Family Business Owners See Inheritance Tax As Penalty On Success

Arthur Gordon's Irregardless Cafe has been around for 25 years. The third-generation restaurant owner wonders if there will be a fourth.

"It sort of makes me feel like I'm restaurant poor," Gordon says. "There's never going to be a big payday."

Gordon, who wants to pass on his restaurant to his three children, believes the inheritance tax is like a penalty on success.

"You end up taking life insurance out on yourself so you can cover your passing, and it would be able to retire your debt," Gordon says.

The U.S. House has made a move to eliminate the tax so families would not have to liquidate a property just to cover the federal taxes.

Rep. Bob Etheridge, D-Lillington, voted to repeal the tax, but he says he would compromise by raising the exemption from just over $1 million to $8 million to protect small businesses and farmers.

"I am confident that we would find something that he (Clinton) will sign that will be enacted this year," Etheridge says.

Experts say 12 percent of all businesses will be transferred to a third generation, and three percent would be transferred to a fourth-generation.