Paul L. Caron

Wednesday, January 5, 2022

Kaplan: When the Stepped-Up Basis Of Inherited Property Is No More

Richard L. Kaplan (Illinois; Google Scholar), When the Stepped-Up Basis of Inherited Property Is No More, 47 ACTEC L.J. 77 (2021):

Written for a symposium on how Trusts & Estates might change in the future, this article considers the implications of repealing the “step-up in basis” rule for inherited property, as President Biden proposed. The article begins by explaining how this century-old tax rule affects gratuitous transfers and then reviews previous repeal efforts before it examines the impact of such repeal on family tax planning, retirement account funding, and charitable donations.

Very few tax rules have persisted largely intact for an entire century, and when such a rule is eliminated for many taxpayers, the changes in taxpayer behavior are likely to be dramatic. Such would be the case if the tax code’s step-up-in-basis rule for inherited property is significantly curtailed. Owners of appreciated property beyond the permitted exclusion amount would probably reevaluate their plans for lifetime versus testamentary gifts, allocations to retirement savings plans, and intended charitable contributions.

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