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Letting the estate tax R.I.P.?

Estate_tax2 It now looks like the move to make the now-dead estate tax retroactive to Jan. 1, 2010, is itself starting to show failing life signs.

The Dow Jones Newswires service reports that Ways and Means Chairman Charles Rangel (D.-N.Y.) is unsure whether there will be legislation to re-impose the federal estate tax retroactive to the first of this year.

This is exactly what I suspected would happen (slide 12 of my presentation this week to Austin CPAs). Of course, I thought it would be estate tax opponents leading the charge, not the man who heads the House tax-writing committee and who has been an advocate of the estate tax.

"I don't like retroactivity, but you never can tell," Rangel told reporters Tuesday evening after a House floor vote.

On the Senate side, however, Finance Committee Chairman Max Baucus (D.-Mont.) is still all for a retroactive estate tax law that will mean the tax remains in effect throughout 2010. Of course, it was the Senate that let the estate tax die, so those folks sort of have to be for cleaning up the mess they made.

Constitutional questions: But what about a retroactive tax? The constitutionality of such a move was the subject of much legal debate as the elimination of the estate tax loomed:

What if estate attorneys act conservatively and cautiously, but Congress does nothing in 2010 or it retroactively reinstates the taxes? What if it ultimately determined that the taxes cannot be retroactively reinstated?  How will we deal with beneficiaries (and plaintiffs lawyers waiting in the wings) who don't have the same concerns as do fiduciaries and their advisers about what might or might not happen in the future?   

Now the discussion has intensified. Some legal scholars say it's not a problem. Others vehemently disagree.

If the estate tax is instituted retroactively, you can bet the final decision will rest with the courts, and probably the U.S. Supreme Court. This is, after all, America, the most litigious society in the world!

And we know what all that means. Estate planners, not to mention grieving families, are going to be kept in tax limbo for a while until all this shakes out.

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Comments

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Pastor Jim Kibler

Ths estate tax is all about income redistribution and nothing else.

Evan

This whole situation is NUTS! I can't tell you the amount of times I said in 2009, "Don't worry about it, they'll fix it."

What I think is Crazier are the 2010 capital gains rules.

Kelly

No tax should be retroactive. Here is the Senate once again trying to clean up the mess they originally made. If they would stop spending all their time on this health bill maybe they could actually get some work done. Oh wait..I forgot I was talking about government :)

jim

The estate tax is brutal in general. I've been hoping it will never be reinstated but with this administration I'm sure it will be. I also feel its scary to think that they can impose this tax retroactively. I've heard that its legal from some circles but those circles tend to be political in nature.

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