One of President Biden’s most cherished new tax proposals is referred to as the “Step-up Tax”, a tax that could devastate many family businesses. Basically, this is a tax that would immediately be imposed upon the death of a business owner. It is a tax that is levied on “unappreciated assets”. Current laws allow those that inherit a business and its related assets to do so without taxes being imposed on unrealized gains. This proposed tax could be 40% or more, and very well could lead to many inherited businesses being sold just to meet this tax obligation. The White House says this tax would raise over $100 billion in new taxes over the next 10 years.
Many believe that implementing such a death tax would be opening Pandora’s box for taxation that might never be closed. Frankly, taxing unrealized capital gains is a huge controversy. This proposed tax has opposition from both Republicans and Democrats as they believe that death should not be a taxable event. The proposed Step-up Tax is something for business owners to keep an eye on. We will monitor this matter closely and provide updates as we become aware of any.
