.S. economy and obviously for the source of food for the United States and beyond. So that stability is a pretty big deal for all Americans.”

NEBRASKA RANCHER DISCUSSES DEATH TAX PLANNING 9-14-17
California rancher discusses 10-year struggle to pay death tax
video

AGDAILY Staff · September 11, 2017
5th Generation California Rancher Struggled to pay large Death Tax Bill
The National Cattlemen’s Beef Association has kicked off a media and advertising campaign that will shine a spotlight on how the death tax impacts America’s cattle and beef producers.  The first campaign video features fifth-generation California rancher Kevin Kester, whose family struggled for a decade to pay a large death-tax bill after his grandfather passed away.
“Without a doubt the biggest challenge that keeps me up at night is trying to figure out how to pass the ranching operation – our family operation on to the next generation,” Kester says in the video as he drives across his Bear Valley Ranch near Parkfield, California.
The campaign is centered around a new website, CattlemenForTaxReform.com, and will run through September.

VIDEO

60 Plus recognized during White House Press Briefing as leader in effort to Kill the Death Tax

(Alexandria, VA) May 16, 2017 – The Trump administration made clear that Killing the Death tax was one of their priorities on the campaign trail. Late last week during a press conference with Secretary Mnuchin, the Secretary of the U.S. Treasury and Director of the National Economic Council Gary Cohn The 60 Plus Association was discussed as leaders in the ongoing fight to repeal the death tax.

QUESTION: Thank you, Mr. Secretary. Quick question. You bring up repeal of the death tax, the estate tax. This is an issue that’s been going on for decades. And it used to be they were always talking about phasing out the death tax over a period of years. Groups such as Jim Martin’s 60-Plus Seniors Association said they wouldn’t accept it and wanted immediate killing of the death tax. Is that what this is going to be? Or is it going to be a phase-out measure again?
DIRECTOR COHN: Right now our initial proposal is to immediately phase out — when this proposal becomes effective — to phase out the death tax immediately.

QUESTION: You say “phase” and “immediate.”

DIRECTOR COHN: With the implementation of the new tax, the death tax would disappear.

Chairman Martin was pleased to be invited by the White House to a meeting the following day; during which he met in person with Secretary Mnuchin and Director Cohn at a meeting pointing out death of the Death Tax would lead to economic expansion and more jobs. To those who claim that this is a tax cut for the rich, we say, “That horse is dead, dismount.” The wealthy on the left — Mark Zuckerburg, Warren Buffett, Bill Gates, Ted Turner, Oprah Winfrey, etc. — and the wealthy on the right, like Pat Boone and Donald Trump, set up trusts and foundations to shelter their assets. Instead, its small businesses, farmers and ranchers across the country that suffer.

Martin frequently cites studies from both conservative and liberal economists, from Douglas Holtz-Eakin on the right, to Ed McCaffery on the left, who point out that the death tax actually hurts the poor, kills jobs, eliminates upward mobility, destroys savings, rewards conspicuous consumption and slows our economy — all while adding extremely little net revenue to the Treasury.

Director Cohn added: “We’re going to repeal the death tax. The threat of being hit by the death tax leaves small business owners and farmers in this country to waste countless hours and resources on complicated estate planning to make sure their children aren’t hit with a huge tax when they die. No one wants to see their children have to sell the family business to pay an unfair tax.”

Death Tax Horror Story

 Pro-Death Tax supporters have waged an effective public relations war by portraying the Death Tax as only a levy on the super-rich “Wall Street” crowd, a so-called “war on the wealthy.” In order to fight back against this propaganda, we plan to tell the Death Tax horror stories of families hit hard by this destructive tax.

Our goal is to finance and produce dozens of short videos that will launch our campaign to restore the American Dream by repealing the Death Tax. The 60 Plus Association will host informational briefings on Capitol Hill and in key states to educate the public and decision makers on Capitol Hill about the economic destruction the Death Tax causes.

Congresswoman Kristi Noem (R-SD) often speaks about the problems the Death Tax created for her family’s farm when her father unexpectedly passed away (It took her 10 years to pay off the balance of the Death Tax following his death). In a recent focus group conducted by pollster Frank Luntz, her story was extremely effective in terms of influencing members of the group that the Death Tax is morally wrong. We have found that personal stories, more than charts and statistics, are the best way to show the American people and Members of Congress the destruction and devastation the Death Tax causes.

In order to put a face to the tragedy of the Death Tax, we will first identify family business owners who have been hit by the Death Tax within the membership of our organization and allied organizations. Our hired film crew and director will travel across the country capturing these stories.

Our videos will show the American people and Congress that folks worried about the Death Tax are not like Warren Buffett and Bill Gates, who protect their assets behind trusts and who have built businesses with the goal of passing them on to the next generation.

