Basis in the Era of Uncertain Estate Taxes

Except for IRAs and retirement plans, assets owned by a person at his or her death receive a new cost or stepped up basis equal to their value at the person’s death. This new basis is relevant for capital gain when an asset is sold and for purposes of depreciation. The estate tax exemption is currently $5,490,000 with an estate tax of 40% on the excess. If assets are gifted away during a person’s lifetime, then they do not receive a stepped up basis at the person’s death.

President Trump has stated that he will sign legislation which would  repeal the estate tax. If this comes to pass, it is likely that along with it the rules regarding stepped up basis at death will be modified. One possibility is that the basis of assets will only be stepped up at death on the first $10,000,000 of assets, with the remaining assets not qualifying for a step up in basis.

Because of the uncertainty regarding the estate tax and the basis step up at death, people should seek professional advice before making gifts of appreciated assets during their lifetime.

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About randyspiro

I am a super lawyer in California with dual specialization in Estate Planning and Taxation.
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