Taxation of Unrealized Gains at Death - An Evaluation of the Current Proposals

Abstract

The failure to tax the appreciation of capital assets transferred at death has been described as the major shortcoming of existing federal income tax laws. From time to time since 1942, the Department of the Treasury and others have urged alteration of the rule which underlies this failure. Recently the House Ways and Means Committee held panel discussions and public hearings on the subject of tax reform during which consideration was given to the possibility of changing the laws dealing with taxation of appreciated property at death. In its recommendations to the Committee, the Treasury Department did not push for change in this area. Nevertheless, Congress seems likely to approve some revision of the present rules allowing a stepped-up basis of assets transferred at death. This Article evaluates the leading proposals for change in this area by examining the way each proposal treats ten specific problems which arise in conjunction with transfers of appreciated property at death and makes recommendations concerning possible solutions to the problems.