If the U.S. Senate fails to pass an estate tax bill, the estate tax disappears Jan. 1. But it's not all good news. By law, the tax will reappear in 2011 with higher rates and lower exclusions.
Under the law that takes effect Jan. 1, taxpayers will face capital gains taxes on inherited property. The tax will be calculated on the original cost of the property to the person who has died. This could be extraordinarily complicated: "How much did grandpa pay for that piece of property 75 years ago?"
It is likely that the Senate will pass a one-year extension of the current law, with a retroactive date to Jan. 1, 2010, buying time to fix the situation. But that will almot certainly result in a rash of lawsuits that could make inheriting property in 2010 no less murky.
Source: Washington Post Writers Group, Kenneth R. Harney (12/28/2009)