Jan 1, 2011 12:00 PM

Faced with an uncertain tax landscape, executors and trustees didn't get to enjoy the 2010 tax holiday

By Gail E. Cohen

The year 2010 may be remembered fondly by some as “The Year Without Taxes” because on Jan. 1, 2010, all federal estate taxes and generation-skipping transfer (GST) taxes disappeared. It was also a year with “almost” no other federal personal taxes because tax rates remained at historically low rates: qualified dividends and capital gains were taxed at the bargain basement rate of 15 percent; gift taxes were “on sale” at 35 percent; and even ordinary income tax rates at 35 percent were rock bottom. The tax holiday should have made it easier for fiduciaries; on the contrary, fiduciaries — both executors and trustees — faced unprecedented challenges because of the uncertainty of the unique 2010 tax landscape.

The executor's roles should have been easier because there was no federal estate tax return to file. However, 15 states and the District of Columbia continue to impose a separate state estate tax for which a state return is necessary.¹ Complicating matters further, only a limited federal step-up in income tax cost basis was allowed during 2010. Executors were required to determine exactly how to allocate this limited step-up in an equitable manner. The Internal Revenue Service issued a cost basis reporting form, but then promptly recalled the form, reissuing it again on Dec. 16, almost one year after the law took effect. Any assets sold by the executor that weren't stepped up potentially created a capital gains tax that the estate had to pay, the amount of which was determined by any built-in gains that existed. And, while there was no step-up in basis for many assets, there was still a “step-down” for assets that had built-in losses at death.

Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
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Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

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2011 Trust Glossary

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50 Years Ago This Month

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50 years ago, in May 1962, we featured articles such as: "Future of Canadian Trusteeship" by Arthur H. Mingay", "Training Trust Employees" by Ian M. Marr, "What is a Trust Officer?" by Eric J. Brown, and "Selling Services" by Donald I. Webb.

Conrad Teitell's Guide to Tax Benefits For Charitable Gifts

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