Revenue and Incentive Effects of Basis Step-Up at Death: Lessons from the 2010 "Voluntary" Estate Tax Regime

14 Pages Posted: 21 Mar 2016 Last revised: 12 May 2023

See all articles by Robert N. Gordon

Robert N. Gordon

Twenty-First Securities Corporation

David Joulfaian

U.S. Department of the Treasury, Office of Tax Analysis (OTA); Georgetown University - Department of Economics

James M. Poterba

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: March 2016

Abstract

In 2010, the U.S. estate tax expired and executors of wealthy decedents were not required to file estate tax returns. In the absence of the estate tax, beneficiaries received assets with carryover rather than stepped-up basis. Unrealized capital gains accounted for 44 percent of the fair market value of non-cash assets in estates that chose the carryover basis regime, and an even higher percentage for some asset categories. Many of the largest gains were on assets that had been held for at least two decades.

Suggested Citation

Gordon, Robert N. and Joulfaian, David and Poterba, James M. and Poterba, James M., Revenue and Incentive Effects of Basis Step-Up at Death: Lessons from the 2010 "Voluntary" Estate Tax Regime (March 2016). NBER Working Paper No. w22090, Available at SSRN: https://ssrn.com/abstract=2752295

Robert N. Gordon (Contact Author)

Twenty-First Securities Corporation ( email )

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David Joulfaian

U.S. Department of the Treasury, Office of Tax Analysis (OTA) ( email )

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Georgetown University - Department of Economics ( email )

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James M. Poterba

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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