Topic
Carryover basis
About: Carryover basis is a research topic. Over the lifetime, 12 publications have been published within this topic receiving 29 citations.
Papers
Posted Content•
TL;DR: In this article, the authors proposed a major step toward leveling the playing field by requiring wealthy heirs to pay income and payroll taxes on inheritances they receive above a large lifetime exemption.
Abstract: Despite our founding vision as a land of opportunity, the United States ranks at or near the bottom among high-income countries in economic equality and inter-generational mobility. Our tax code plays a key role. Inherited income is taxed at less than one-seventh the average tax rate on income from work and savings. This chapter proposes a major step toward leveling the playing field by requiring wealthy heirs to pay income and payroll taxes on inheritances they receive above a large lifetime exemption. As part of this shift, the proposal would repeal the current estate and gift taxes and would tax accrued gains (beyond a threshold) on transferred assets at the time of transfer. It would also substantially reform the rules governing family-owned businesses, personal residences, and the timing and valuation of transfers through trusts and similar vehicles. Relative to current law, the Urban-Brookings Tax Policy Center estimates the proposal would raise $337 billion over the next decade if the lifetime exemption was $2.5 million, and $917 billion if the lifetime exemption was $1 million.
The proposal would almost exclusively burden the most affluent and most privileged heirs in society, while the additional revenues could be used to invest in those who are not as fortunate. As a result, the proposal would soften inequalities, strengthen mobility, and more equitably allocate taxes on inheritances among heirs. It would also enhance efficiency and growth by curtailing unproductive tax planning, increasing work among heirs, and reducing distortions to labor markets and capital allocation. Furthermore, the proposal is likely to increase public support for taxing inherited income. While the burdens of estate and inheritance taxes both largely fall on heirs, inheritance taxes are more self-evidently “silver spoon taxes” and appear to be more politically resilient as a result.
18 citations
TL;DR: In 2010, the U.S. estate tax expired and executors of wealthy decedents were not required to file estate tax returns as discussed by the authors, and beneficiaries received assets with carryover rather than stepped-up basis.
Abstract: In 2010, the U.S. estate tax expired and executors of wealthy decedents were not required to file estate tax returns. In the absence of the estate tax, beneficiaries received assets with carryover rather than stepped-up basis. Unrealized capital gains accounted for 44 percent of the fair market value of non-cash assets in estates that chose the carryover basis regime, and an even higher percentage for some asset categories. Many of the largest gains were on assets that had been held for at least two decades.
5 citations
Posted Content•
TL;DR: In 2010, executors of estates for decedents in 2010 could choose between an estate tax regime and a basis carryover regime as discussed by the authors, which created a tradeoff between a current estate tax payment and a future capital gains tax liability for beneficiaries who inherited assets with carryover-basis.
Abstract: Executors of estates for decedents in 2010 could choose between an estate tax regime and a basis carry-over regime. For most executors, this created a tradeoff between a current estate tax payment and a future capital gains tax liability for beneficiaries who inherited assets with carryover-basis. Various features of a decedent’s estate, including the gross value of assets, outstanding debts, whether the decedent resided in a state with an estate tax, and the basis of assets held at the time of death, affected the relative tax burden under the two regimes. Some executors chose to file estate tax returns for decedents from 2010, but these estate tax filings resulted in very little estate tax revenue. Estate tax filers had more leverage, were more likely to be from a state with an estate tax or from married decedents, were less likely to have made lifetime gifts, and had larger charitable bequests – all factors that are associated with reduced estate tax liability. While it is not possible to tell definitively whether executors chose the most tax-efficient option when confronted with the two tax regimes, evidence from tax returns suggests that an increase of one percent of estate value in the difference between estate tax liability and prospective tax liability under the carryover basis regime reduced the likelihood of filing an estate tax return by between 0.3 and 1.5 percentage points.
4 citations
Posted Content•
TL;DR: In this article, Dodge and Soled explain why inflated tax basis reporting is pervasive, estimating that this problem will cost the federal government $250 billion over the next 10 years and that the real figure could easily be much higher.
Abstract: In this article, Dodge and Soled explain why inflated tax basis reporting is pervasive, estimating that this problem will cost the federal government $250 billion over the next 10 years and that the real figure could easily be much higher. And, unlike corporate tax shelters, this type of tax fraud is available to all taxpayers who engage in property transactions. Furthermore, the underlying problem of tax basis identifications will be dramatically exacerbated if the new Congress moves quickly (as seems likely) to permanently repeal the estate tax, in which case a carryover tax basis regime of section 1022 will supplant the current basis-equals-fair-market-value-at-death rule. The authors question, however, how estate fiduciaries could possibly calculate the tax basis that decedents had in their investments, if the taxpayers themselves, while alive, did not know that basis. A carryover basis regime failed so badly in 1976 that it was retroactively repealed. In light if this failure, there is no reason to suspect that the carryover basis regime scheduled to take in effect in 2010 will fare any better, unless Congress and the IRS institute safeguards along the lines that the authors propose. In a conversation with Mikhail Gorbachev, Ronald Reagan once said, Trust, but verify. In making that remark, Reagan made an important observation about how perhaps we should conduct diplomacy and, the authors suspect, our affairs in general. Tax basis identifications require the same vigilance on the part of Congress and the IRS.
3 citations
3 citations
Related Topics (5)
Performance Metrics
| Year | Papers |
|---|---|
| 2020 | 1 |
| 2016 | 3 |
| 2013 | 1 |
| 2010 | 1 |
| 2005 | 1 |
| 2001 | 2 |