Taking on heirs

On July 17 the Finance Ministry announced that in fiscal 2008 the amount of money the government received for sales of property it owned and which wasn’t in use was ¥66.5 billion, a 60 percent drop from the previous fiscal year. This is sort of serious since in 2005 the government, in order to reduce its debt, set a goal of raising ¥2.1 trillion over the next ten years from sales of government land, whether in use (think: those postal insurance hotels) or not in use. In 2006 and 2007, the government made about ¥220 billion per year in land sales and hoped to get at least ¥100 billion in 2008, but the recession and its attendant effect on land prices put a crimp in that plan. Of incidental interest to this blog is the fact that of the land owned by the government, 4,105 plots were obtained through payment in lieu of inheritance taxes, and that at the end of 2008 the combined book value of this property was ¥403.8 billion.

There’s a myth that’s grown around this type of land transaction, a myth that says Japan’s inheritance tax is very large. Actually, it all depends on how many heirs there are. When someone dies, no tax is owed on his or her estate up to ¥50 million plus ¥10 million for each heir. So the more heirs there are, the more money each of them gets to keep. The myth has to do with real estate. If the total property is above the taxable limit and the heirs have no cash, they may forfeit land or a portion of the land to pay the tax. This is generally where the abovementioned unused land from inheritances comes from. In Tokyo, especially, where land is still expensive, people tend to think that when your father dies you have to sell his land to pay the inheritance tax, but statistics show that most people don’t.

In 2007, for instance, 47,000 people paid inheristance tax, which is only about 4.2% of all people who inherited property (in whatever form). About 6.8% of those inheritance tax payers live in Tokyo. That isn’t to say some people don’t pay through the nose. Certainly the most famous inheritance taxpayer was Makiko Tanaka, the daughter of the late prime minister Kakuei Tanaka. After he died in 1993 and his wife died several years later, Makiko owed a whopping ¥5.2 billion in national inheritance taxes. Of that, she paid ¥800 million in cash and the rest in stock in various Tanaka family-owned companies. She also gave up a sizable chunk of land in Bunkyo ward in Tokyo to pay the local inheritance tax. That land has been turned into a public park, though Makiko has complained because the city cut down some of  the trees.

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