Rep. Noem-Death Tax Story one pager

 

Roger Williams (R-TX 25th District) Death Tax Story

Apr 16, 2015 Column
In 1939 a man started a car dealership to realize the American dream. When he died the ownership of the business was passed along to his son and so was a death tax liability equal to a significant value of the business’ worth.
The son nearly declared bankruptcy.

Fortunately, he was able to pull the resources together to keep his father’s dealership afloat. He still runs the dealership to this day and has more than 100 employees.

That son is me.

When I hear people like Jason Furman, the Chairman of President Obama’s Council of Economic Advisers, tell reporters that a repeal of the estate tax is, “not even a tax cut for employers,” it irritates me beyond belief.

It is worrisome that the president relies on advisers like Furman, who have little to no business experience, to guide him on economic decisions that impact the nation.

To me it appears the president’s staff of government bureaucrats and academics view their policies through the isolated lens of Northeast ivory towers rather than through the shop windows of family businesses on Main Street.

President Obama would have you believe the death tax is justified because “the rich should pay their fair share of taxes.”

What he won’t tell you is that many second generation business owners do not have the means to hire teams of accountants and lawyers to navigate the costly and burdensome obstacles to save the family farm.

Just because I was able to free myself from the stranglehold of the federal government does not mean others have shared similar stories of success.

As a business owner of many years I have seen friends and colleagues lose gains made from a lifetime of hard-work because of Washington’s failed policies, like the death tax.

I spent two decades cutting checks to the federal government so I, and my business, could be in good legal standing. I have paid Uncle Sam money that could have gone to hiring more workers, money that could have gone to charitable causes.

Instead, my money was transferred from my business to a bloated government that is 18 trillion dollars in debt.

The death tax has traded job creation for bigger, less responsible government.

Let’s look at the facts.

The death tax is a tax on savings that have already been taxed before, but the tax provides less than one percent of federal revenue.

According to the Tax Foundation, a repeal of the death tax would “boost GDP, create 139,000 jobs, and eventually increase federal revenue.”

That’s right, ironically, by killing the death tax, the U.S. government would profit more.

We must put an end to the unfair policy of double taxation on job creators so that the federal government can gain an insignificant amount of income.

As they say, there is nothing certain in life but death and taxes. Let’s make sure the latter doesn’t happen twice.

Original Article can be found here.

 

More Horror Stories relating to the Death Tax can be found below from the Policy and Taxation group, whose website can be found here 

Open Letter from a Tax Payer

To Whom It May Concern:

My name is Clayton and I have a story to tell. In the 1860’s my great-great grandfather was a cattleman. He had moved from England to Virginia and from Virginia to Texas. He began leasing land from landowners to graze cattle, all the while saving his money. Gradually, as he saved more and more, he began purchasing small tracts from the people he was leasing from and over his lifetime he had purchased several thousand acres through hard work and frugal living, the typical American dream.

When he passed away the land then went to his children. His children continued the ranching tradition and passed it on to his five children (one of which was my grandmother). My grandmother passed away in 1997 and unbeknownst to my father (or my grandmother at the time of writing her will), he suddenly had to pay a tax, 38.5% of the estate minus a $1mil deduction, on the appraised value of the land that her grandfather had worked so hard to purchase, protect, and work. At the time, no one even knew the value of her estate because its value was in what it could produce, not what it could sell for. Her estate didn’t have many liquid assets or a large amount of cash that could pay this new debt to the IRS. So, my father set up a payment plan and began working to pay it off.

We fast forward to the Summer of 2006. My father began to get ill and since the estate tax of my grandmother had become such a burden and such a large part of our family life we got together with a team of attorneys, CPA’s, and tax planners to try and avoid the dreaded estate tax should something happen to my father. In November 2006, my father passed away. We had a written plan on how to structure the family ranch, but the majority of it we didn’t get to put into practice in enough time to steer clear of the estate tax.

So, once again, my father’s will stipulated that the family ranch would go to my brother and me. We would be the 5th generation to own and work this land. But, we had to pay for inheriting what he fought to hold on to…again! And once again, my father didn’t have much saved cash or liquidable assets. What few liquid assets he had were quickly spent on CPA’s, tax attorneys, surveyors, and appraisers to determine what we owed the IRS. So, we were forced to set up another payment plan with the IRS.

We are now burdened with two estate tax payments every year. One for my grandmother’s estate (from 1997!), and one for my father’s estate. We will be making these payments for the next 15 years. So, not only are we trying to make a small family business in ranching profitable for ourselves, we are now trying to make it profitable for the IRS so that it doesn’t end up as federal land.

For five generations my family has worked this land. Five generations have poured their blood, sweat, and tears into this land, this family business. We have diligently paid our local, state, and federal income taxes. We have sowed into our local, state, and national economy. But because we’re now defined as wealthy according to someone else’s definition of the word, it will be next to impossible to preserve our family heritage for another generation.

