REPEAL'S FLIPSIDE

Under the current law, the first $1 million of an estate is sheltered from estate taxes, a level that will rise to $3.5 million in 2009. Any amount over that threshold is taxed at rates up to 50%, but the cost basis of the assets is stepped up to the value on the date of death, so that heirs could sell the assets immediately and pay no capital gains tax. When the so-called death tax bites the dust in 2010, heirs will pay no estate taxes on inherited assets, but they will pay a capital gains tax if they sell, based on the cost of the assets when they were bought. For an estate that would be under the exemption threshold based on current law, the capital gains bite could be a lot nastier than the estate tax.