Dec
22

With estate tax restored, a look at George’s passing

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When George Steinbrenner died in early July, many commentators noted his perfect timing. The Boss passed away during the one year in which Congress had allowed the estate tax to lapse, and it seemed to be the perfect Steinbrenner coda to a long and controversy-filled life in baseball.

Of course, at the time, we knew Congress wouldn’t be silent on the matter forever. Even though the estate tax would been restored by default in 2011, Congress acted to restructure the estate tax and make it retroactive for 2010. For the next two years, the estate tax will be collected at 35 percent of all probate assets with a $5 million exemption. Only around one-half of one percent of Americans will have to pay the tax, but with the way the new tax bill is structured, the Yankees and its owners will have to pay something even though George passed away while the tax had lapsed.

Paul Sullivan of The Times explained what this means for those who died with large estates in 2010. He wrote late last week:

Under the estate tax wording in the bill, the heirs of people who died this year will have two options for a tax bill. If they chose to treat the estate by the tax laws in place in 2010, they will have to calculate the capital gains on all assets in the estate to determine if the value is above a level the Internal Revenue Service is allowing. This “artificial step-up in basis” is $1.3 million to any heir and $3 million to a surviving spouse.

The other option is to apply the 2011 law, which would exempt the first $5 million of the estate and impose a rate of 35 percent on anything above that. This is far more generous than the 2009 law — a $3.5 million exemption and a 45 percent tax rate — which many people thought would be reinstated.

Leading estates lawyers, including Ed Koren, a Holland & Knight attorney who represented Steinbrenner, said that folks with estates over $10 million would opt to pay the capital gains tax at 15 percent. Koren spoke to the point about the Yankees as well, and it sounds as though the team and family were well prepared for the Boss’ death.

“I can assuredly say that the Yankees wouldn’t have been on the block this year if there was an estate tax. It has to be an aggressive and ongoing approach,” he said of insulating as much a portion of a large estate as possible from the tax. “I represented George for 22 years.”

George had become, for better or worse, the poster child for the lapsed estate tax, but even as Congress has restored the tax, the Yankees and the family should be just fine. They have money and access to very good lawyers. I’m not at all surprised.

Categories : News
  • http://twitter.com/cephster Ross in Jersey

    Would the Yankees organization even be considered part of George’s estate? After all, he didn’t own the whole team, and he had effectively passed ownership to Hal before his death, right? Curious how that all works, but good luck figuring out Tax law.

    • Ed

      While George didn’t own the entire team, he did own a percentage of it. That part would count under his estate.

      There are also laws limiting your ability to just give things to other people without tax implications, specifically to prevent skipping out on the estate tax in cases like this. It’s something along the lines of you can give someone up to $1m cash/assets tax free, but after that it’s taxed. And it’s a lifetime thing, not annual.

      I forget though, estate taxes are a horrible, horrible mess to sort through, and they’ve been changing a lot in recent years.

  • Esteban

    This is pretty damn close to having a post about politics, no? Although it’s ostensibly about the effect the new law will have on the Steinbrenner family, I could easily see how someone would say there shouldn’t be an estate tax or that it doesn’t go far enough. Interesting that you would wade this close to the line that you established.

    • pat

      The person saying there shouldn’t be an estate tax would be the one in the wrong, no?

      • Esteban

        Haha, there you go.

        • Hughesus Christo

          It’s fine to discuss the facts of the case: There is an Estate Tax, it will do X to the Yankees

          It’s not okay to discuss the policy itself: The Estate Tax is good/bad, it should/shouldn’t be this high/low, etc.

          The facts is there is an estate tax being applied to the Yankees. This will have some impact on their finances.

          • Scooby

            That explains why Cliff Lee isn’t a Yankee. Damn you Congress!

  • Jose the Satirist

    Still disproportionately taxing the rich even after they are dead. Thank goodness for the Steinbrenners that ridiculous 2009 tax rate isn’t still in effect.

    • http://www.secondavenuesagas.com Benjamin Kabak

      The main point of this post is that the Yankees are structured to minimize the tax impact of one of the holders dying. I think even had George died in 2009 when the estate tax rate was 45 percent, the club and the family would have been just fine.

      To call the estate tax on the right though undersells it. It was in 2009 a tax on the top 2 percent of wealthy Americans. Now it’s a tax on less than 1 percent of Americans. Without judging the tax on its merits, that’s beyond the über-rich.

  • ryan

    ex post facto?

  • robert

    Ben,

    Stay in the shallow end of the pool with FIP and WHIP. Or read a little Dr. Sowell and get back to us all on the “Estate” tax.

    • http://www.secondavenuesagas.com Benjamin Kabak

      Besides being sarcastic, what’s your point? I didn’t editorialize on whether or not we should have an estate tax. I simply explained how the new tax bill will impact the Yankees and how it shouldn’t have a huge effect on the team’s ability to spend.

      I don’t need some economist to teach me about the workings of the estate tax. I had one of the leading trusts and estates lawyers teach my course this past semester. But thanks. Try not to drown in the deep end.

      • http://www.retire21.org Mike R. – Retire 21

        I believe Dr. Sowell was the first person to discuss the impact of OF defense on the ERA of a pitching staff. No?

      • Esteban

        I told you this would happen. Some issues are impossible for some people to just debate the effect of policies without arguing if policies are good or bad.

        • Adam

          I’d rather have some jackass insert his opinion than ban intelligent discussion on an interesting issue. If I have to skip over a pretentious comment, fine.

          • Esteban

            Right, I agree, but being a baseball blog, sometimes it’s better to keep the peace, or I think that’s RAB’s policy anyway.

  • Adam

    No, no. You go read Dr. Sowell. No doubt you will adapt his beliefs. Then you may have the privilege of indulging us. Run along now.

  • LeftyLarry

    Estate taxes after you’ve paid taxes on the income and dividends your entire life can only be supported by those who never accomplished anything in theirs, have no heirs or were selfish and spent it all on themselves and don’t give a hoot.

    • KofH

      I agree.

      WHICH IS WHY WE DON’T HAVE CLIFF LEE!!1!

  • Magento themes

    I don’t have much knowledge about George Steinbrenner. but what I know in my ranking he is the good achiever and always do his best