Quote:
Originally Posted by loganmule
The House of Representatives has passed a bill which would immediately repeal federal estate tax. I doubt that the Senate will follow suit, but it ticks me off that the it is getting greater acceptance and at some point in the future probably will happen.
Only the VERY rich will benefit, and it will be at the expense of the all of the rest of us. Currently, the tax only applies to taxable estates greater than $1.5 million, and this goes to $2 million next year. With estate planning, married couples can double up, so that the tax only hits them to the extent their marital property is greater than $3mil and $4mil, respectively.
The dirty secret about estate tax repeal is that it would eliminate stepped up basis and reinstate carryover basis. In other words, heirs receiving appreciated assets will have to pay capital gain tax, when currently there would be none. Let's say that a decedent's heirs inherited a farm which cost the decedent $100k, and they sold it for $1mil. If this was the only asset of the decedent, there currently wouldn't be any estate tax or capital gain tax. Following estate tax repeal, the heirs would be stuck with a $900k capital gain to pay tax on. Meanwhile, the mega rich would trade down from a 50% marginal estate tax rate to a 20% maximum capital gain rate.
Does anyone have a different take on the issue, and if so, what is the reasoning for it?
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If this is as you say, it's certainly highly deceptive.
Do I understand you correctly that if the "estate tax is repealed," the above farm owners will wind up paying texes that they would not have incurred under current law?