Tuesday, February 13, 2007

We knew that it was too good to be true

Next year the tax rate on long-term capital gains is scheduled to go to zero for those in the bottom two tax brackets. That set up a great opportunity for grandparents to make annual exclusion gifts of appreciated securities to grandchildren, for potential tax-free gains to augment a college fund. That strategy looks likely to be killed before it is born. Tax Analysts ($) reports that the Ways and Means Committee has cleared a small tax cut for small businesses. Among the "revenue offsets" used to pay for the cut is a new denial of the lowest tax rates on dividends and capital gains to dependent children.

The bill apparently enjoys strong bipartisan support.

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