Oct 1, 2010 12:00 PM

Federal uncertainty about the estate tax and GST tax causes a ripple effect on state tax regimes.

Sharon L. Klein

Attention in 2010 has primarily been focused on the extraordinary state of affairs on the federal level — the lapse of the federal estate and generation-skipping transfer (GST) tax regimes. Meanwhile, at the state level, many state taxation regimes are entwined with federal tax concepts. Accordingly, uncertainty at the federal level has had a significant and sometimes unintended ripple effect on the state level. If when all the dust settles, we're left with periods in 2010 when the federal estate tax and GST regimes lapsed, many state level problems will persist even after the federal landscape is clarified.

Due to the sunset provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), there are no federal estate or GST taxes in 2010. However, a modified carryover basis regime is in effect. Instead of inheriting assets with a basis equal to the fair market value (FMV) of the assets on the date of death, beneficiaries inherit assets with a basis equal to the lower of the decedent's original cost basis or the FMV on the date of death (with some modifications to basis, including a special basis adjustment of $1.3 million for assets passing to any beneficiary and an additional spousal basis adjustment of $3 million for assets passing to a surviving spouse).¹

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

E-Newsletter Signup

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