To amend the Internal Revenue Code of 1986 to treat property transferred by gift or at death as sold for fair market value, and for other purposes.

I 117TH CONGRESS 1ST SESSION H. R. 2286 To amend the Internal Revenue Code of 1986 to treat property transferred by gift or at death as sold for fair market value, and for other purposes. IN THE HOUSE OF REPRESENTATIVES MARCH 29, 2021 Mr. PASCRELL introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to treat prop- erty transferred by gift or at death as sold for fair market value, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. DEEMED REALIZATION OF CAPITAL GAINS AT 3 TIME OF GIFT OR DEATH. 4 (a) TREATMENT AS SALE.— 5 (1) IN GENERAL.—Part IV of subchapter P of 6 chapter 1 of the Internal Revenue Code of 1986 is 7 amended by adding at the end the following new sec- 8 tion: 9 VerDate Sep 11 2014 01:36 May 26, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H2286.IH H2286 pbinns on DSKJLVW7X2PROD with BILLS 2 •HR 2286 IH ‘‘SEC. 1261. GAINS FROM CERTAIN PROPERTY TRANS- 1 FERRED BY GIFT OR UPON DEATH. 2 ‘‘(a) IN GENERAL.—Any property which is trans- 3 ferred by gift or at death shall be treated as sold for its 4 fair market value on the date of such gift or death. 5 ‘‘(b) EXCEPTIONS.— 6 ‘‘(1) SPOUSE OR SURVIVING SPOUSE.—This sec- 7 tion shall not apply to a transfer of property to the 8 transferor’s spouse or surviving spouse if such 9 spouse or surviving spouse is a citizen of the United 10 States. 11 ‘‘(2) CERTAIN TANGIBLE PERSONAL PROP- 12 ERTY.—In the case of tangible personal property, 13 this section shall apply only to the following: 14 ‘‘(A) Property held in connection with a 15 trade or business. 16 ‘‘(B) Property held for investment. 17 ‘‘(C) Collectibles (as defined in section 18 408(m) (determined without regard to para- 19 graph (3) thereof)). 20 ‘‘(3) CHARITABLE CONTRIBUTIONS.—This sec- 21 tion shall not apply to any transfer to an organiza- 22 tion described in section 170(c). 23 ‘‘(c) SPECIAL RULES FOR TRUSTS.— 24 ‘‘(1) CERTAIN GRANTOR TRUSTS.—In the case 25 of any property which— 26 VerDate Sep 11 2014 01:36 May 26, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2286.IH H2286 pbinns on DSKJLVW7X2PROD with BILLS 3 •HR 2286 IH ‘‘(A) is held in a trust of which the grantor 1 or another person is treated as the owner under 2 subpart E of part I of subchapter J of chapter 3 1, and 4 ‘‘(B) is includible in the gross estate of the 5 grantor or such other person under chapter 11, 6 such property shall be treated as transferred under 7 subsection (a) when the grantor or such other per- 8 son ceases to be treated as the owner of such prop- 9 erty, or such property ceases to be includible in the 10 gross estate of the grantor or such other person (in- 11 cluding by reason of the death of the grantor or 12 such other person, or the distribution of such prop- 13 erty to a person other than the grantor or such 14 other person). 15 ‘‘(2) OTHER TRUSTS.— In the case of any 16 property held in trust and not described in para- 17 graph (1), such property shall be treated as trans- 18 ferred under subsection (a) upon the transfer of 19 such property to a trust. 20 ‘‘(3) TRANSFERS FROM AND MODIFICATIONS OF 21 TRUSTS.—Any modification of the direct or indirect 22 beneficiaries of a trust (or the rights of the bene- 23 ficiaries to trust assets) or any transfer or distribu- 24 tion of trust assets (including to another trust) shall 25 VerDate Sep 11 2014 01:36 May 26, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H2286.IH H2286 pbinns on DSKJLVW7X2PROD with BILLS 4 •HR 2286 IH be treated as a transfer described in subsection (a), 1 unless the Secretary determines that any such trans- 2 fer or modification is of a type which does not have 3 the potential for tax avoidance. 4 ‘‘(4) DYNASTY TRUSTS.— 5 ‘‘(A) IN GENERAL.—Any property that is 6 continuously held in trust and is not subject to 7 subsection (a) for a period of 30 years shall be 8 treated as transferred pursuant to subsection 9 (a) at the end of such 30 year period. 10 ‘‘(B) PROPERTY HELD IN TRUST ON THE 11 EFFECTIVE DATE.—Any property held in trust 12 on January 1, 2022, that has been continuously 13 held in trust for more than 30 years as of such 14 date shall be treated as transferred pursuant to 15 subsection (a) on such date. 16 ‘‘(C) CERTAIN GRANTOR TRUSTS AND 17 QUALIFYING SPOUSAL TRUSTS.—For purposes 18 of this paragraph, property shall not be treated 19 as held in trust during any period when such 20 property is held by a trust described in para- 21 graphs (1)(A) and (1)(B), or when such prop- 22 erty is held by a qualifying spousal trust. 23 ‘‘(5) QUALIFYING SPOUSAL TRUST.— 24 VerDate Sep 11 2014 01:36 May 26, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2286.IH H2286 pbinns on DSKJLVW7X2PROD with BILLS 5 •HR 2286 IH ‘‘(A) IN GENERAL.