Tax Reforms and Their Applicability

The following excerpts are from Robert L. Moshman, The Zero Percent Capital Gains Tax Rate, Est. Analyst (Feb. 2008):

These days, tax reforms are like time-release pills; the relief comes years after the legislation. The zero percent tax bracket of 2008 originated with the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) and was scheduled only for one year, 2008. Then the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) extended the zero bracket to include 2009 and 2010 as well.***

The zero bracket applies only to taxpayers who are in the two lowest federal income tax brackets of 10% and 15%. The favorable zero bracket covers long-term capital gains (after being offset by net short-term losses). Qualified  dividend income is also covered.***

Second guessing these decisions is inevitable because the fate of the stepped-up basis for assets transferred at death remains uncertain. An estate tax repeal with a carryover basis is still possible, so taking advantage of current temporary techniques to avoid capital gains is somewhat tempting.***