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Financial Planning > Tax Planning

Speaker: Estate Tax Uncertainty May Linger

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Members of Congress may extend the 2009 estate tax provisions into 2010 while they develop a permanent estate tax structure.

Kenneth Kies, a tax policy specialist, made that prediction Monday here at the annual meeting of the Association for Advanced Life Underwriting, Falls Church, Va.

Kies also warned that Congress could impose a $1 million-per-year limit on non-qualified deferred compensation, in an effort both to limit the effect of the alternative minimum tax and to pay for extending business tax breaks that are scheduled to expire at the end of this year.

The cost of extending the business tax cuts for a year could be $50 billion to $70 billion, and the cost of minimizing the effects of the AMT on middle-income taxpayers could cost $60 billion to $70 billion, Kies said.

In general, the 2009-2010 congressional cycle could be “the most active tax legislative exercise that the country has ever witnessed,” Kies said.

About $4 trillion in tax provisions will be expiring by the end of 2010, Kies estimated.

“That is more expiring tax provisions than ever before,” Kies said.

Under the Economic Growth and Tax Relief Reconciliation Act of 2001, the estate tax exemption for 2009 is $3.5 million per person, with a 45% maximum tax rate for estates that do pay estate taxes.

EGTRRA calls for the estate tax to disappear in 2010, then bounce back to the old, 2001, $1 million-per-person exemption in 2011.

“Something will have to happen in 2009,” Kies said. “There is an implied consensus that [Congress] cannot let 2010 possibly happen with a zero estate tax.”

Merely extending the 2009 rate into 2010 “buys Congress an extra year to debate a permanent solution to the estate tax issue,” Kies said.

“Based on past history, 3 of the past 4 past new presidents have gotten a major tax bill in the first 6 months in office,” Kies noted.


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