John R. Bullis: Repeal the estate tax?
The House Ways and Means Committee reported out House Resolution 1105 “Death Tax Repeal Act of 2015” by a vote of 22 to 10.
As you know, it must pass the House of Representatives, then pass the Senate and then be signed by the president (or if vetoed, passed over his veto). That is not certain to happen and become law. But it is a step in the right direction.
The current law exempts from “death” estate tax (transfers of assets at death) of $5,430,000. And the same exemption applies to gifts (transfers of assets during life).
The current proposal would repeal the estate tax and the generation-skipping transfer tax for estates of folks dying for transfers on or after the date of enactment.
Enactment is still a long ways off. We will watch what our Senate and our president do on this.
The proposed bill would not change the rules for determine tax basis of assets inherited from the current rules. The “step up” in tax basis to value at date of death would still apply.
A gift results in the tax basis of the donor (giver) being transferred to the recipient. If you paid $100 for an item (like stock) and it is worth $500 when you give it to someone, they have the old tax basis of $100. If they sell it for $500, they have a $400 gain to pay tax on.
An inheritance is different. The cost that was paid was $100 is discarded, and the fair market value of say $500 is the tax basis for the person that receives the inheritance. If later sold for $510, the gain to be taxed is only $10.
Now, this new proposal would change the “death” tax, but the income tax rules would be continued as they are now.
Maybe you remember when there was one year of no death tax (2010). The estate (or trust) of folks that died in that year did not have a death tax to pay. This proposal would make the repeal of the death tax last for at least 10 years.
There is still a long way to go for this proposal to become law. Maybe now is a good time to contact members of Congress and ask them to support this new proposal.
Did you hear? “Making anything a success rests with people and commitment, strong will to always do the best, confidence in one another … and absolute determination.” — Jorgen Roed.
John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.