Carry-Over Basis for Heirs (beginning in 2010)

Under the existing federal estate tax law, heirs receive
a step-up in basis to the date-of-death value of the decedent's assets.

As expected, to offset part of the revenue loss created by
the new Act, Congress has overhauled the step-up in basis
rules currently in place. The new system takes effect in 2010
and contains the following features:

• The basis assigned to death transfers will be the lesser
  of the transferor's basis or the fair market value at the
  date of death.

• However, there will continue to be a step-up in basis for
  $1.3 million of assets to be selected by the executor and
  an additional $3 million of assets passing to a surviving
  spouse under conditions that would otherwise have qualified
  for the marital deduction.