<p>I didn’t write that well. I don’t like what I wrote on the generation skipping. A trust is set up with the inheritance in it. The grandchild inherits the trust tax free. Actually, I will ask my friend again what he is doing.</p>
<p>Notrichenough, are you kidding about not understanding about labor being taxed multiple times?
Really? You tell me.</p>
<p>I am talking federal taxes when I write about estate or inheritance taxes. States have different ways of taxing inheritances or estates.</p>
<p>Labor gets taxed once, when the income is earned.</p>
<p>Lol…</p>
<p>Then capital gains are taxed once. And dividends are taxed once.</p>
<p>Then educate me.</p>
<p>As far as I can see, capital gains are taxed once, and dividends are taxed twice.</p>
<p>Sometimes capital gains are only taxed once. Some people are going to have to pay medicare taxes on cap gains. Sometimes capital gains are never taxed. Never.</p>
<p>When I mention that labor is taxed multiple times it is because income from labor pays the social security taxes, the medicare taxes, in addition to income taxes.</p>
<p>As far as dividends go, I already commented on dividend taxes.</p>
<p>“For example, property is placed in a trust for the donor’s child and grandchildren. The income may be distributed among the child and grandchildren in accordance with their needs and the principal of the trust will be distributed outright to the grandchildren following the child’s death. If the trust property is not subject to estate tax at the child’s death, a generation-skipping tax will be imposed when the child dies.”</p>
<p>I was told that when the grandfather dies, a generation skipping trust that was set up takes affect. The grandchildren don’t get to take out the principal of the trust. During the years that the grandchildren are waiting for their parents to die, income or cap gains from the trust that stays in the trust accumulates tax free for the rest of the life of the parents. </p>
<p>I asked another friend who has a father that set up a generation skipping trust. He has no clue.</p>
<p>If I was told wrong, somebody can correct me.</p>
<p>Just because some portions of income tax are broken out to separate line items on your pay stub doesn’t mean income is taxed more than once. It is all income tax.</p>
<p>Now if I were taxed again this year on last year’s income, that would be taxing it twice.</p>
<p>Paying medicare tax on capital gains doesn’t mean it is taxed a second time, it just means some people will pay a different capital gains tax rate than others for some or all of their capital gains, just like they do for income.</p>
<p>By this logic, I could say my earned income is taxed 7 or 8 times - some at 10%, some at 15%, some at 25%, some at 28%, some at 33%, some at 6.2%, some at 1.45%, some at 5.3% (state).</p>
<p>[More</a> Good Dividend News Ahead: All the More Reason to Invest Wisely – Read Here for Tips - Forbes](<a href=“http://www.forbes.com/sites/ycharts/2012/07/13/more-good-dividend-news-ahead-all-the-more-reason-to-invest-wisely-read-here-for-tips/]More”>More Good Dividend News Ahead: All the More Reason to Invest Wisely -- Read Here for Tips)</p>
<p>If dividends were a function of tax rates, why is the dividend ratio so low by historical standards. Both corporate taxes and dividend tax rates are near recent historical lows.</p>
<p>So, dividends should be higher based on taxes. There must be something else at play here.</p>
<p>I know that some companies are giving out special dividends with the threat of increased taxes on dividends looming, but corporate and dividend taxes have been low for years.</p>
<p>“Howard Silverblatt, S&P’s dividend guru says yes. He points out that the
dividend payout ratio (the percent of company earnings that is sucked up to pay the dividend) historically has averaged 52%. Today the average is still a very low 32%, suggesting firms have plenty of earnings on hand to keep the increases coming. You can chart dividend payout ratios on YCharts Pro, as well as Cash Dividend Payout Ratios (YCharts editor Dee Gill explains why the cash dividend payout ratio is an even better metric to follow.)”</p>
<p>It is all a tax on income.</p>
<p>I am going to go with the Warren Buffett’s of the world and myself over your interpretation, notrichenough.</p>
<p>Your explanation comparing multiple rates to what I said doesn’t fly. Think about it. </p>
<p>Gotta go.</p>
<p>
</p>
<p>Trusts are taxpayers. Income to them is reported to the its by brokerage and other firms. There is no such thing as a trust that accumulates gains or other income and doesn’t pay the applicable rate.</p>
<p>From the TurboTax site (for lack of energy to find a simple irs explanation).
</p>
<p>Obviously, the trust is not taxed on capital gains until they are realized. No different from anyone else.</p>
<p>Ok… I am going to have to have a little conversation with a friend of mine. 
thanks.</p>
<p>From the earlier wikipedia link…</p>
<p>I am looking this up…this is not what I was told…I am not sure why I was told about income tax free…</p>
<p>"For generation-skipping trusts created in the years of 2011 and 2012 and for outright gifts to skip-persons, taxpayers are entitled to a $5 million GST tax exemption.
