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URL:  http://boards.fool.com/does-anyone-know-how-this-rule-will-interact-with-13003738.aspx

Subject:  Re: Long/Short Term Cap gain for me? Date:  7/26/2000  10:33 AM
Author:  TMFExRO Number:  38036 of 121219

Does anyone know how this rule will interact with the soon-to-come ultra-long-term capital gains rates?

My money says Congress never thought about it. There's no mention of inherited property where they set the rate (IRC 1(h)), and there's no mention of the 5-year holding period in the holding period section (IRC 1223).

IRC 1223 establishes the holding period for inherited property by saying that should one sell it within 1 year of inheriting, one will be considered to have held it for more than 1 year. (I just love the straightforward way they put things in the Code.)

I assume this is one that IRS will have to clear up, and a cursory review leads me to believe that the "super" rate will apply only if the seller has held the property more than 5 years, or more probably 5 years from the DOD. There might be something in the legislative record that would lead you elsewhere, but I don't see it in the "plain" language of the law.

Actually, I think counting only the legatee's holding period makes sense from a practical standpoint, too. We've all seen the trouble people have establishing basis and holding period on gifted stock, and that's sometimes when they can still ask the donor. If they try to tie this to the decedent's holding period, buy stock in Psychic Friends.

TMF ExRO
Phil Marti
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