Thomas Jefferson once said: “A wise and frugal government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor and bread it has earned. This is the sum of good government.” Ask yourself if our story is one that represents the sum of good government.

Thank you for your time.

Sincerely,
Clayton T. Leverett

 

“Excerpts from 60 Plus Association Supporters who Favor Repealing the Death Tax. (None named Gates, Sr., Buffett, Turner, Soros, etc., who want to keep it.)”

1. “I’ve spent most of my adult life in tax—as an IRS Agent. I’ve always disagreed with an estate or Inheritance Tax. It discourages saving and encourages waste.” B.C. in California

2. “I’m in strong support of Sen. Kyl’s bill in the Senate and Rep. Cox’s bill in the House to abolish these taxes.” D.H. W. in Wisconsin

3. “I definitely agree with the Family Heritage Preservation Act (Cox-Kyl bills). You were right when you said we work hard to make life better for our children, grandchildren and loved ones.” J.M. in Kansas

4. “A few days ago, I watched 60 Plus on NET-TV and would like more information on your organization.” R.B.T. in Oregon

5. “I am very intrigued that an organization such as yours exists. Heretofore I believed that I was alone in viewing our Congress and our government as the biggest bunch of grave robbers ever to exist. I applaud your efforts to repeal the Inheritance tax.” W.F. McN. in Michigan

6. “The onerous death tax is akin to stealing the very gold out of a dead man’s teeth while he lies stone cold and defenseless. It is no less evil than stealing a dead man’s wallet and credit cards while he lies dead in the street after a fatal car accident unable to resist.” R.E.D. in California

7. “I am attracted to the 60 Plus Association because I know it is not just another special interest group trying to edge in for extra benefits or governmental subsidies.” H.F.L in Missouri

8. “Thank you for the [1995 Estate Tax Summit]. Your speakers and panelists were more varied than the usual run by far and I enjoyed hearing their views.” F.R. in Washington, DC

9. “I want to be a part of the movement to repeal the Estate Taxes.” K.M.O. in Illinois

10. “I am glad that an organized group is not only fighting for the reduction, but going for the ABOLITION of the Inheritance Tax.” J.K.L. in California
_______________________________________________________________________________

“Businesswomen are Discovering Estate Tax’s Dire Consequences”
Wednesday May 17, 2006
By: Barbara Kasoff

Many people like to think of the estate tax as a victimless crime.

Sure it is double taxation, they’ll say, but the government needs the money and, besides, few people actually pay. Unfortunately, the estate tax actually contributes very little to the federal budget, and its victims are real and tragic: family farms and small businesses.

It works like this: When small farmers and businesspeople die, their estates must pay a sum equal to 47 percent of the value of their total assets above $2 million, including their farms and businesses. If the heirs cannot pay the tax, they must liquidate.

In all likelihood, this is what will happen to Melanie Meyer’s business. The majority owner of the Versailles Arms apartment complexes, which together constitute one of the largest Section 8 public-assistance housing properties in New Orleans, Ms. Meyer has been an exceptional proprietor and community leader. Her buildings have always been clean and superbly maintained, and she has worked vigorously to promote economic development and empowerment in her predominantly low-income neighborhood.

In 1994, she helped establish in New Orleans the Safe Neighborhood Action Plan (SNAP), a joint effort between the Department of Housing and Urban Development and various community organizations to prevent crime, provide continuing education and promote economic development and homeownership. She has been a leading force in the initiative ever since, and SNAP has its local headquarters at the Versailles Arms Neighborhood Networks Learning Center.

Ms. Meyer is trying to rebuild the Versailles Arms in the wake of Hurricane Katrina. She wants it to be the same positive force for change in the coming decades that it has been in the previous few. This is why she would like to keep the property in the family: to ensure that those who run it are mindful of both the community and the bottom line, and not simply one or the other. But there’s a catch. If Ms. Meyer died today, none of her heirs would be able to afford the estate tax on the property.

The estate tax is patently unfair to Ms. Meyer. She has worked all of her life to build her enterprise, and she has paid taxes on everything she has earned in the process. The government has already taken a generous chunk of the wealth she has generated. When she dies, it will demand half of what is left.

Yet the estate tax is even more unfair to the members of the community who have benefited from the existence of the Versailles Arms. If the tax persists, Ms. Meyer’s properties will expire when she does. Its tenants, who relied on it for safe, sanitary and affordable housing, will have no place to live. Its employees, who relied on it for their jobs, will have no place to work. The local residents, who relied on the learning center for education and financial advice, will be on their own once again.

The estate tax is fundamentally against the interests of the American people because, in effect, it destroys the things individuals create in their lifetimes, things that we would just as soon have around. Think of the family farms that are sold and then parceled up to make way for subdivisions. Think of the small businesses sold and digested into larger corporations, leaving their former premises empty and their former workers unemployed. Think of Ms. Meyer’s housing complex.

