Turns out there is a little problem that we don't have a clear resolution yet.
Many people are familiar with the old "step=up" in basis. What is that you ask if not familiar? We pay income taxes on income or gains from selling assets. So if you purchase something for $100, then later sell it for $300, you have $200 of income to pay taxes on.
Many items inherited were purchased a long time ago when prices were much lower. (Think about a residence owned for 50 years.) Under the expired tax laws inherited property is revalued to the fair market value at the time of death. Under current law there is the same step-up for up to $1.3M in assets, plus an additional $3M for items inherited by the spouse of the deceased. These step-ups allow a family to keep the "family farm" in the family after death.
How are these step-ups recorded? On the Estate Tax Form 706. But with no estate tax this year then Form 706 is not required. So there is no way to identify what assets are being included in the $1.3M (or $4.3M) for future tax purposes.
OK, this will never affect me personally either. But it is an issue for some. There is rumor that the IRS is developing a new form to document this and the new form will be attached to the individual's tax return. If this could be an issue for you, then stay alert - it could make a big difference in your future taxes.
