Blogs Derek's Tax Blog Estate Tax not Included with Extenders
The estate tax isn't the only tax provision expiring on Dec. 31. Due to congressional inaction 50 tax provisions will expire. Including the annual AMT patch, the deduction for state and local sales taxes, the $4,000 deduction for college tuition, a provision that allows taxpayers age 70-and-a-half or older to transfer up to $100,000 directly from an IRA to charity, the business R&D credit, and a biodiesel tax credit. Many of these provisions require action every year and they are likely to be extended again, but retroactively this year.
The Chairman of the Senate Finance Committee, Max Baucus (D-Mont.), and ranking minority member Chuck Grassley (R-Iowa) sent a letter on Tuesday to Senate leaders announcing their intention to move a tax bill as soon as possible in 2010. However, The Hill reports that the letter did not mention the estate tax and that neither of the Senators mentioned it while discussing the contents of the letter from the Senate floor. Reading farther we find the reason why. Senator Grassley blames the inclusion of the estate tax as the reason the tax extender bill did not pass the Senate before the end of the year.
Learning from their mistake, the Senate leadership appears to have decided to move on the less controversial tax extender provisions without the retroactive restoration of the estate tax. This means that the estate tax bill will likely come after the extender bill is passed, but that could take months. From Forbes:
But taxpayers can't count on early action. "We've seen this movie before," sighs Clint Stretch, managing principal of tax policy with Deloitte Tax. "When this has happened in the past, it's been literally months before Congress has gotten around to fixing things." For example, Congress finally included dozens of lapsed tax breaks in the October 2008 bank bailout, making them retroactive to Jan. 1, 2008.
Meanwhile, those of advising actual living clients and not just theoretical tax payers need to re-examine the carryover basis rules for capital gains and determine who's plans we need to revise.