The great irony in all of this is that the estate tax does not even generate much income for the federal government. It constitutes only 1-2 percent of federal revenue on paper, and many experts believe that collection and compliance costs approach the amount actually collected. So, in all likelihood, we are jeopardizing our farms and businesses without actually increasing the federal bottom line.

Female business owners are becoming particularly aware of the negative impacts of the estate tax. There are 9.1 million woman-owned businesses in the United States, employing 27 million people, and women are starting businesses at twice the rate of men. But the more they accomplish, the more women recognize that the estate tax hangs like a guillotine over all they have built.

For the sake of the family farms and small businesses across the country, Congress must act to repeal the estate tax permanently. It is not just unfair to business owners and damaging to the American economy, it is an affront to the American dream that so many women are striving to achieve.

Kasoff is president of Women Impacting Public Policy, a national organization of women in business.

The Barthle family had to take out loan to pay $1,000,000 Death Tax!
One family-owned ranch is Barthle Brothers Ranch, located in San Antonio, Fla., and owned by the Barthle family.
Four generations of the Barthle family have called the ranch home. Randy Barthle and his daughter, Sarabeth Barthle-Simmons, attended the “Beef 101” presentation and gave a first-hand account on how the death tax has affected their family’s operation.
Barthle said that when his grandfather passed away in 1971, the family was hit with a $1 million estate tax, causing the family to have to take out additional loans in order to pay the tax within nine months.
“Being a cattle producer is a family business, and the death tax has a devastating effect on ranching families,” said Randy Barthle.
“It’s all about family for us, along with preserving the land we ranch on. There are 17 children in the next generation of our family, and they all agree on one thing; they want our ranch and family’s way of life to be preserved.”
One important fact addressed during today’s presentation is that most agricultural operations are asset-rich and cash poor, with most of their value tied up in the value of the land.
For asset-rich and cash-poor family businesses, the appraised value of rural land is extremely inflated when compared to its agricultural value. “Uncertainty in the tax code, and more specifically with the estate tax, creates an unnecessary burden for farmers and ranchers who are forced to set aside valuable resources for estate planning instead of investing in the expansion of their family businesses,” said Kent Baucus.
“Farmers and ranchers are already faced with uncontrollable factors like the weather and input costs. The tax code shouldn’t be as unpredictable as the weather.”
http://www.southeastfarmpress.com/livestock/cattlemen-take-estate-tax-message-capitol-hill

Tennessee farmer Brandon Whitt told the House Ways and Means Committee this past March that the estate tax–often called the death tax by opponents–is crippling his and other family farm operations across the country.
In public testimony, Whitt said his father-in-law was forced to sell off a large portion of farm land in 1998 to pay the estate tax when he inherited the operation. What’s left, Whitt said, is a seven th- generation farm with little liquid assets and an inability to expand.
Saying he faces the same dilemma as his father-in-law in the years ahead, Whitt urged Congress to “quickly act to end the estate tax so no other farmer or rancher has to sell part of their business to pay this misguided tax.”
http://fortune.com/2015/04/13/death-tax-killing-american-family-farms/

Death Tax Afterlife
Too many American families today face a triple-tragedy when the senior member in a family business dies. Not only does the family lose a loved one and a leader, but surviving family members suddenly find they have to pony up as much as 55 percent of the family’s assets — in cash — to pay federal death or inheritance taxes.
This literally forces many families to sell the family business in advance simply to avoid the agony of a fire sale. As a result, the death tax is probably the No. 1 reason there are few large circulation, family-owned newspapers in the United States. It’s just impossible for many families to come up with that kind of cash for taxes, and so they sell.
One notable victim was the Chicago Defender, a famous black-oriented newspaper that began publishing in 1905. The Defender’s reporting on employment opportunities and the social climate in the industrialized North is widely credited with triggering the “Great Migration” of blacks out of the South in the years between the world wars. Facing an estate tax levy of $3 million following the death of publisher and family patriarch John Sengstacke, surviving family members were forced to put the Defender up for sale.
Similarly, Seattle’s Bridge family had to sell their 63-store jewelry chain to Berkshire Hathaway, the global conglomerate run by investor Warren Buffett. No wonder Mr. Buffet, the billionaire liberal, wants to keep American families under the weight of the “death tax” that forces many of the family-owned companies he gobbles up onto the block. Company founder Herb Bridge, who is near retirement age, told a Seattle newspaper that the federal death tax was a “very strong factor” in the decision to sell.
This sad story repeats itself countless times every year, as farms and small-to-medium sized businesses go on the block. Sometimes, as with Ben Bridge Jewelers, the process is orderly. Often, however, it’s a race against IRS grave robbers.

http://www.washingtontimes.com/news/2003/jun/15/20030615-112301-5129r/