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Re-assessing the Costs of the Stepped-up Tax Basis Rule

Author

Listed:
  • Jay A. Soled

    (Rutgers Business School)

  • Richard L. Schmalbeck

    (Duke Law School)

  • James Alm

    (Tulane University)

Abstract

The stepped-up basis rule applicable at death (IRC section 1014) has always been a major source of revenue loss. Now, in the absence of a meaningful estate tax regime, taxpayers and their estate executors and administrators are likely to report inflated date-of-death asset values. As a result, the revenue loss associated with this tax expenditure, called the “stepped-up tax basis rule”, will surely increase markedly. The Internal Revenue Service will no doubt attempt to police excessive tax basis adjustments, but the agency lacks the resources to do so adequately. Congress should therefore institute reforms to ensure proper tax basis identification.

Suggested Citation

  • Jay A. Soled & Richard L. Schmalbeck & James Alm, 2019. "Re-assessing the Costs of the Stepped-up Tax Basis Rule," Working Papers 1904, Tulane University, Department of Economics.
    • Handle: RePEc:tul:wpaper:1904
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    File URL: http://repec.tulane.edu/RePEc/pdf/tul1904.pdf
    File Function: First Version, April 2019
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    More about this item

    Keywords

    Estate tax; capital gains; stepped-up basis tax rule.;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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