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ASA Supports Continuation of Stepped-Up Basis

ASA joined the AGC, the National Federation of Independent Business, along with many other associations in strong support for the continuation of stepped-up basis. Stepped-up basis prevents family-owned businesses and farms from being hit with two significant and damaging tax bills when a family member passes away, including the capital gains tax on any appreciated assets and the estate tax on whatever is left.  Per our letter to the House Ways and Means Committee, “we oppose any changes to stepped-up basis that would impose this double death tax and increase taxes on family-owned businesses and farms—including administratively unworkable “protections” that simply delay destructive tax hikes.”  On April 29, 2021, President Biden unveiled the American Families Plan, which proposed making death a taxable event for inherited assets and eliminating stepped-up basis, along with unspecified protections for family-owned businesses and farms. Per the letter, “it remains unclear how and if these protections would shield future generations from substantial tax increases—but we know that current law already provides effective protections for families seeking to pass a business on to the next generation.”  Some have proposed ‘protecting’ family-owned businesses and farms by allowing them to defer realizing any capital gains until the business or farms are sold. While this carryover basis regime delays payment of tax until inherited assets are sold, the total tax bill will be the same as if the gains were taxed at death.  Per the letter, “carryover basis is simply stepped-up basis repeal by another name—it represents a significant tax increase for family-owned businesses and farms, and it is an administrative nightmare.”  Finally, repealing stepped-up basis will hurt the economy at a critical time and carryover basis is not an effective exemption from stepped-up basis repeal for family-owned businesses and farms, and we would oppose any such misguided “protections.”