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Estate Tax Reform – Presidential Candidate
Views
Congress needs to take action in 2009 concerning
estate tax reform. Under
current law, there is no estate tax in 2010, but returns in 2011
with a $1 million exemption and 55% tax rate. For 2009, the
exemption is $3.5 million and 45% top tax rate.
Both Presidential candidates oppose keeping
the current law. The
main points to settle are the top tax rate and the exemption. Obama
favors a $3.5 million exemption and McCain favors $5 million. McCain
favors a top tax rate at 15%, while Obama is at 45%.
It’s probable at this point that the
Obama rate will prevail since the Democrats control Congress.
Both candidates support making the exemption
amount portable. When
one spouse dies, the unused exemption would pass to the survivor. This
item would greatly simplify planning, for example, couples would
not have to retitle assets to equalize their estates.
Under current law any unused exemption is lost.
Asset values at date of death would be continued
to be used. Under
current law, this provision expires at December 31, 2009. If
the law isn’t changed, taxpayers would have to use the decedent’s
income tax basis( in most cases –original cost) for
inherited assets starting in 2010. This will cause much estate
and tax planning nightmares.
Expect estate tax legislation early in the new presidential
term.
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