Recently, I came across a U.S. Treasury study from 1969 that proposed capital gains tax at death. They gave two justifications: (1) A step-up in basis creates an inequity in the law because tax liability depends on whether the asset was sold or kept until death; and (2) assets become immobile when seniors hold them just to get a stepped-up basis and avoid an income tax on any appreciation.
Here is an excerpt from U.S. Treasury Department, Tax Reform Studies and Proposals pt. 1 (Comm. Print 1969):
Under current law, the tax basis for an asset that is received from a decedent is either stepped-up or stepped-down to fair market value. IRC § 1014. President Biden proposed to eliminate the step-up in basis. See, e.g., Taylor Tepper, Stepped Up Basis Reform: Biden’s Middle-Class Tax Hike?, Forbes, May 7, 2021.
Hani Sarji
Lawyer and writer. Husband, father of daughter, son, brother to one brother and two sisters, uncle to eight nieces and nephews, and great uncle. Has two dogs and two cats. Loves technology and music.
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