A Capital Idea

President Biden and members of Congress are working on plans to?increase capital gains taxes?on the highest income earners and estates as a means of reducing the government deficit and paying for the infrastructure bills.

Up for consideration:

• Taxing long term capital gains at?39.6%,?for those earning more than $1m/year ($2m as a couple), as opposed to the current maximum, federal rate of 20%, and
• Changing to?carry-over capital gains tax basis?for all but the first $1m of gains in your estate. This move would keep the longstanding “step-up” in tax basis to the date-of-death value only on the first $1m in gains in the estate.

What to do if these pass:

If you have gains of this magnitude, selectively “harvest” gains?in the last decade of life in particular (to try to keep the annual income below $1m),?employ installment sales treatment?to reduce annual receipts of gain in the sale of real estate or a business, and set up?community property trusts?(creating step up of the?entire?basis of assets at the death of the first spouse – instead of the usual half) in a state like Nevada.

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