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For tax year
2010 ONLY, the estate tax and generation-skipping transfer tax have been
repealed. This can cause a problem when
heirs inherit a decedent's property. Generally,
the basis of inherited property is the fair market value (FMV) on the
date of the decedent's death OR the alternate valuation date, if elected
by the personal representative of the estate. This is known as "stepped
up basis."
But in year 2010, heirs must assume, or carry over, the
decedent's basis in the property. However, if the FMV is LESS THAN the
decedent's basis, then the FMV will be used. This may have tax ramifications. Since
some property may have greatly appreciated over the years, Congress
decided to give heirs a bit of basis consideration: $1.3 million of
inherited property will receive a basis "step-up" to FMV, with surviving
spouses getting an additional $3 million, bringing the "step-up" basis
total for a widow or widower to $4.3 million. While this seems
substantial, some individuals, particularly non-spousal heirs, will find
the "step-up" change will create capital gains issues they didn't have
to deal with while the estate tax was in effect. |
