Blogs Derek's Tax Blog Tricky - Tax Proposal Clouds Year-End Gifts
A review of the new tax legislation introduced in the Senate Thursday reveals that it includes a gift tax trap. 2010 is a wacky year for estate planning. In addition to repeal of the Federal Estate Tax, the absence of Generation Skipping Transfer Tax and the 35% gift-tax rate makes 2010 a particularly good year to make gifts, especially gifts to grandchildren.
Tax Proposal Clouds Year-End Gifts - WSJ.com
Advisors have been trumpeting this all year, but many clients have been procrastinating on making the gifts, assuming they could wait to do it until the end of the year. Perhaps motivated by this, Senator Baucus of Montana included an effective date of December 2nd for the reinstatement of the GST Tax and the gift tax rate increases.
The effective date for tax increases is always an important issue for tax planners. Most commonly, the date is set to some point in the future (“January 1, 2012”) or to date the bill is signed by the President. Less commonly the date is set to the date it first passes in one of the chambers or the date it is first introduced in congress. Rarely is it retroactive to date prior to introduction, that can happen too.
In this case, setting the date to December 2nd gives planners and taxpayers warning that the final bill could be effective as early as December 2nd. That possibility may be enough to stifle taxable generation skipping gifts.