Death taxes and 9/11

Back in 2001, which seems like another century already, Pendyala Vamsikrishna was a software engineer working in California. His wife, Prasanna Kalahasthi, was a grad student at USC. They had been married just two years.

Pendyala was aboard the American Airlines flight from Boston that crashed into the World Trade Center. He had been returning from a business trip.

Although he was not rich, apparently Pendyala was well insured, so his death created an instant estate. That property passed to his surviving spouse, Prasanna. But she was devastated by her husband's death, and committed suicide on October 17, 2001, less than a month into her widowhood. She left notes explaining that she couldn't endure the pain of her loss.

Income and estate tax relief was extended to families of the terrorists victims. Notably, a reduced federal estate tax rate applied to the estates of those who died from "wounds or injuries" suffered during the WTC attacks of September 11, 2001 and April 19, 1995, as well as those made ill by the anthrax attack in 2001.

Prasanna was undoubtedly another victim of the terrorists. But she did not meet the requirements for the favored tax treatment claimed by her estate, a District Court has ruled. An additional $669,552.68 must be paid to the IRS as a result of Prasanna's suicide, funds that must come from the insurance proceeds paid to her when her husband suffered his fate.

I can't quarrel with the District Court's reading of the law here. There'd be no effective limit to who could qualify for tax exceptions if we let Prasanna's estate off the hook merely because it is a tragic story.

But I do think that cases such as this validate the idea that we are talking about a death tax here. Contrary to what you may read elsewhere, "death tax" is the honest name for this payment, and all the other euphemisms are political marketing.