Tax Policy: Repeal Basis Adjustment and Ordinary Income Tax on Capital Gains
The Biden administration hinted that it would try to have the tax policy of basis step-up upon death repealed and capital gains treated like regular income. The base step-up is a crucial factor in transfer tax planning, even though it is primarily concerned with income tax preparation. Because the donee obtains the donor’s basis, donations of low-basis assets may be harmful under present law. In order to receive the basis step-up at death, taxpayers frequently choose to hold onto certain low-basis assets rather than sell or gift them. After obtaining those assets, the family members or trusts can sell them for little or no capital gains tax.
The Biden administration has suggested doing away with this tax policy of basis adjustment. Although many observers believe this is improbable, an alternate proposal would regard the transfer of valuable property upon death or by gift as a taxable event causing the gain to be recorded.
The impact of eliminating the tax policy of basis step-up would be worsened by the Biden Administration’s plan to tax-qualified dividends and long-term capital gains as ordinary income on all income above $1 million.
Ask an Estate Planning Attorney Today
For more information, go to Hudack Law Estate Planning Attorney and areas of service. We proudly serve California and Arizona; please call our California line at (877) 314-4309 or our Arizona line at (602) 777-7882.