Forbes To Save Millions in Estate Taxes

WASHINGTON (AllPolitics, March 7) ‹ In his flat tax plan, GOP hopeful Malcolm S "Steve" Forbes, Jr. proposes eliminating inheritance taxes completely. In the meantime, however, the wealthy publisher has managed to slash the tax bill on his late father's multimillion dollar estate.

In 1994, Forbes, who is the executor of his father's estate, convinced a New Jersey tax court that federal interest deductions he took should lower the taxable value of the estate.

The state disagreed and appealed the decision. But the administration of Gov. Christine Todd Whitman, Forbes' friend and neighbor, later dropped the matter. Forbes advised Whitman's 1993 campaign on a plan to cut income taxes.

Deputy Attorney General Joseph Fogelson, who argued the case on behalf of the state, said no politics were involved. "After thinking about the case some more, the state decided there was little likelihood of winning on appeal," said Fogelson.

The result ensures tax refunds over the next decade for the estate, whose beneficiaries include Forbes, his three brothers and one sister. A lawyer familiar with the case said the family would get back several million dollars through 2004.

Campaign aides declined to say how much in tax refunds the estate has already received. "He'll continue to file for the refunds he's entitled to," spokeswoman Gretchen Morgenson said.

Under the Forbes' flat tax proposal, the multimillionaire and his family wouldn't have to pay any taxes at all on the fortune. The proposal would institute a flat 17 percent income tax and would exempt individuals from paying taxes on inheritances, among other things.

The refunds are on top of already drastically reduced taxes on the fortune of Malcolm Forbes Sr., who died in 1990. The flamboyant publisher, famous for throwing lavish parties and squiring Elizabeth Taylor, was worth between $400 million and $1 billion, according to published reports. Court records show Forbes' heirs paid $16.9 million in estate taxes in 1992. Based on federal and state tax rates, lawyers familiar with the case estimated the estate is worth about $100 million.

"The case is rare because of the amount of money involved," said Ronald Cappuccio, a New Jersey attorney specializing in estate. "Not many estates are worth as much as Malcolm Forbes'."

The elder Forbes sheltered the fortune from tax collectors by buying life insurance and through other maneuvers, according to published reports. His son, who inherited control of his father's publishing empire, has been successful as well in holding down taxes.

First, he took advantage of a law allowing heirs of family businesses to pay off federal estate taxes in installments over several years. The government charges the heirs interest, which can then be used as a deduction to lower the estate's taxable value.

Forbes sued New Jersey in 1993, arguing he should be allowed to use the interest deduction to lower the state taxes on the fortune as well. His lawsuit sought a $535,000 refund on the state taxes paid on his father's estate the previous year. It also sought a guarantee for future refunds.

The state balked. But in 1994, it agreed to the refund, and state tax court judge Lawrence Lasser ruled Forbes could also qualify for annual refunds through 2004 as long as he could show he was making deductible interest payments to the federal government.

The court case isn't the only tax matter involving the presidential candidate that has gained attention. Forbes also receives tax breaks on most of his 500-acre estate in tony Bedminster, N.J., because it qualifies as farmland. Forbes raises cattle for breeding purposes.

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