Dean Mead’s Estate and Succession Planning Department is one of the largest and most respected groups of estate planning attorneys in Florida. We are frequently…
If Congress takes no action with respect to individual tax rates prior to 2013, then individual tax rates will revert automatically to their pre-2003 levels, which would mean that the highest marginal individual income tax rates will jump from 35% to 39.6% (a comparison of the 2012 and estimated 2013 individual marginal income tax rates, assuming a reversion to pre-2003 levels, are attached above). In addition, if tax rates revert to their pre-2003 levels, the tax rate on long-term capital gains (for non-corporate taxpayers) will jump from a 15% maximum rate in 2012 to a 20% maximum rate in 2013 (these rates also apply to net long-term capital gains that flow through from S corporations, LLCs or partnerships to their respective shareholders, members or partners). In addition to the increase in capital gains rates referred to above, a reversion to pre-2003 tax rates would mean that the tax on dividends (for non-corporate taxpayers) will jump from a 15% maximum rate in 2012 to a maximum rate of 39.6% in 2013. With the potential increases in the individual tax rates described above, taxpayers should consider examining whether, based upon their facts and circumstances, they should:
- sell capital gain assets prior to 2013;
- elect not to utilize tax-deferred like-kind exchange provisions for eligible property sold in 2012;
- elect out of installment sales method under Code §453 with respect to installment obligations received in 2012;
- alternatively, dispose of installment obligations payable after 12/31/12(see, I.R.C. §453B); and
- for S corporations with prior C corporation earnings and profits, consider making a distribution or a deemed distribution to zero out the prior C corporation earnings and profits at a preferential 2012 dividend tax rate.