The Biden Administration: The Green Book
It all begins with an idea.
The Biden Administration: The Green Book
On May 28, 2021, the Treasury Department released its General Explanations of the
Administration’s Fiscal Year 2022 Revenue Proposals (a/k/a the Green Book). The Green Book provides a comprehensive set of tax proposals the Administration would
like to become law.
The Biden Green Book DID NOT include estate and gift tax proposals that were
proposed by the Obama Administration and/or included in For the 99.5% Act and American Housing and Economic Mobility Act of 2021, such as:
- Lowering the exemption
- Eliminating zeroed-out GRATs
- Eliminating perpetual GST Exempt Trust
- Including grantor trusts in decedent’s estate
The Biden Green Book DOES propose eliminating the “basis step-up” and makes gifts, death, transfers to and from trusts and partnerships, and having a 90-year holding period, recognition events for income tax purposes.
Lifetime Gifts and Death:
Event Triggering Gain: Transfers of appreciated property as a gift or at death will be treated as a realization event for the donor or donor’s estate.
Exclusions:
- Tangible Property: Tangible personal property (other than collectibles) are not treated as being sold.
- General Exclusion: Biden’s proposal provides that in addition to any other exception from gain being recognized that there would be a $1 million per-person exclusion from gain.
- Principal Residence: In addition to general exclusion, there is an exclusion of up to $250,000 of gain per taxpayer on the sale of a principal residence.
- QSBS: The gain exclusion for qualified small business stock would continue to be available.
Transferees Exempt from Recognition:
- A surviving spouse who is a “U.S. spouse” will receive carry-over basis
- Charities
Donee’s Basis: No basis increase for lifetime gifts under the $1 million exclusion, but other transfers (including tax free transfers at death) will receive a basis adjustment.
Deferral:
- 15-year payment plan allowed for non-liquid assets
- Deferral for family owned and operated businesses available until that business is no longer family owned and operated
Valuation: The determination of fair market value will be using gift and estate tax valuation principles, but the proposal restricts application of valuation discounts by providing that the value of “a transferred partial interest would be its proportional share of the fair market value of the entire property.
Reporting: Deemed recognition would be reported either on 1) the estate or gift tax return or 2) a separate reporting form.
Effective Date: All gifts and deaths occurring on or after January 1, 2022.
The STEP (Sensible Taxation and Equity Promotion) Act
It all begins with an idea.
The STEP (Sensible Taxation and Equity Promotion) Act
Who: Senators Van Hollen, Booker, Sanders, Whitehouse, and Warren; Representative Pascrell
Effective January 1, 2021
Tax unrealized gains upon transfer by gift or at death
- Would not apply to transfers to US citizen/long-term resident spouses, charities, charitable trusts, qualified disability trusts and cemetery trusts
- $1,000,000 of exclusion (adjusted for inflation), $100,000 of which is available during life
Taxation of assets in non-grantor trusts every 21 years
- Transition rule for trusts established in or before 2005 – first tax due in 2026
Deferral over a 15-year period available for tax on gains other than actively traded assets, that are transferred at death or taxed at 21 years
Would add reporting requirement for trusts with more than $1M in assets or $20,000 in income to report balance sheet, income statement, trustees, grantors and beneficiaries, including “a full and complete accounting of all trust activities and operations for the year