Short Version: Obama’s Proposal to Tax Gains on Gifted and Inherited Property

In the State of the Union Address, the President proposed raising revenues by imposing capital gains on appreciation in the value of a decedent’s assets at his or her death, coupled with an increase in the capital gains tax rate to 28 percent. The proposal would treat bequests and gifts, other than those made to charities, as recognition events on which the capital gains tax would be imposed, but for married couples, no tax would be due until the death of the second spouse. Capital gains of up to $200,000 per couple ($100,000 per individual) could still be left free of tax and this exemption would be automatically portable between spouses. Couples would also have an additional $500,000 exemption for personal residences ($250,000 per individual), which also would be automatically portable between spouses. Tangible personal property other than expensive art and similar collectibles would be tax-exempt, and no tax would be due on inherited small, family-owned and operated businesses-unless and until the business was sold. Any closely-held business would have the option to pay tax on gains over 15 years.

Posted in Status of Tax Legislation, WillPlan Blog.

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