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Estate Tax Update Those levels don't capture a large number of estates. Of the roughly 2.5 million Americans expected to die in 2009, only 5,500 - or 0.25% - will have estates large enough to be taxable, the Tax Policy Center estimates. Imposing a tax retroactively can create administrative and planning headaches for accountants, lawyers and heirs of estates. And it is almost a guarantee that the IRS will get an earful from heirs of large estates arguing that they don't owe the estate tax, if a decedent died during the months when the repeal was in place.Given that there are not 60 votes yet in the Senate to support a temporary |
extension of the estate tax, it's not clear whether there will be a sufficient number of votes next year either. If the attempt to make the tax retroactive fails and the repeal stands, that still doesn't mean there won't be any tax consequences for those who inherit assets. That's because along with the repeal of the estate tax, the so-called "step-up" in basis for heirs of any estate, no matter how large or small, would be limited to the first $1.3 million in assets. The step-up simply means that when heirs sell an inherited asset, they only owe |
capital gains tax on the asset's appreciation from the day the asset was inherited to the date of sale rather than from the day the asset was originally purchased by the decedent. Say a parent buys stock at $20 a share, dies and leaves it to his son when the stock is trading at $60 a share. If the son later sells the stock at $80, he only owes capital gains tax on the $20 gain ($80-$60), rather than the full $60 gain that his parent would have owed. Under estate tax repeal, any asset over the $1.3 million threshold would not be granted a step-up in basis. So any heirs of estates that fall between $1.3 million and $3.5 million next year will pay more in capital gains tax than if there were an estate tax in place. |
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Copyright © 2009 Jeff Christian. All rights reserved.
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