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An easier estate tax and extenders

They say you can't take it with you, but when it comes to the estate tax, some experts say some of its provisions should be portable.

Specifically, the argument is that the that the surviving spouse should be able to use the first-to-die spouse's estate exemption. Now, in many cases, when one spouse dies without having used the exemption, it cannot be used by the surviving spouse.

But David Cay Johnston, who won a Pulitzer Prize for his tax writings, says that many of the estate tax changes being floated are just too complicated. He argues in an article for Tax Analysts for the KISS, or Keep It Simple, Stupid, approach.

Eye_on_the_irs I elaborate on Johnston's argument in my other blog, Eye on the IRS.

Tax legislation timing: I hope that lawmakers take his Johnston's advice when they finally get around to dealing with the estate tax, which is set to disappear completely on Jan. 1, 2010. That's not likely to happen, for several reasons that I discuss in R.I.P. estate tax ... maybe.

The big question is not will the tax live (it will). The issue is just exactly when will Congress get around to making sure the estate tax doesn't die.

Capitol Hill has a packed agenda, so it could be a while. But then, what else is new? Congress seems to enjoy putting off critical tax action until the very last minute. Heck, half the time, tax law changes are made after the fact and applied retroactively.

The latest word, via the Senate Finance Committee's staff director who spoke earlier this week at the Southern Federal Tax Institute conference in Atlanta, is that the Senate will probably combine a package that extends expiring tax provisions with an extension of current estate tax law.

You remember extenders? Those tax breaks that everyone loves, but that get pushed until the very last minute -- literally in some Congressional sessions; case in point, December 20, 2006 -- before they are renewed.

The goal this year, Sullivan told tax conference attendees, is to get an estate tax (and extenders) bill on Obama's desk by the end of the year.

I say in all sincerity, good luck with that.

IRS issues final estate tax reg: It's been a lively week for the estate tax. 

In the Oct. 20 Federal Register, the IRS published issued final regulations on deductions for post-death estate expenses under Section 2053 of the Internal Revenue Code.

Tombstone (2) This tax law section, notes Allison Bell (no relation ... that I know!) in National Underwriter, allows estates to take deductions for funeral expenses, administration expenses, claims against the estate and "unpaid mortgages on, or any indebtedness in respect of, property where the value of the decedent’s interest therein, undiminished by such mortgage or indebtedness, is included in the value of the gross estate."

I'm no estate tax expert, but from what I've read about this matter, it's been a matter of great debate for years. In fact, the Federal Register regulation states that "the amount an estate may deduct for claims against the estate has been a highly litigious issue" and court opinions on the deductions have diverged.

And, according to some, this supposedly final decision by the IRS might not actually be the end of it. Sort of like the overall will-it-or-won't-it-die question.

Kind of fitting, don't you think for a so-called death tax ruling around Halloween?

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