Politics, Tax Law and Appraising

As many of you are aware, there are soon to be some changes in the estate tax law, especially with the tax exclusion, but perhaps the rate as well. For 2008 the exclusion or threshold for paying estate tax is 2 million dollars, with any remaining amount taxed at 45%. The 2009 exclusion is 3.5 million and 45% rate for amounts of above and by 2010 the tax is repealed, then to come back at 1 million in 2011.

I would think Congress will act sometime in 2009, before the 2010 repeal. But exactly how congress is going to act may very well depend upon the results of the presidential election this fall.

Each candidate has their only plan for dealing with the estate tax. McCain would like to see a 5 million dollar exclusion and then a tax rate of 15%. Obama would like to see a 3.5 million exclusion with up to a 45% tax rate on anything above. That is very similar to the existing 2009 code. In either event, estates need to be valued, establishing basis property valuations for heirs will remain, and the need for appraisals will continue to be necessary.

An interesting opinion piece from the Wall Street Journal called Stayin' Alive: How to Cheat the Estate Tax follows.

An excerpt from the WSJ:

Don't bet on total repeal of the estate tax, though, even for one year. Financial planners, accountants and lawyers expect Congress and the next president -- whether it be Sen. Barack Obama (D., Ill.) or Sen. John McCain (R., Ariz.) -- to reach a compromise that will retain the estate tax in some form.

"The one thing we all know cannot happen is what current law says will happen," says Mr. Graetz, referring to the current law killing the estate tax in 2010 and reviving it in 2011 with only a $1 million exclusion. "That means Congress must act next year, no matter who's president."

So what will Congress do? Although nobody knows, it's significant that, under both candidates' plans, only a tiny fraction of all estates would get hit by the federal estate tax. "Our calculations from IRS and other data sources indicate that Obama would tax less than one-half of one percent of all estates of people dying in the U.S. -- and McCain would tax less than one-quarter" of one percent, says Clint Stretch, managing principal of tax policy at Deloitte Tax LLP in Washington.

To read the full WSJ opinion piece click HERE.