A new tax change proposal could directly impact family farmers across the country. A group of Senate democrats – including Elizabeth Warren, Mass.; Chris Van Hollen, Md.; Cory Booker, N.J.; Sheldon Whitehouse, R.I.; and Bernie Sanders, I-Vt. – introduced the plan Monday that would tax additional assets at death.
The Senate democrats say the Sensible Taxation and Equity Promotion Act – or STEP Act- would get rid of the step-up in basis and the capital gains of unsold assets – like stocks – at death.
“It is absurd that our tax code allows many of our country’s wealthiest people to get away with never paying a cent in taxes on millions or even billions in capital gains income, while working people pay taxes on every check they receive,” Sanders said this week.
One farm tax expert says the proposal wouldn’t just tack on that tax at death. He says the proposal, as written today, would also place a tax on gifting assets like tractors while the farmer is still alive.
“This is not a one-alarm fire, this is like a 12-alarm fire,” Paul Neiffer, CPA for CliftonLarsenAllen, told Chip Flory on AgriTalk earlier this week.
Neiffer says while the proposal touts changes to the death tax, in order to get the step up in basis, a tax will be imposed on those who gift items while they are still alive.
“What it means is you’re still going to get the step-up basis, but the offset is now you’re going to pay tax in order to get the step-up basis, and you’re going to pay a tax during your lifetime,” he says. “This isn’t simply waiting till death.”
Neiffer says while the proposal touts changes to the death tax, in order to get the step up basis, a tax will be imposed on those who gift items while they are still alive.
“Let’s say that I’m a farmer and I want to transfer some grain to my kids, or I want to gift a tractor to my son for his farm operation. We have to pretend like we’ve sold that tractor for fair market value and that farmer has to report all that gain on their tax return,” Neiffer explains. “Now the son, in this situation, is going to get a step up in basis because of the fact that dad reported a gain. So, the step-up in basis is nice, but if I have to pay an immediate tax in order to get a step-up in basis, that’s not a good provision.”
Neiffer says this is the first proposal, which focuses more on the income side. He fears the next proposal could impact the estate and gift tax.
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