Federal Estate Tax-What will happen to our basis in 2010?

The Federal Estate Tax exemptions ratchet up until 2010 when such exemptions are unlimited, then drop back down in 2011. Speculation is that before 2011 Federal Law will change, with much lobbying for and against repeal of the Federal Estate Tax. However, such repeal would also partially eliminate the step up in basis that occurs when property passes to heirs. Few know that if the present law prevails, that in 2010 with no Federal Estate Tax, a single person that passes away will have $1.3 Million of basis to allocate to assets and a married decedent will have $3 Million of additional basis for assets passing to the surviving spouse, so that basis can be stepped up on appreciated assets. For most farm families this would take care of the appreciation of the farm in 2010 so that a full step up in basis could occur. However, instead of getting an automatic full step up in basis, this will necessitate keeping track of basis step up.  For a discussion of the considerations for Federal Estate Tax elimination along with the potential partial loss of step up in basis, refer to the complete article.

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