Wednesday, March 24, 2010

Estate Tax, part 6

There is some concern that changing the estate tax rules in the middle of the year might be unconstitutional. One proposal that tries to deal with this problem is to give estates a choice of using either the 2009 rules or the 2010 rules.
The 2010 rules, headlined by an absence of any estate tax, are not as simple as they sound. Assets inherited under the rules in place until the end of 2009 become valued at fair market value as of the date of death (or an optional alternative date). Assets inherited under the 2010 rules would keep the same value they had when the decedent owned them. Thus there could be huge capital gains if the heir sells the assets. There is an exemption of $1.3 million in gains for such cases, plus an additional $3 million exemption for surviving spouses.
The Senate may be tied up for a while longer in fighting over changes to the health care bill that just passed. That could further delay action on the estate tax.