Bloomberg Quotes Beth Kaufman on Biden's Capital Gains Proposal
The Biden administration’s planned capital gains overhaul has tax professionals and wealth advisers eager for more details, including how lawmakers will tailor legislative language concerning the way contributions to partnerships are taxed.
President Joe Biden’s proposal goes beyond raising the top rate for gains by stocks, bonds, real estate, and other assets. His plan, intended to pay for trillions of dollars in new infrastructure and social spending, also calls for taxing appreciated assets passed on through gifts or at death.
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However, the administration provided some relief, including a provision to allow that tax to be paid over a 15-year period for illiquid assets, other than family business interests eligible for indefinite deferral under the plan.
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“Lots of wealthy people have illiquid assets because they invest in hedge funds, for example,” said Beth Shapiro Kaufman, a Member in Caplin & Drysdale's Washington, D.C. office. “I assume that those would be considered illiquid because they aren’t readily tradeable.”
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Tax professionals also questioned the usefulness a provision that allows individuals to shield $1 million of unrealized gains—$2 million for married couples— from tax when gifting appreciated assets. The exemption also applies when assets are transferred at death, but in a slightly different manner.
Professionals noted that when it is applied to gifts, recipients have to eventually make up the capital gains tax on the amount exempted by the donor when they sell the assets.
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“That seems like cruddy use of your exemption because you use your exemption but only get the gain deferred, whereas when you use your exemption at death, the gain gets excused,” Kaufman said.
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