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News from the Heckerling Institute on Estate Planning

Jan 13, 2015

This week, the 49th annual Heckerling Institute on Estate Planning convened in Orlando, Florida. Heckerling is the largest and most prestigious estate planning conference in the country. This year's Institute has drawn more than 3,000 attendees.

Several EisnerAmper professionals are attending this week's Institute and are reporting on "hot" topics being discussed. This is the first of a series of blogs on the Institute.

Howard M. Zaritsky and Lester B. Lee started off the proceedings with a primer on basis of property.

As first discussed at the 2014 Institute, the American Taxpayer Relief Act of 2012 (“ATRA”) has significantly changed the income tax and estate tax regime, particularly for those who reside in states with high income tax rates and modest or low estate tax rates. Many have an income tax rate that is higher than the estate tax rate. Estate planners therefore must consider both the estate and income tax rates, including the 3.8% surtax on net investment income, as implemented by the Health Care and Education Reconciliation Act of 2010, amending the Patient Protection Act, when determining what assets, if any, should be transferred to other family members.

This paradigm shift has made the calculation of basis very important. Without basis, one cannot readily determine gain or loss on the sale of property. Basis measures the accretion of wealth and recognition of revenue when assets are bought, sold, exchanged and otherwise disposed of under Internal Revenue Code section 1012(a). Simply put, basis is your investment in property and is a unique tax concept.

Some planning strategies to maximize basis on gifts include:

  • Shifting a taxable gain to a donee by shifting taxable gain on the potential sale of the property to a donee with an available capital loss carryover. The donee is then able to partially or entirely offset the gain with the loss, thereby minimizing or eliminating the capital gain on the transaction.
  • A donor should compare the income tax effects of a gift transfer with the estate, gift and GST tax savings. The carryover basis rules for gifts create a risk that a significant taxable gain will be recognized on a later sale of appreciated property that was gifted. A bequest or devise of that property will give the donee a step-up in the income tax basis equal to the value at either the date of death or, if the executor so elects, the alternate valuation date, which is generally six months after the date of death. However, the value of the property would be subject to the estate value.

For more content stemming from the 2015 Heckerling Institute on Estate Planning, please click here.


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Marie Arrigo

Marie Arrigo is an Advisor and led the Family Office Tax Services Practice within the firm’s Private Client Services Group.

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