Jan 05 2010

Federal Estate Tax Law is Repealed for One Year

Tags: federal estate tax , death tax

Congress inaction in December has created confusion about the current and future estate tax law. Below are two scenarios that we created to illustrate possible outcomes. Given the inability of Congress to resolve the problem with any degree of order, many other outcomes are also possible.

Scenario One:
Donald Trump dies January 1, 2010. No federal estate tax will be due unless Congress and the President change the laws after his death and, after years of litigation, the United States Supreme Court rules that imposing the estate tax retroactively is constitutional. If Donald’s children sell assets inherited from their father (before the U.S. Supreme Court reaches its decision), they will have to search years of financial records to determine the cost basis on the assets. Capital gains tax will be due on the difference between the sales price and the basis.

Scenario Two:
Donald Trump dies January 1, 2011. An estate tax of 55% will be payable on assets passing to his children (his wife, if he has one, can receive assets free of estate tax). His assets will have an income tax basis equal to the date of death value of his estate so records of long ago transactions are not necessary.

von Briesen & Roper Legal Update is a periodic publication of von Briesen & Roper, s.c. It is intended for general information purposes for the community and highlights recent changes and developments in the legal area. This publication does not constitute legal advice, and the reader should consult legal counsel to determine how this information applies to any specific situation.