Estate Tax, Will it Disappear?

I’ve blogged at the Michigan Estate Planning Lawyer Blog many times on the Federal Estate Tax, so you know that unless congress acts soon, next year we will be in an enviroment with an unlimited estate tax exemption. Well, in addition to that unlimited estate tax exemption there is a little talked about issue that has the potential to make a huge tax mess for anyone passing away in 2010.

The issue is the “step-up in cost basis”. If we get to 2010 and there hasn’t been any change in law, then not only are we going to see no estate tax, but also there will be no step-up in basis. What this means is that if Grandpa purchased a house back in 1950 for $10,000, passes and transfers the property to grandchild in 2010 and grandchild sells the property for $100,000. Then grandchild will be looking at a taxable gain of $90,000 versus no taxable gain under the old system.

The WSJ has an in depth article on the subject which you can read here: Will the Estate Tax Disappear?