Letter: ‘Death tax’ does apply to corporations

The Dec. 25 op-ed column about Washington state’s estate tax (“Reducing the burden of the death tax on families”) raised an important issue worthy of discussion and suggests a reasonable response to the concern. However, I found one paragraph to be misleading and felt it should be addressed.

The article stated the “death tax” does not apply to corporations. That is not correct. A corporation is simply one form of owning a business and many family businesses are indeed corporations. Additionally, corporations are owned by shareholders and the value of stock in any corporation is included in the gross estate of a shareholder who dies. It doesn’t matter if the company is large or small, or if it is incorporated or uses some other form of business ownership.

Small, family businesses feel the burden more than larger companies because the family business may be the single largest asset in the estate and there is not enough cash to pay taxes. Larger companies likely have more shareholders, so the tax does not affect the entire company as significantly when one shareholder dies.

Businesses use the corporate form of ownership for multiple reasons — limited liability, governing structure and certainly some tax benefits in particular cases — but avoiding estate taxes isn’t one of them.

This story was originally published December 30, 2016 at 4:21 AM with the headline "Letter: ‘Death tax’ does apply to corporations."