About Schmidt - Louis Begley [7]
There were at least three reasons why Schmidt hadn’t wanted Mary to be backed into that corner. She wasn’t well, the question was so obvious there was no need to ask it, and he was sure he knew the unpleasant answer. She had never told it to him, and it wasn’t for Murphy’s ears, but he knew that before she died, she intended to settle an old score. As for the taxes, they didn’t worry her. She could have no doubt that Schmidt would pay them himself before he saw Charlotte sell the house. Therefore, it made him squirm, first to hear Mary carry on about the solemn promise she had made to Martha, and how Charlotte could get a mortgage to pay the taxes, and then Murphy’s solution, never mentioned to Schmidt previously, and inspired, it seemed to him, by the two vodka martinis Murphy had drunk over lunch at the Racquet Club. How neat! Mary would leave Schmidt a life estate in the house! That did it! The word given to the aunt wouldn’t be broken, since, as a matter of law, Charlotte was the heir. Because Schmidt had the house for life, it would escape taxation when Mary died, and, when Schmidt died, the tax would fall on his estate.
Except that I don’t fancy playing the dowager on my daughter’s property, and he wouldn’t have minded pointing out to Murphy that if he had kept his mouth shut, Mary might have left the house to her husband after all, was the rejoinder Schmidt would have liked to make, but what was the use? Apparently, he was to continue to be a slave to a house that would never be his own.
Thus, when Mary turned her eyes on him—there were tears in their corners, and he couldn’t help thinking of her contact lenses and how lucky it was that she still cared about her looks—and smiled, saying, Mr. Murphy is right, don’t you think so? he smiled back and said, Yes, that’s just fine.
That was that, but he saw the way to undo it. For Charlotte’s wedding present, he would surrender his life estate and pay the gift tax on the entire value of the house. He was sure that was how the tax law still worked. The market was down, but not for properties of this quality. It would have to be a big payment. He would call Murphy and go over the figures, but, whatever they were, his heart told him he could and would do it. There was another aspect of the situation to be considered. If he moved fast enough, and bought another place for himself, there was tax he could save some money on, the tax on the gain on the sale of the Fifth Avenue apartment. He had bought it the year of his and Mary’s marriage, with the money he had inherited from his mother. It was large and elegant, so that, even after he became a partner, there was no need for them to move. But the price that had made him gasp at the time turned out, in hindsight, to have been nothing at all, less than one-fiftieth of the sum for which he had been able to sell the place. He had literally rubbed his hands together with glee watching the value of that place go up, realizing that it was his real nest egg. Yes, in terms of what his investment adviser liked to call preserving family wealth, the result wouldn’t be all that bad—he would use up the gift tax exclusion and pay about seven hundred thousand in gift tax, save some of the million dollars in tax on the gain on the apartment, and hand the property over to Charlotte at a time when gift and estate taxes were high but not so high as one might fear they would become in the future.
Where the proposed transaction departed from a pleasant capitalistic model was in its effect on his income: he had planned to pay the gains tax and add what was left from the sale of the apartment to his capital. And he hadn’t intended to buy for himself a house that cost as much as the astonishing price the apartment had commanded, which was what he would have to do if all of the capital gains tax was to be saved. In fact, he had had no thought of buying any house; his plan, to the extent such a thing existed, had been to live right where he was, in a place he had become used to thinking of as his home,