It’s doubtful the estate tax—and FLP discounts—will disappear next year

BVWireIssue #84-2
September 16, 2009

Here’s how one law firm cleverly describes the current situation: “Almost like magic, the federal estate tax will disappear on January 1, 2010 and reappear on January 1, 2011 with a much lower federal estate tax exemption of $1 million per individual and an elevated federal estate tax rate as high as 55%—unless those magicians in Congress can conjure up a spell, or pass a bill, to reform the federal estate tax prior to the magical expiration date,” begins a new article in Corporate & Finance Alert, (Gibbons Law, P.C.).

There are four proposals currently pending before Congress: the Pomeroy Bill (H.R. 436), the Baucus Bill (S. 722), the Mitchell Bill (H.R. 498), and the McDermott Bill (H.R. 2023) (the details of each are outlined in the Gibbons Law article above). Of the four, only the Pomeroy Bill would eliminate valuation discounts for any transfer of non-business assets (stocks, bonds, real estate, etc.) in connection with family partnerships and LLCs (see BVWire # 77-4).  Another source: the Treasury’s recently released General Explanations of the Administration’s Fiscal Year 2010 Revenue Proposals (the so-called “Greenbook”) reflects the Obama Administration’s proposals that would keep estate and gift tax rates at current 2009 levels.      

“Congress will at the very least pass legislation before the end of the year to continue the current federal estate tax exemption of $3.5 million per individual and a maximum federal estate tax rate of 45% for one more year,” the Gibbons article says. Both the House and Senate 2010 budget resolutions, already passed, accommodate the status quo. “Overall, we can expect that the federal estate tax will not disappear in 2010, but will continue in its present form with some modifications.”

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