Can basis be stepped up more than once?

[iratax]

The elimination of step up in basis was actually implemented by the Republicans. It will be reinstated in 2011 if not changed before then. The Republicans want to make the elimination of step up in basis permanent and the Democrats are the ones actually saying to put it back.

Don't go blaming us for your actions or put out false rumors!

[thomtax]

Don't go blaming us for your actions or put out false rumors!

IRA Tax - You replied to one of my posts with this. I looked back over my posts and cannot find any false rumors or blame in them. Would you care to tell me why you are blasting me like this?

LT

[newbie]

The asset basis is FMV at time of receipt. Mom got stepped-up basis of dad's property when he died...you get stepped-up basis when it becomes yours. Your basis in the property is the FMV at time you received it.
That is until the democrats take this law away which could happen if we get a democrat for President.
Anyhow just remind your client that "his stock broker is a stock broker not a tax expert".
And tell him to ask the broker for documentation of his statement. taxea

IRA Tax - You replied to one of my posts with this. I looked back over my posts and cannot find any false rumors or blame in them. Would you care to tell me why you are blasting me like this?

LT

Thomtax, I don't think IRA Tax was replying to you, I think it was a response to Taxea. I asked Taxea if he could show me where the Democrats had propsed the change in stepped up basis. This is the response.

Sorry for not being more specific but I relate FMV step-up as date of death step-up. Thought that would be sop.
The present tax on basis is what the dems want to eliminate. This law is only in effect thru or until 2010. Bush has been trying to extend it because what will happen when it expires is that the basis to the new owner will be the basis of the prior owner with no step-up in FMV.
Can you imagine...if this law is not extended here is what will happen.

Original owner had a total basis in a property of $30,000 including improvements because he/she owned it for 45 years. The FMV on the property was $300,000 at the time of the original owners death. The new owner would have a basis of $30,000. with no step-up. taxea

[iratax]

Thomtax I was responding to taxea but the message posted just after yours. I did not intend anything against you. I respect your answers and contributions to this board and I'm sorry that it was misinterpreted..

[DaveO]

The elimination of stepped-up basis was the trade-off for elimination of the Estate Tax. When Congress passes these things, it has to make them "work" budget-wise. It does not help the budget or the deficit to give these tax laws a sunset provision so they can justify the cost, and then extend every one of them or make them permanent, which is just another way to pass another tax cut.

Isn't there still a dollar amount of step up similar to the old exemption amount of $1 million or so? After that point it's all decedent's basis.

[Burke]

As I understand it, that is the rule for 2010 only, which is the year the Estate tax is repealed. No estate tax due, but you can add up to $1.3M to decedent's basis ($3M more to surviving spouse), but not more than actual FMV surely. After 2010, the 2001 rules go back into effect, which allowed $1M exemption and full step-up. Since most of these things get changed, who knows what will really happen. I have tried not to focus on what might happen until it does. I imagine the financial / estate planners are going nuts.

[thomtax]

iratax - Thanks for the reply. I was just a little confused as to what I had done to offend. I appreciate the reply.

[iratax]

Your very welcome.

[taxea]

Can basis be stepped up more than once?

iratax-everything I have researched says this law is set to expire...could you give me your source for it being reinstated? My understanding is that if an extension is not voted in then it is gone in 2011. Bush is trying to have it extended the Dems are the ones not voting for an extension.
Also, no offense intended, but no one should assume the gender of a poster. taxea

[iratax]

I'm not saying the law is being reinstated but the provisions of the old law are which have the step up. If nothing happens then the step up returns in 2011. The Republicans are wanting to change this, the Democrats are wanting to leave it alone. Therefore the Republicans are wanting to eliminate the step up up in basis.

[taxea]

Can basis be stepped up more than once?

iratax-not to belittle a subject but the republicans want to change it by extending the existing law, and yes, the dems want to leave it alone by letting it expire and going back to new owner basis being the prior owner basis at time of death.

[newbie]

I'm not saying the law is being reinstated but the provisions of the old law are which have the step up. If nothing happens then the step up returns in 2011. The Republicans are wanting to change this, the Democrats are wanting to leave it alone. Therefore the Republicans are wanting to eliminate the step up up in basis.

iratax-not to belittle a subject but the republicans want to change it by extending the existing law, and yes, the dems want to leave it alone by letting it expire and going back to new owner basis being the prior owner basis at time of death.

Where do you people, he/she or it, get your information? If you are going to start slinging mud why don't you enter in some facts? Who are the Democrats or who are the Republicans that want no more step up basis? What else is included in the proposed legislation to extend the existing law? I don't think it is just that black and white. And that statement is not meant to be a racist. It's just not that simple.

This entire election has become a pathetic joke. Whine, whine, whine and Fox News and their beloved Palin seems the worse.

[outwest]

A little history and clarification..

The step up to fair market value at death was tied to the estate tax regimen. Without the step up in basis, capital gains would be due on the disposition of the asset by the heirs based on carryover basis. (you all know how much grandpa paid for the farm don't you?) Oddly enough, the net effect of the estate and gift tax system was a huge simplification and tax break for 99+% of families.

So along comes the phased repeal of the estate tax at the start of the current administration (you do recall which party controlled the presidency and congress don't you?) So the 1% or so of families with very large estates benefit while much larger numbers of heirs face a tax trap from capital gains. Nice.

So if current law runs it's course and sunsets, estate tax is more a problem for the top 1% but 99% get a free pass on basis step up. If the law is extended the reverse is true.

Now, splitting hairs, the percentages are not be precise. I've seen some as low as 3/10 of a percent benefit from the estate tax changes. Whatever, I want to illustrate the concept.

Second, the current (soon to sunset) law does provide for a partial step up. For a discussion of the problems and traps of that approach see:

http://www.abanet.org/rppt/publications/magazine/2005/nd/bekerman.html

One telling quote from this article:

"In 1976, Congress attempted to repeal this so-called “step-up” in basis with a system in which the beneficiary would receive a carryover basis from the decedent. This system was so unsuccessful that it was repealed retroactively shortly after passage."

and further

"As is often the case, these modifications of a strict carryover basis system create a set of problems that Congress likely did not contemplate during the enactment of EGTRRA"