Estate Tax Repeal ???

[Bees Knees]

Don’t you just love the IRS?

Of course we are all wondering what to do about the estate tax. Is Congress going to retroactively repeal the repeal of the estate tax for 2010?

Under the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA"), the estate tax is repealed for 2010, but it comes back with a vengeance for 2011.

What do we do if we have a client who dies in 2010? (I have one who died with a non-citizen spouse who would be subject to the estate tax under the old rules…)

Well, IRS seems to answer this question on their website:

http://www.irs.gov/businesses/small/article/0,,id=224519,00.html

According to IRS, we can ignore the estate tax for 2010 because under current law, its gone (but not the gift tax --- its still here.)

Here is the good part…after trying to explain the new old new rules, IRS says:

“For more information, please contact your tax adviser.”

Well duh…who do you think is reading the information on your website, trying to figure out what we should do????

[joanmcq]

No one knows what to do. Including our illustrious elected officials that got us in this mess in the first place.

[Edsel]

2010 Death

My mother died a few weeks ago in a nursing home. She had an infection, which, had I sent her to the hospital, most likely could have been cured, and her life saved. While discussing this with the nurse, my thoughts kept thinking how much better her estate would fare if I let her go ahead and die, rather than risk her living and then dying in 2011. So I made the decision to go ahead and let nature take its course.

{ACK!!!!!!!!!!!!!!} This didn't really happen, lest some of you come down here and drag me to a public stoning.

But I do sometimes wish this type of bed-side decision upon our elected officials.

[BHoffman]

My neighbor, aged 90, refused surgery that may have extended her life. She was a very shrewd investor and left a sizable estate. I have no doubt at all that this legislation was part of her decision.

[JG EA]

I have questions about this site page that Bees gave. I just read this from NATP also.

There will be a new form on the final return to show the basis ("maybe"if needed) - that sounds promising.

I am still concerned about the "executor" allocating the amount of basis. Do you think this will boil down to the responsible party. The surviving mate for instance?

Do you think if someone sells something years from now that they inherited in 2010 we will only have to be concerned about FMV?

[Kram BergGold]

phone call to Congressman

I called my congressman's office. his Rep said there was very little chance the repeal of the repeal would happen. No one would touch this, for fear of being categorized as for the death tax. And it is an election year.

[Bees Knees]

Its not going to be FMV

Do you think if someone sells something years from now that they inherited in 2010 we will only have to be concerned about FMV?

Assuming the repeal of the repeal does not happen, which is looking more and more like reality, then we all have a big problem. For 2010, basis of inherited property is not FMV. It is the lesser of FMV or basis, plus whatever this dumb calculation of step up of basis is that allows executors to pick and choose what assets get stepped up to whatever, limited by a 1.3 million / 3 million total asset step up.

So you get a new client 5 years from now who inherited stock in 2010.

You ask him or her: "What’s the basis?"

I'll let your imagination fill in the rest of the conversation...

[taxea]

File an extension and hope it all gets taken care of before the extension is due.

[jimmcg]

Pull the plug on granny before January 1.

[tpnl]

It will not be repealed . . .

or the mega millionaires will file suit against the govt. It will be fought all the way to the Federal Supreme Court if it is. Does anyone know of any other tax law that was implemented retroactively? It would create an undue hardship for estates to stay open to see whether or not they owe tax. If I was heir to Steinbrenner (spelling??) I would want the estate closed ASAP.

[Davc]

Does anyone know of any other tax law that was implemented retroactively?

http://www.heritage.org/Research/Lecture/Retroactive-Tax-Increases-and-The-Constitution

[Edsel]

We've seen 'em

Davc, great article -- maybe the best I've seen on the subject. According to the track record, if Congress reinstitutes the death tax retroactively to Jan 1 2010, and the Steinbrennars take it to the Supreme Court, they will lose.

Actually, we've been seeing these retroactive changes nearly every year. How many provisions, such as Tuition Refund, R&D Credit, AMT bailouts, etc. are rescued at the last minute every year?

[DonPriebe]

...
Actually, we've been seeing these retroactive changes nearly every year. How many provisions, such as Tuition Refund, R&D Credit, AMT bailouts, etc. are rescued at the last minute every year?

Ah, but all these retroactive changes favored the taxpayer. Who would have standing to complain?

[DMICPA]

Step up Basis, Step down Basis, Basis Adj Estate Tax

OK, the rules for this year have been confusing. There is no estate tax. The basis of assets are the tax basis or the FMV whichever is less. Then there is this $1,300,000 adjustment?

Here is my question:

Mom (97) passes on and leaves daughter farm land. Mom got it from who knows what relative dating back to the civil war.

Appraised land value at date of death is $800,000.

Question - What is daughter's "cost" when she sells the land? It would seem to me to be $800,000. There are no other assets.

Am I correct in thinking that the first $1,300,00 is NOT subject to estate tax? and can be used to step up assets? I am correct on this aren't I?????. Therefore, as long as daughter sells land for $800,000 or less, there is no tax liability on daughter's tax return.

[Bees Knees]

1. There is no federal estate tax on the $800,000 in 2010. Your state may still have an estate tax. MN currently only allows a $1 million exemption, so anything over $1 million is still subject to MN estate tax.

2. Basis of the asset is the decedent's basis as of the date of death. The executor of the estate has to fill out a form that IRS has yet to develop, and elect to step up the basis to $800,000. Without such election by the executor, the basis is not stepped up.