The Taxpayer Relief Bill of 1997 was passed by Congress and signed by
the President. We have changed Inter-Est 3.00 for Windows to adjust for these
changes. Most of these changes have also been incorporated into Inter-Est 2.00 for
DOS.
The 15% increased estate tax on excess retirement accumulations under
§4980A has been repealed as to decedents dying after December 31, 1996. The input or
computation items for this tax have been disabled for dates of death after December 31,
1996.
The table for the unified credit has been changed to allow for the
phase in of the increase unified credit. The applicable exemption amount will be increased
from $600,000.00 in 1997 to $1,000,000.00 in 2006. This adjustment is straight forward.
The tax table has been modified to allow for the fact that the upper
limit to the 5% additional tax will change as the unified credit changes. The upper limit
is now $21,040,000.00. It will increase to $24,100,000.00 in 2006. This change will only
have an effect on taxable estates greater than $20,000,000.00 so it will not affect most
estates.
The Options menu has a new input item has been added. It allows the
input of inflation factors starting in 1999 so Inter-Est can adjust three items for
inflation. These three items are:
The 10,000 gift tax annual exclusion,
The $1 million GST tax exemption and
The $1 million ceiling on the value of a closely-held business that is eligible for the
special 2% interest rate mentioned in §6601(j)(2).
Under the §6166 election provisions, several related changes have been
made:
The amount drawing a special rate (which was 4% and under the new law
will be 2%) changes. It moves from the current $153,000.00 to an amount computed using a
formula. Under the formula, the amount would climb from $412,000.00 in 1998 to $435,000.00
in 2006 if there were no inflation. As this is one of the items that will be adjusted for
inflation starting in 1999, I anticipate that this amount go above $500,000 fairly fast.
Starting in 1998 The new interest rates become effective. These rates
are:
2% for the amount qualifying for the special interest rate.
45% of the regular rate (currently 9%) for other qualified tax which is extended. 45% of
9% is 4.05%.
The regular rate (currently 9%) for the non-qualified tax.
These factors are not as easy to compute as you might think. Using
compound interest, the factor at 2% interest is not one-half of the factor computed for
4%. The factor for interest at 45% of the regular rate is not 45% of the factor computed
at the regular rate. Our interest table files have been changed to accept a second special
factor and to also compute the factor for 45% of the special rate. The interest tables now
compute five different interest factors that might be used for each interest period:
The factor at the regular rate.
The factor at 45% of the regular rate.
The factor at the refund rate.
The factor at the old special rate (4%).
The factor at the new special rate (2%).
If the date of death is before 1998, you can select a period and enter
your election to take the new 2% interest rate instead of the current 4% rate. Interest
accrued after the election is entered is not deductible.
If the date of death is after 1997, the new factors are used
automatically.
Inter-Est 3.00 assumes interest accrued after a sec. 6166
election is terminated is deductible.
The new features are offered only on federal interest computations and
not on state computations. This might have to be changed in the future.
We have assumed that you either qualify for the low rates and interest
is not deductible or you are not eligible for the low rates and interest is deductible.
There is a chance that this assumption is too simple. We will have to wait for the IRS to
take a position on various possible problems (protective elections, elections on
deficiency, etc.).
Also added to Release 18 of Inter-Est Ver. 3.00 is the ability to
compute simple gift tax liabilities. We were developing a simple gift tax provision that
would be similar to our prepare files.
The computation provisions are almost complete, but the output format
has not been set up correctly yet. We decided to furnish this module even though it is not
complete because it might be useful to you.
We will complete this module when we have more time.
The changes to Release 51 of Inter-Est Ver. 2.00 are similar to the
changes listed above for Release 18 of Ver. 3.00.
The changes to Ver. 200 are not as polished as the changes to Ver.
3.00, but the two programs should continue the get the same answer. Because of the
additional data for interest periods required, Ver. 2.00 will be somewhat more likely to
run out of memory than in the past.