[edit]Advantages of using exemptions from the tax</p>
<p>Many individuals who might otherwise leave their entire estates outright to their children allocate their generation-skipping exemption to transfers to generation-skipping trusts for the benefit of their children and grandchildren. Such trusts will be funded with cash or property worth up to the available generation-skipping transfer tax exemption. If the term of such a trust is not limited, the trusts are often referred to as dynasty trusts.
Utilizing the generation-skipping tax exemption in this manner offers two important advantages:
The trust will escape all transfer taxes when the children die and will pass tax-free to the grandchildren.
The trust may be protected from the claims of creditors and, to some degree, from claims of ex-spouses. Had the trust property been left to the children outright, the property would be subject to such claims.</p>
<p>
</p>
<p>I agree. If the income is distributed, it is treated as personal income and taxed at the individual’s rate. The personal income tax rate is lower than trust rate. It is common to distribute the trust income to avoid being taxed at a higher trust rate.</p>
<p>I guess some posters should be looking at dynasty trusts…</p>
<p>[How</a> Does a Dynasty Trust Work? | eHow.com](<a href=“http://www.ehow.com/how-does_4761663_dynasty-trust-work.html]How”>http://www.ehow.com/how-does_4761663_dynasty-trust-work.html)</p>
<p><a href=“http://www.pgdc.com/pgdc/planning-dynasty-trust-charity[/url]”>http://www.pgdc.com/pgdc/planning-dynasty-trust-charity</a></p>
<p>“Example: Assume you transfer $1 million to a Dynasty Trust. Assume the trust will benefit your child, grandchild, and great-grandchild for their lives after which time the remaining assets will pass outright to your great great-grandchildren. Assume the trust balance grows by a net of 6% annually. In this case, when the trust ends, your great great-grandchild would receive about $84 million. If instead, you gave this $1 million outright to your child, who in turn passed it down through each succeeding generation, your great great-grandchild would receive only about $8 million. The Dynasty Trust has $76 million more in assets because of the magic of transfer tax-free compounding!”</p>
<p>This is a pretty interesting article on dividend taxation:</p>
<p>[Tax</a> Policy: What Buffett Really Pays - Seeking Alpha](<a href=“http://seekingalpha.com/article/516911-tax-policy-what-buffett-really-pays]Tax”>http://seekingalpha.com/article/516911-tax-policy-what-buffett-really-pays)</p>
<p>
It’s a little wordy, and there’s arithmetic. You’ve been warned. :)</p>
<br>
<br>
<p>Warren Buffett held the largest above-ground hoard of silver in the world in London. Because he was concerned that the US Government would confiscate it in an emergency. Do you believe that the US Government would confiscate silver too?</p>
<p>The rules for the higher health tax on higher earnings is coming out in a few days. This will keep the boys over at TurboTax busy.</p>
<p>[IRS</a> aims to clarify investment income tax under healthcare law | Reuters](<a href=“http://www.reuters.com/article/2012/12/03/us-usa-tax-irs-idUSBRE8B21HA20121203]IRS”>http://www.reuters.com/article/2012/12/03/us-usa-tax-irs-idUSBRE8B21HA20121203)</p>
<p>It’s a good link…</p>
<p>I see that labor is taxed multiple times.</p>
<p>According to your definition notrichenough, dividends are only taxed once. Corporate profits are taxed. When dividends are issued to individuals then they are taxed. The dividends are taxed once. So, I guess you are going to change your definition. ;)</p>
<p>I was part of a corporation where I was paying taxes on profits I did not receive. The profits stayed in the company. Kind of stunk. And the profits eventually went away too. So
I paid taxes on profits that did not last. I bet you wouldn’t like that too much, notrichenough. </p>
<p>Well, there is hope for you. Dividend tax rates haven’t gone up yet. I still don’t see why it is assumed that if the dividend tax rates go up, corporate tax rates should go down. I don’t see the correlation between corporate taxes and dividends. I guess dividends given out from corporations can be deductible from earnings. But then you might not get revenue increases for the government.</p>
<p>Where do you want to raise 160 billion in taxes a year, notrichenough? Where are you going to get that money? From somebody else, right? </p>
<p>You like to talk about original intent.
The Bush tax cuts were supposed to expire in 2010, right?
The Bush tax cuts should not even exist anymore, right?</p>
<p>No. Do I have to? Did I say I agree with Buffett every time he speaks? All his opinions?</p>
<p>Buffett sold his silver. I guess Buffett is not that worried.</p>