Step-Up in Basis: Policy Perspectives on a Longstanding Policy Loophole

This essay offers three different and conflicting perspectives on the income tax step-up in basis for property acquired from a decedent under IRC § 1041. Arguments in favor of repealing this longstanding tax loophole include increased revenue, elimination of the tax preference for income from capital versus labor, and minimizing tax considerations on economic investment decisions. Arguments against repeal include political infeasibility, administrative convenience, and incentives for middle class investment. These divergent perspectives are concrete examples of robust tax policy analysis guided by commitments to multiple principles at the same time. Those commitments include familiar ones like efficiency, equity, and administrability, but also equity and the real-world human consequences of tax rules.

Keywords: tax, basis, step-up, step up, policy

JEL Classification: K1,K34

Suggested Citation: Suggested Citation

Crawford, Bridget J. and Lichtenberger, Crystal and Maguire, Kaitlin and McQuillan, Gigi, Step-Up in Basis: Policy Perspectives on a Longstanding Policy Loophole (January 25, 2024). Geo. Wash. Bus. & Fin. L. Rev. (2024, Forthcoming), Available at SSRN: https://ssrn.com/abstract=4706929