I hate steel bands, however...

As giddy as the Rich-Person-Death-Tax repealers are at the idea of no estate tax in 2010, they may soon sober up to the fact that Junior and Sis better not try to sell any of those long-held assets.

Hard-liners are enthusiastic. Abolishing the estate tax even for one year is a triumph, they believe. However, those who actually have to deal with the death of a relative in 2010 may not necessarily feel that way. That is because the repeal legislation replaced much of the lost revenue by requiring that capital gains taxes be paid on estates in lieu of the estate tax.
The way the law has been historically is that assets with capital gains are exempted from the capital gains tax at death--the assets are stepped up to current values. Thus someone planning to hold an asset until death never had any reason to worry about basis for tax purposes and may not have even bothered retaining such records. But his or her heirs will now have to figure out basis in order to calculate the proper capital gains tax--and the person who purchased the assets in the first place won't be around to help.
In 1976, Congress enacted a provision exactly like this, called carry-over basis. It was so difficult for executors to implement that Congress repeatedly delayed its effective date and eventually repealed it. In the coming year, at least some heirs will wish they had the certainty and ease of paying an estate tax for which the rules have been established for many years rather than deal with carry-over basis.
It's too soon to say what the final resolution of the estate tax mess will be in 2010. But given Republican intransigence on the tax issue and their improving electoral prospects in November, there is a very good chance that no action will be taken on this issue and the law will stay on automatic pilot.

Personally, I won't consider this a triumph of principle over expediency. Permanently raising the estate tax exemption and lowering the rate is a good deal, and permanent repeal is an unrealistic goal, especially given the federal government's deteriorating finances. Those who think otherwise are living in a dream world. [More from my favorite conservative blogger]

Having settled a few estates that included farmland that literally cost nothing via land grants, the idea of paying taxes on the centuries of gains should at least give pause to repealers. Moreover, as Bartlett points out, trying to document purchases from say, 1967 would test my record-keeping system.

The basis step-up is the Big Secret of estate taxes. It's also the reason why the claim of estates being double-taxed is patently false for capital appreciation. Throwing it away would be a Pyrrhic victory.

Meanwhile, commentators are envisioning - among other observations - some odd funeral arrangements this time next year.

I’m looking forward to a covert market in death certificates at the end of 2010: doctors willing to formally decree an individual dead, which event would be swiftly followed by a small cremation ceremony with immediate family only. And then a mysterious resident in the guest house on St Bart’s, whom nobody ever talks about. [More]

I think I'll enjoy the weather and the fruity drinks at least.