These entrepreneurs grew their businesses by teaching others the tricks of their trade. You can, too.
Can we slow it all down, just a bit? For Goda s sake, Dennis Hopper is making out his last will and testament, George Blanda is 82, and a oePsychoa is celebrating its 50th anniversary of scaring the wits, and everything else, out of us.
Up through 2009 (and starting again in 2011, assuming the law isn't changed), there was a federal estate tax. That was and will be the bad part, at least for people who owed or will owe tax.
The good part was that, in exchange for potentially being subject to the estate tax, you got a "step-up" in basis. Essentially, when an individual died, his or her assets took as their basis for capital gains purposes their fair market value as of the date of death. So, to consider an example,...
Mom buys a bunch of stock in Company X, starting in 1950 and continuing to her death. The actual cost basis for her purchases was $15,000.
Mom dies, and her Company X stock is work $500,000.
Mom's three kids are left the Company X stock under Mom's Will.
What is the basis in the Company X stock? During a year in which there's an estate tax, that's easy: it's $500,000. So, if the kids sell the stock after Mom's death, they pay capital gains on the difference between the sale price and $500,000.
But how is this handled in 2010? There are three main rules:
1. Instead of a step-up in basis, we have a carryover basis regime. So the basis in Company X would be $15,000. But...
2. There is still a step-up in basis for $1.3 million of assets passing to beneficiaries who aren't the decedent's spouse. And...
3. There is a step-up in basis for $3 million of assets passing to the decedent's spouse.
The major problem with a carryover basis regime is that, in many cases, it is difficult or impossible to calculate the decedent's basis in his or her property. (From what I have read, this was the problem when carryover basis was briefly made the law, back in 1976.) And I worry that the biggest result of this change in the law will be full employment for America's forensic accountants.
