Congress loves to sneak new laws into hard to defeat bills, especially those related to highways, and it has happened again with new IRS rules that dictate how inherited property is valued. Before July 31, 2015, a person who inherited property was able to use alternate valuations on the property instead of the amount that was reported for estate tax purposes. Usually, the inheritor would claim a higher value as the basis in the property in order to avoid capital gains tax but this practice was costing the treasury an estimated $150 million per year. Even President Obama called out this practice and made it a point to fix the loophole. From now on, the estate tax valuation will have to be used as the basis which presents a choice for the estate planner to give a lower value to avoid estate taxes or a higher value so the new owners have a lesser tax hit when they sale the asset. As of now, no regulations have been issued by the IRS on the specifics of the new rule but they are tentatively set to be release on February 29, 2016.
See Ashlea Ebeling, Congress Cracks Down On Inheritors’ Tax Loophole, Forbes, December 16, 2015.
Special thanks to Jim Hillhouse for bringing this article to my attention.
