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President Biden’s American Families Plan calls for the elimination of the stepped-up basis tax provision to raise revenue for government spending. This would be devastating for many members of the cold chain industry. What is stepped-up basis? Suppose a business was purchased for $1 million and valued at $5 million at the time of the owner’s death. Under current law, there would be no tax on the $4 million appreciation that accrued during the owner’s lifetime. The heirs would take the $5 million value of the business as tax basis – the basis would be “stepped-up” by the $4 million unrecognized capital gain without having to pay tax on that gain. Were the heirs to sell the business in a future year for $7 million, they would owe capital gains tax on just the $2 million in appreciation under their ownership. This is a longstanding provision of US tax law that has been in place since the Revenue Act of 1921 and ensures that family businesses remain in business as heirs take over after the passing of the owner. If repealed it would cause devastating impacts on family businesses across the nation.
In addition, Chairman David Scott (D-GA) of the House Agriculture Committee sent a letter to President Biden on Wednesday, June 2 also expressing concerns over potential impacts the repeal of stepped-up basis would have on family farmers, ranchers and small businesses. He called the stepped-up basis tax provision “a critical tool enabling family farming operations to continue from generation to generation”.
Read Chairman David Scott’s full letter HERE.
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