As I understand it, there is a proposal in Congress to totally repeal the Federal Estate Tax.
The Federal Estate Tax effects people who make gifts or devises, either during life or at death, in excess of $675,000 (not including the $10,000 annual exclusion).
As part of the repeal bill, I understand that Congress will repeal the "Step Up In Basis." The Step Up, which is part of current law, says that if you bought YHOO stock for $5,000, and it is worth $500,000 on the date of your death, your children can sell the YHOO stock without paying income tax. Absent the "Step Up" rule, your children would be liable for a capital gain of $495,000, at 20%.
Is this a fair deal for America?
The fact is that ALL American families benefit from the "Step Up" rule. If your parents die with $200,000 in assets, under current law you can sell those assets free of estate tax OR income tax. Under the proposal to repeal the estate tax, you can sell them free of estate tax, but you WILL be liable for the income tax.
So, the proposed repeal of the estate tax is a benefit to American families who die with assets greater than $675k, but is a detriment to American families who die with assets less than $675k.
Since the number of American families with assets less than $675k outnumber those with assets of greater than $675k by 90 to 1, it appears that the "Repeal The Estate Tax" bill is actually a TAX INCREASE in disguise.
That is to say, the bill represents a TAX INCREASE for 98% of American families, and a TAX DECREASE for 2% of American families.
Your thoughts? |
