We will have alot to discuss in coming months as we digest the new law, and its temporary nature. For now, its enough to point out that our descendants will be able to (we hope) enjoy more of our hard earned wealth.

Latest this afternoon is that House Democrats voted down the proposed tax deal. This was to be expected, as maneuvering towards serious negotiations to water down the Obama/Republican estate tax proposal.

Wall Street Journal today reports that the proposed tax legislation is being prepared to include a provision for deaths occurring in 2010, giving the option to choose the law existing in 2010 (repeal, with its loss of step up in basis), or the new law in 2011 (and we fully expect a return of basis step up with the tax exemptions and rates previously discussed). This is good news for those smaller estates for decedents who passed away in 2010 which would not have paid estate taxes under 2009 or 20011 laws, but who lost the step up in basis. This effectively represented an unintended income tax penalty for smaller estates, which may now be rectified.

The deal between the President and the Republican leadership appears to avoid a retroactive application of taxes to this year, a relief to many families who lost a parent in 2010. The potential for ramming through the deal on estate taxes in its present form allowing for a $5 million exemption and 35% rate seems uncertain. Democrats will try to compromise and implement the $3.5 million/45% plan, despite assurances that this deal is not negotiable. It is simply too difficult at this point to determine whether negotiating room will become available. We must remember that the Republican proposal represents a very large step back from the days where they hoped for full repeal, or a $10 million exemption. With luck, our clients will be able […]

Most of you are aware that a deal seems to be in the works to extend the bush era INCOME tax cuts for a few years. There is no indication, however, that the ESTATE and GIFT taxes will be dragged along. This seems improbable, as the two sides are not that far off on this. Republicans favor 35% rate after $5 million, and the Dems favor a 45% rate after $3.5 million. Not a whisper about the big issue for 2010: will they change it-we dont know.

Thanks to Laura Saunders for her work on this wonderful picture of our tax dollars applied to the workings of our democracy. http://sg.wsj.net/public/resources/images/BF-AA154_TAXREP_NS_20101105122802.gif

Clearly, the chances of a compromise on the issue of income taxes before the end of the year has increased, and it seems more likely that income tax rates will not be increased in 2011 (at least for those with incomes under $250k). For larger incomes, it remains impossible to predict, still. Unfortunately, the Republican/Tea Party resurgence as it may apply to estate tax legislation is harder to fathom. More right leaning legislators may not favor compromise, and begin to look for full repeal of the estate tax again. On the other hand, Democrats may be more willing to compromise (even this year) on a $5 million exemption than they were previously. Accordingly, the landscape has changed, and the politics and the calculations, but deadlock […]

Will Congress Take a Pass on the Estate Tax and Send Us Back to 2001? Reaching into the graves of wealthy, dead taxpayers across the county to collect unpaid tax debts may seem reminiscent of a low-budget horror film, but it’s not. In fact, after the November midterm elections, Congress may empower the IRS to do just that. According to The Hill newspaper “one issue is how to stop the estate tax from returning to pre-2001 levels, which means estates worth more than $1 million are hit with a tax that could be as high as 55 percent.” Indeed, although the 2010 federal estate tax repeal is now in its ninth month, Congress continues to consider retroactive estate tax legislation, which would invoke cryptic scenes […]