Going back to the carnage of 2010 since now it is apparent that there will be no tax bill.

Beatrice Gooding was a wonderful granny. She cooked lots of great cookies for her children and grandchildren. She sewed things for her career minded daughter=s kids and watched them when they needed watching. Beatrice was also worth $300 Million. She had inherited that sum from her second husband Frederick Johnston an inventor. He had invested pens that wrote upside down and then parlayed his patent money in real estate. Beatrice was worried. She could think of the wonderful things that her children and grandchildren could do with her money, if only she would die in the year 2010. But her doctor told her that she was in perfect health and could look forward to many long years. She didn=t want to see the government take her money to use on those awful inplements of war. She remembered reading that single car accidents could not be ruled a suicide. But did she have the courage to do it.

The Court of Federal Claims ruled against her. They cited several US cases including U.S. v. Darusamont. Therefore, the estate tax was due and payable. Congress has been given apparently ample authority to levy taxes retroactively. This was first decided in 1916 in Brushaber v. Union Pacific Railway Co. 240 US 1 (1916). In that case Congress passed the first income tax statute in October, 1913 (after the 16th Amendment was ratified). The tax was for the period March 1, 1913 through December 31, 1913. Union Pacific challenged the law including under the 5th Amendment and Due Process clauses of the Constitution. The Court rather summarily said that Congress had the power to retroactively tax. They have been pretty consistent about that ever since. See, U.S. v. Darusamont 449 US 292 (1981). Taxpayer had large capital gain and was retroactively hit with alternative minimum tax for 1976. The Income Tax case was a bit more dicey. The Court reviewed the file and determined that she should have received a deduction for estate taxes paid on the Fiduciary income tax return, but that again was permissible as the law was in effect before the end of the year and she knew what the rules were.

I must confess that last week flew completely out of control as far as writing was concerned. Also it was one of waiting to see if what might come out of Congress. So far no tax bills are forthcoming with the Senate totally tied up in knots over passing a health care bill. This means of course that time is running out on a bunch of extenders that need to be passed by the Senate and the ever present 2010 one year repeal of the Estate Tax which I worked over last year. If your billionaire uncle is about to die, you might hold off pulling the plug for a couple of weeks at this stage. I do recall some late bills passing Congress, but with only 10 days left in the year, I would put the odds a 50/50 whether any tax bills are signed into law before the end of the year. I heard that once President Obama signs a health care law in whatever form, he’s heading for a vacation in Hawaii. So, now we get to the knotty question of ex post facto laws. What happens if a person dies on January 1, 2010 worth over $3.5 Million Dollars and then there is a retroactive passage of a bill setting that limit at $3.5 Million. Is that legal? We’ll talk about that in the coming days.