What will likely happen is Congress will retroactively enact the estate tax in 2010, meaning even if you die before the retroactive ennactment you will still owe taxes if you have an estate larger than the exclusion amount. "Is this constitutional," you may ask. Well it appears so under United States v. Carlton, 512 U.S. 26 (1994), which upholds the constitutionality of retroactive tax legislation if (1) the legislation has a rational legislative purpose and is not arbitrary; and (2) the period of retroactivity is not excessive. This is a very low constitutional threshold, as the Court noted that "[t]ax legislation is not a promise, and a taxpayer has no vested right in the Internal Revenue Code." The Court approved a 14-month period of retroactivity in Carlton.

Now, will I still advise clients to challenge the constitutionality of such retroactive legislation, you better believe it.

Harry Reid dragged his feet on this one and now he is paying the price. I have never really liked him and I hope this causes him to lose his leadership position.

Tax,

NYS retroactively changed the rules on Empire Zone's and the personal income tax rates this year. I have yet to hear anyone filing a lawsuit on them yet.

I think retroactively imposing rates and imposing a filing and remitting obligations retroactively are two very different issues.

This is going to be a fiasco.

Way to go Harry Reid!

Harry Reid is incompetent and needs to be replaced.

Tax,

I agree, but NYS did retractively impose new filing requirements and tests. They also imposed penalties on taxpayers who *poof* did not meet their new tests.

That being said, Reid and the all these cowards in Congress need to go. Sadly they will stay until they are caught doing something illegal (though David Vitter has managed to hold onto his Senate seat) as they will not have serious challengers until private $$$$ is removed from the election cycle.

Of course the left will blame the right and the right will blame the left and the cycle will go on and on with the only "citizens" being represented are the ones that can afford to buy access.

Harry Reid is incompetent and needs to be replaced.

~Danni.

THIS.

Be Well.

"Of course the left will blame the right and the right will blame the left and the cycle will go on and on with the only "citizens" being represented are the ones that can afford to buy access."
#5 | Posted by 726

Well said!

Even if the 1 year "repeal" holds, there is no "tax free" transferance at death. The other thing that goes away with this is the step up in basis at death. In other words, if Dad bought a stock for $100,000 20 years ago and it's now worth $2,000,000 and he leaves it to you at his death and you go to sell it...you pay your capital gains currently based on a basis of $2,000,000 - whatever it was worth when pop passed on is your basis. Dad's estate is only subject to the estate tax now if he leaves more than $3,500,000 directly to his heirs other than his spouse.

Under the "repeal" if Dad dies in 2010 and leaves the stock to you, there would be no estate tax due regardless of the estate size....

But when you go to sell that stock, you are going to have to track back and find out what dad paid for it...because you are going to pay capital gains tax on the difference between the current value and what he originally paid for it. In this case, you'd have a $1,900,000 gain (I'm assuming he bought it a LONG time ago) which is a $285,000 federal tax -- even if his estate wasn't big enough to have an estate tax due under the 2009 limits.

WHat gets real fun with this is if there are a number of assets involved..you could well be paying someone to do some forensic accounting to figure out the basis in the assets, just like was done for a short time in the 1970s when we were on a capital gains based system.

#8,

so that means that a "defacto" estate tax invades way more estates than, say the current tax brackets.

right?

Harry Reid is incompetent and needs to be replaced.

#4 | Posted by danni

Couldn't agree more.

right?

#9 | Posted by eberly

Yea, but in the example above there is $1,900,000 of income that has NEVER been taxed. Is hitting that with 15% capitol gains really unfair?

"Harry Reid is incompetent"

When did he get that good?

Alexander Hamilton observed, at the Constitutional Convention, "Money is one of the essential agencies of government. Without it no Government can exist, and without the power to raise it, it cannot be had." The power to "raise it," of course, is simply the power to seize it. In other words, money is so important to government that seizing it, by force if necessary, from those who possess it, is proper and right. Of course, the owners of the money could rightly claim that their money is essential to them, and they cannot exist without it; but such arguments would be dismissed as baseless, or in modern terms, "frivolous": a shibboleth employed by government to describe an argument they cannot refute.

"In other words, money is so important to government that seizing it, by force if necessary, from those who possess it, is proper and right."

Feel free to point out one government -- ever -- that did not tax and spend.

DCINMA quotes the real huge issue here. No step up in cost basis at date of death.

WHo the fuck are those clowns in DC fooling? There is NO WAY the IRS or just about anybody else can prove cost basis from way back when. records don't exsist for most long term assets. It's a fucking nightmare.

They promise a retroactive fix. Well fuck us if they don't heh?

No American is safe when Congress is in session.