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Dan Duncan’s family likely to inherit billions tax-free

By A. James Memmott

June 9, 2010 at 11:27am

The heirs of Dan L. Duncan, a Texas billionaire, would seem to have benefited greatly from the fact that he died this year.

The New York Times reports that because Congress had allowed the inheritance tax to lapse just for 2010, Duncan’s estimated $9 billion fortune can be passed on to his children and grandchildren tax free.

Duncan died on March 28, at age 77, of a cerebral hemorrhage. He had made his fortune in the oil business, having started his pipeline company, Enterprise Products Partners LP, in 1968 with just $10,000 and two fuel trucks.

His wife, Jan, his four children and four grandchildren survive him.

Under current federal law, his wife, who reportedly received their home, ranch and millions in stock as her part of Duncan’s estate, would not be taxed on her inheritance.

However, had Duncan died in 2009, his children and grandchildren would have been taxed at a rate of at least 45 percent, the Times reported. Had he died next year, the rate would be 55 percent.

But the estate tax is 0 percent for 2010 as required by the 2001 tax cuts signed into law by President George W. Bush. Those cuts expire this year and the estate tax next year returns to the 2001 rate.

At the time of the 2001 cuts, Democrats vowed to restore the estate tax for 2010 should they retake Congress. They now have majority control of the Senate and the House but could not gain agreement on a law that would bring the tax back.

Though a lightening rod for debate, the estate tax has been applied to very few individuals, as it has been levied on the amount of money over $3.5 million left by an individual or $7 million left by couples.

While Duncan’s heirs would seem to be eligible to receive his legacy tax-free, they still might be subject to other taxes. Brian J. O’Connor wrote in the Detroit News that the heirs would have to pay some capital gains on any assets, such as stock, that they should sell.

Under the rules of the 2001 law, the capital gains beyond certain amounts would be computed not from the time an asset was inherited, but from when it was acquired by Duncan, O’Connor wrote.

“The people who have a lot of pre-death appreciation are going to be in for a real kicker,” an estate lawyer told the newspaper.

Duncan’s heirs might also be subject to a retroactive change in the estate tax law, both the Times and the News reported.

Given the controversy over the estate tax (or “death tax,” as it’s characterized by its opponents), it’s no surprise that the Times story prompted a high volume of comments.

Opponents of the tax argued that it’s an unfair tax on income that has already been taxed. “He earned it, he paid tons of taxes on it, he should dispose of it as he sees fit,” wrote one commentator.

Supporters of the estate tax asserted that most of the estate is made up of capital gains not yet taxed. “These people are passing on wealth without ever paying taxes on most of it,” wrote another commentator.

Some people also took exception to Duncan’s avocation. A big-game hunter, he reportedly went on hunting trips to six continents and had killed polar bears and elephants among other animals.

Duncan had also given millions of dollars to a variety of causes, including at least $100 million to what is now the Dan L. Duncan Cancer Center at Baylor College of Medicine.

According to Bloomberg News, at the time of Duncan’s death, Enterprise Products owned 48,000 miles of pipeline and had the storage capacity to “hold every barrel of oil imported in the U.S. over a three-week period.”

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13 Comments

  • #1.   Lee Coursey 06.09.2010

    Horrors! A group of free citizens of the United States may be allowed to keep their father’s private property without allowing the government to seize a major portion of it! Good Lord, that’s terrible! Those crazy citizens might even SPEND or INVEST some of that money, creating jobs and prosperity in their wake! Someone has GOT to put a stop to this, now!

  • #2.   jar 06.09.2010

    What does Dad Duncan’s time spent as a big game hunter have to do with tax laws regarding his family’s inheritance?

  • #3.   John Watcher 06.09.2010

    Tax only once. If the person holds the unrealized capital gains, then at the time of death, take the market value of the his assets and he need to pay the capital gains tax. After paying the the capital tax, the rest should go to his heirs without any further taxes. If the so called “death tax” (in other words “estate tax”) of 45% or 55% is imposed on after-tax estate value, then its totally unfair.

    If this unfair taxation continues then US will become the broken welfare state where there is no incentive to work hard and earn wealth.

  • #4.   Laurie Bennett 06.09.2010

    Here’s the problem with the “tax only once” argument: Like it or not, the tax code is based on money changing hands. When I sell a piece of real estate, I pay taxes on the profit. When I buy and sell stock, I pay tax on the capital gains.

    Those who argue against the inheritance tax apparently believe that assets are not changing hands when they pass from the person who has died to the people who are the heirs. But this IS a change in ownership. The heirs did not make the money, and so the “tax only once” premise has no application.

  • #5.   Larry 06.09.2010

    The Obama administration should pass a law seizing all of this man’s assets–he stole it by destroying the environment and now his leeches (children) are going to suck off these monies that rightfully belong to the government. The Obama government needs the money and knows how to spend it better than anyone in the world.

  • #6.   John Watcher 06.10.2010

    Now from 2011 onwards, the estate tax exemption will go back to $1 million.

    Suppose someone has $11 million assets at the time of death. He has grown his business since its foundation, so lets say all $11 million is his capital gains because he never sold his shares. Now 11-1 = 10 million is his estate. He needs to pay capital gains tax on $11 million and on the rest of estate after paying capital gains tax, he needs to pay 55% estate tax.

    15% capital gains tax on $11 million = $1.65 million
    55% estate tax on $8.35 million = $4.6 million

    So his/her children will get only $4.75 million out of $11 million. To pay $6.25 millions to IRS, heirs needs to liquidate the assets. Where is faireness here?

  • #7.   John Watcher 06.10.2010

    The above example is for someone who hold the assets for whole life.

    Now consider following example. You founded an investment company with your own start-up investment. You did whole lot of trading of securities. Every year you paid short term and long term capital gains tax. On your death, your heirs will get only half because 45%-55% goes to IRS for estate tax. Is this fair?

  • #8.   Laurie Bennett 06.10.2010

    Did your heirs make the profit?

  • #9.   Roberto Blanco 10.09.2010

    Did the government make the profit?

  • #10.   Devon Haverly 12.13.2010

    Laurie and Larry
    You are sickening individuals. And ignorant too.
    OBAMA does not pass or write any laws. The congress does.
    The planet MAKES oil and if we didn’t bleed it off it would be everywhere.
    How dare you! How dare you say that the governemnt rightly owns anything! This isn’t communist China!
    And Larry “The Obama Governement”? Really? there’s no such thing as that. It’s the Obama administration not goverenment. Moron.
    I had to laugh when you said “duh Obuma guberment need duh munny and no’s how to spind da munny bedder dan enny wun in du wirld”… LMFAO! No government knows how to spend money puddin head. Now the author of this article sounds like a cry baby who makes little or no money at all and is waiting for his pi-in-the-sky handout from Obama that will NEVER come. Back to reality. The Obama worship is dead. He’s a Republican now…

  • #11.   Devon Haverly 12.13.2010

    AND furthermore. Is it not enough that he gave hundreds of millions of dollars to worthy causes? No I guess not. Wth liberals, it’s never enough and liberals DO NOT give as much to charities why? because you think the government should take care of it. Ninnies. Are you people for real???

  • #12.   Laurie Bennett 12.13.2010

    Devon,

    By rights, we should delete your comments because of the personal attacks - “sickening individuals,” “ignorant,” “moron,” etc.

    We’re leaving them up as a reflection of your advanced intellectual approach to the issues.

  • #13.   Homepage-Symbol 10.26.2012

    Hey! Would you mind if I share your blog with my facebook group?
    There’s a lot of folks that I think would really appreciate your content. Please let me know. Thanks

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