WaPo: Estate-Tax Repeal Would Hurt the "Small Rich"

Interesting article in today's Washington Post:  Estate-Tax Repeal Would Hurt the "Small Rich," by Allan Sloan:

When the Senate turned down President Bush's bid to repeal the estate tax permanently last week, it actually did a favor for tens of thousands of moderately well-off households -- the "small rich," if you prefer. That's because such households would be worse off under the full repeal scheduled for 2010 (which Bush wants to make permanent) than they would be under the 2009 rules, which are more favorable for estates than today's rules. According to a study by Congress's nonpartisan Joint Committee on Taxation, 7,500 estates would be better off under full repeal in 2010 than under the 2009 rules -- but more than 60,000 would be worse off.

This isn't exactly what you heard during last week's debate, is it? How on earth could the beneficiary of any estate be better off under the 2009 rules than under the 2010 version of permanent repeal? The answer gets a little complicated -- but please bear with me. It has to do with the difference between so-called stepped-up tax basis and carry-over tax basis.