To remove your email from the subscriber's list, please follow the instructions on the email.

The Tax Prophet Newsletter   Issue #80 December, 2009


In This Issue:
Capital Gains

Kill Grandma? 2010 and Estate Tax Repeal


Congress failed to renew the estate tax and, as of January 1st, it is repealed. Will greedy heirs pull the plug on their parents and grandparents? Will the life insurance industry experience a sudden spike in claims?

Will Congress retroactively reinstate the estate tax? Who knows?

Estate Tax Repeal

For 2010, the estate tax is eliminated. In 2009, it applied to estates of more than $3.5 million ($7.0 million for couples). The President supports the 2009 exemption, but so far, Congress has failed to act.

Watch out: In 2011, the tax comes back with a vengeance, hitting estates worth more than $1.0 million, a potential disaster for many taxpayers with modest estates.

Capital Gains Tax

The new law's dirty secret: A capital gains tax has been substituted for the estate tax. For example, if a decedent purchased 1,000 shares of stock at $1.00/share now worth $125/share at death, a later sale for $125/share produces $124,000 in capital gains. Under the old rules, an heir inheriting stock at $125/share paid capital gains tax on gains above $125/share.

Note: Complicated procedures may provide some relief. See: my Hot Topics Article for details.


Repealing the estate tax and substituting a convoluted capital gains tax makes no sense. A permanent exemption of $3.5 million, indexed for inflation, with a maximum rate of 40-45%, should be enacted.

Let's see if Congress will make it a reality and calm the fears of wealthy seniors with money-grubbing heirs.

Home | Who We Are | What's New | Search | Contact Us | Subscribe

All contents copyright 2009 Robert L. Sommers, attorney-at-law. All rights reserved. This newsletter provides information of a general nature for educational purposes only and is not intended to be legal or tax advice. This information has not been updated to reflect subsequent changes in the law, if any. Your particular facts and circumstances, and changes in the law, must be considered when applying U.S. tax law. You should always consult with a competent tax professional licensed in your state with respect to your particular situation. The Tax Prophet is a registered trademark of Robert L. Sommers.