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Long Island's Elder Law, Special Needs & Estate Planning Firm

Thursday, December 17, 2009

ESTATE TAX UPDATE

WASHINGTON, Dec 16 (Reuters) - An effort by Democrats to stop the repeal of a tax on wealthy estates in the United States has failed in the Senate, as Republicans blocked a renewal of the tax that expires in 15 days.

Senate Finance Committee Chairman Max Baucus failed on Wednesday in a procedural move to introduce a measure that would have extended the tax for two months, to give lawmakers more time to work out a deal.

Without action, the 45 percent tax on estates after a $3.5 million exemption disappears for a year and then jumps to 55 percent, with an exemption of $1 million, in 2011.

The tax has divided Democrats, with conservatives from the party teaming with Republicans to propose a lower tax with a greater exemption level.

"Americans, even after informed that the estate tax may not apply to them, object to it on principle," argued Senate Minority leader Mitch McConnell as he blocked Baucus's effort.

Democratic leaders had hoped to permanently extend the tax, and the House of Representatives passed a bill to do that earlier this month.

But the Senate is mired in its health-care debate, so floor time is scarce.

"We're a little concerned that if it's allowed to disappear (for a year), some lawmakers will be more tempted to make that permanent," said Steve Wamhoff, legislative director for Citizens for Tax Justice, a group that calls for a more progressive tax system.

Once the tax expires, those inheriting estates after Dec. 31 will have to pay capital gains taxes on any asset sold. The cost will be based on the original price of the property, which could mean record-keeping headaches and bigger tax bills for some people.

"If we do not extend our estate tax law, all taxpayers, all heirs will be subject to massive, massive confusion in trying to determine the value of their underlying asset," Baucus argued on the Senate floor.

The estates of about a quarter of 1 percent of Americans would be subject to the tax under the House bill, according to the the Brookings Institution-Urban Institute Tax Policy Center.

Thursday, December 3, 2009

UPDATE

UPDATE to our last newsletter entitled:
“House Reportedly Set to Vote on Estate Tax Bill Permanently Setting 2009 Levels”

By a vote of 225-200 the House has just passed H.R. 4154, which would make “permanent” the current $3.5 million exemption and 45% maximum estate tax rate.

Wednesday, December 2, 2009

HOUSE REPORTEDLY SET TO VOTE ON ESTATE TAX BILL PERMANENTLY SETTING 2009 LEVELS

The U.S. House of Representatives will vote during the week of November 30th on a bill recently introduced by Rep. Earl Pomeroy (D-N.D.) That would make permanent the 2009 estate tax rules.

The House vote will come Wednesday, December 2nd, “at the earliest,” according to Dow Jones Newswires. It is assumed that by “The House” the news service is referring to the House Ways and Means Committee, to which the bill was referred when it was introduced November 19.

Pomeroy’s Permanent Estate Tax Relief for Families, Farmers and Small Businesses Act of 2009 (H.R. 4154), which is backed by the Obama administration, would set the exclusion amount at $3.5 million and freeze the estate and gift taxes rate at 45 percent. H.R. 4154 is Rep. Pomeroy’s second legislative initiative aimed at fixing the federal estate tax. H.R. 436, which he introduced in January 2009, would also extend the 2009 rules indefinitely but in addition would have a “far reaching effect on gift and estate tax valuation,” according to a paper by Jonathan Blattmachr and Scott Nammacher. Emory law school professor Jeffrey N. Pennell has reportedly said that “H.R. 436 is ‘garbage.’ It has been introduced in the last two Congressional sessions, has no other sponsors, and has gone absolutely nowhere.”

The new Pomeroy bill would cost $233 billion more than current law over the next 10 years. Dow Jones reports that “In addition, there are enough opponents of the Pomeroy bill to block action in the Senate.”

Source: www.elderlawanswers.com