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American Economic Review Vol. 106 No. 5 2016

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

Robert Gordon1; David Joulfaian2; James Poterba3

1 Stern School of Business, New York University, 780 Third Avenue, New York, NY 10017, and Twenty-First Securities (e-mail: ) · 2 Office of Tax Analysis, US Department of the Treasury, 1500 Pennsylvania Avenue NW, Washington, DC 20220, and Economics Department, Georgetown University (e-mail: ) · 3 MIT, 77 Massachusetts Avenue, Room E52-444, Cambridge, MA 02139, and NBER (e-mail: )

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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.

DOI
10.1257/aer.p20161037
Volume
106
Issue
5
Pages
662-667
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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