Thursday, February 24, 2011

Kiplinger discusses the "cost basis" rules for heirs of persons deceased in 2010; a confusing topic

A few days ago, a friend gave me a copy of a March 2011 Kiplinger Personal Finance article on the choice heirs have if they gain from an estate from someone who passed away in 2010.

It appears that heirs can choose between the 2010 tax exemption, or pay tax but use the 2011 special exemption of the first $5 million.

The hooker seems to come with the fact that in 2010, the “stepped up basis” on real estate sales was eliminated.  If you inherited an old house with a huge appreciation, you could be stuck with all the gain from the original basis, not the basis at time of death (but there was a $1.3 million exception anyway).

Confusing?  Try the Kiplinger article ("The 'Death Tax' Lives", dated Jan. 5, 2011, here.  

Kiplinger also has more coverage on long term care issues, which I’ll revisit soon. 

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