The STEP-UP In Investment Value?

Understanding the TAX loophole of a ‘step up’ in BASIS value

By Dr. David E. Marcinko MBA CMP®

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The term “step-up” refers to the difference in value and tax liability that an asset has when it is acquired and when it is transferred to an inheritor.



EXAMPLE #2: The proverbial millionaire Doctor Joe, for example, could buy a home for $350,000 and sell it for $1 million, after which he’d pay taxes on the $650,000 gain. But if Dr. Joe passes the home onto his daughter Ella, and she has it appraised at $1 million, its value has taken a “step up” in value to $1 million. If Ella sells the home for $1 million or less, she wouldn’t owe anything in taxes.

ASSESSMENT: For billionaires like Jeff Bezos, Bill Gates and Elon Musk who earn far more through their investments than their salaries, this loophole is a perfect way to shield their wealth. Intergenerational wealth has contributed to surging inequality in America, which grew wider during the pandemic. Since 2019, the wealth of the top 400 richest people in the US increased by $1.4 trillion, per research from Gabriel Zucman and Emmanuel Saez, a pair of left-leaning economists at the University of California, Berkeley.

“Often, for these people, wealth accumulates tax-free their entire lives,” Frank Clemente, executive director at the left-leaning advocacy group Americans for Tax Fairness, opined. President Joe Biden proposed ending this loophole and making billionaires “pay their fair share,” so why does it look like his party won’t touch it?


Thank You




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