04-08-2021, 08:01 AM
Calm down. Biden cannot override IRC §1014 with an executive order. It would take congressional action to revoke the stepped-up basis rule.
Congress did eliminate the rule in 1976, but the resulting carryover basis was so unpopular that Congress initially suspended its enforcement and later repealed it retroactively.
The initial justification for the rule was that property passing as a result of death was subject to the estate tax based on the date-of-death value, which included any built-in appreciation. In order to prevent double taxation of this appreciation, the rule provided an increase in the tax basis of the property. But today most estates aren't liable for the estate tax due to the increased exemption amount. Because of this development proponents of the rule's repeal argue that the built-in appreciation of assets passing at death shouldn't escape taxation. But keep in mind that the tax on this appreciation is simply deferred until the asset is sold; repealing stepped-up basis doesn't trigger a tax on the appreciation at death.
Of course, if the Democrats reduce the exemption amount back to $3.5 million as many of them want to do, the argument for eliminating stepped-up basis becomes less compelling.
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