The estate tax may end up being repealed after all. Plans to attach a temporary two-month extension of the estate tax at current 2009 rates have been dropped from a defense spending bill due to Senate opposition. If the estate tax does expire on January 1 as scheduled, it will be replaced with a capital-gains tax on inherited assets using the carryover-basis rules instead of receiving a step-up in basis. It would then return in 2011 with the higher 2001 rates.
On December 3, the House voted to permanently extend the 2009 rates, but the Senate has yet to act on the issue because it has been consumed by the debate over healthcare.
Posted by Marc Patterson, Associate Editor, Wealth Strategies Journal.
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