Wednesday, December 23, 2009

Form 706 (Estate Tax) Is Hard Enough WITHOUT Guessing

Political gridlock has caused a lot of uncertainty as to the future of the estate tax, with Democrats at cross purposes on how to proceed and some Republicans desiring the total repeal of the tax. The House had come up with at least a temporary fix but the Senate could not settle on how estate tax issues squared with deficit control legislation. Meanwhile, short-term fix attempts by Democratic leaders hit Republican opposition. As a result, the present scenario is total repeal of estate tax for 2010 and reinstitution at probably stricter rates in 2011.

With busy season for income tax coming, the last thing that tax preparers need is estate tax preparation complications. As desirable as repeal of the estate tax might be, repealing it for just one year cannot be good tax policy nor is it helpful to professional tax preparers. Many years ago, I believe that I suggested instituting a unified credit (to be indexed for inflation) at about $2.5-3 million as a long-term solution--the idea still makes sense to me.


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