—Paragraphs (1), (2), 1 (3), and (4) shall not apply in the case of a 2 qualifying spousal trust, and the property of 3 such trust shall be treated as transferred under 4 subsection (a)— 5 ‘‘(i) upon the death of the spousal 6 beneficiary, 7 ‘‘(ii) upon the distribution of such 8 property from such trust to any person 9 other than the spousal beneficiary who is a 10 citizen of the United States, or 11 ‘‘(iii) at such time such property 12 ceases to be held by a qualifying spousal 13 trust. 14 ‘‘(B) QUALIFYING SPOUSAL TRUST.—For 15 purposes of this section, a trust is a qualifying 16 spousal trust if— 17 ‘‘(i) such trust is a qualified domestic 18 trust (as defined in section 2056A), 19 ‘‘(ii) the sole current income bene- 20 ficiary of such trust is the spouse or sur- 21 viving spouse of the transferor of property 22 to such trust, and 23 ‘‘(iii) such transferor (during the life 24 of such transferor) or such spouse or sur- 25 VerDate Sep 11 2014 01:36 May 26, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H2286.IH H2286 pbinns on DSKJLVW7X2PROD with BILLS 6 •HR 2286 IH viving spouse has the power to appoint 1 over the entire trust. 2 ‘‘(d) EXCLUSION OF CERTAIN GIFTS.—In the case 3 of gifts made to any individual during the taxable year, 4 so much of the dollar amount of such gifts to such indi- 5 vidual as does not exceed the amount in effect for the cal- 6 endar year under section 2503(b) in which the taxable 7 year begins shall not be taken into account under sub- 8 section (a) for such taxable year. 9 ‘‘(e) REGULATIONS.—The Secretary shall prescribe 10 such regulations as may be necessary to prevent the avoid- 11 ance of the purposes of this section.’’. 12 (2) CLERICAL AMENDMENT.—The table of sec- 13 tions for part IV of subchapter P of chapter 1 of 14 such Code is amended by adding at the end the fol- 15 lowing new item: 16 ‘‘Sec. 1261. Gains from certain property transferred by gift or upon death.’’. (b) COORDINATION OF RELATED PARTY LOSS 17 RULES.—Section 267 of such Code is amended by adding 18 at the end the following new subsection: 19 ‘‘(h) PROPERTY TREATED AS SOLD AT DEATH.— 20 Subsection (a)(1) shall not apply to any property that is 21 transferred at death and treated as sold under section 22 1261.’’. 23 (c) TREATMENT OF BASIS FOR GIFTS AND BE- 24 QUESTS TO WHICH TAX APPLIES.— 25 VerDate Sep 11 2014 01:36 May 26, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2286.IH H2286 pbinns on DSKJLVW7X2PROD with BILLS 7 •HR 2286 IH (1) ELIMINATION OF CARRYOVER BASIS FOR 1 GIFTS.—Section 1015(a) of such Code is amended— 2 (A) by striking ‘‘If the property’’ and in- 3 serting the following: 4 ‘‘(1) GIFTS BEFORE JANUARY 1, 2022.—If the 5 property’’; 6 (B) by inserting ‘‘, and before January 1, 7 2022’’ after ‘‘after December 31, 1920’’; and 8 (C) by adding at the end the following new 9 paragraph: 10 ‘‘(2) GIFTS AFTER DECEMBER 31, 2021.—If the 11 property was acquired by gift after December 31, 12 2021, the basis shall be the fair market value of 13 such property at the time of the gift.’’. 14 (2) RULES FOR TRANSFERS BETWEEN 15 SPOUSES.— 16 (A) IN GENERAL.—Section 1041(b) of 17 such Code is amended to read as follows: 18 ‘‘(b) TRANSFEREE HAS TRANSFEROR’S BASIS.—In 19 the case of any transfer of property described in sub- 20 section (a), the basis of the transferee in the property shall 21 be the adjusted basis of the transferor.’’. 22 (B) TRANSFERS AT DEATH.—Section 23 1041(a) of such Code is amended by inserting 24 VerDate Sep 11 2014 01:36 May 26, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H2286.IH H2286 pbinns on DSKJLVW7X2PROD with BILLS 8 •HR 2286 IH ‘‘(including at death)’’ after ‘‘transfer of prop- 1 erty’’. 2 (C) CONFORMING AMENDMENTS.— 3 (i) Section 1014 of such Code is 4 amended by adding at the end the fol- 5 lowing new subsection: 6 ‘‘(g) PROPERTY ACQUIRED FROM DECEDENT 7 SPOUSE.—In the case of property which passes from the 8 decedent to (or in trust for the benefit of) the decedent’s 9 surviving spouse in a transfer described in section 10 1041(a)(1), the basis of such property in the hands of the 11 transferee shall be determined under section 1041(b) and 12 not this section.’’, and 13 (ii) Section 1015(e) of such Code is 14 amended by striking ‘‘1041(b)(2)’’ and in- 15 serting ‘‘1041(b)’’. 16 (3) BASIS MUST BE CONSISTENT WITH GAINS 17 RECOGNIZED IN DEEMED REALIZATION.— 18 (A) PROPERTY ACQUIRED FROM DECE- 19 DENT.—Section 1014 of such Code, as amend- 20 ed by the preceding provisions of this Act, is 21 amended by adding at the end the following 22 new subsection: 23 ‘‘(h) BASIS MUST BE CONSISTENT WITH GAINS 24 RECOGNIZED IN DEEMED REALIZATION.—The basis of 25 VerDate Sep 11 2014 01:36 May 26, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H2286.IH H2286 pbinns on DSKJLVW7X2PROD with BILLS 9 •HR 2286 IH any property to which subsection (a) applies shall not ex- 1 ceed the amount for which the property was treated as 2 sold under section 1261.’’. 3 (B) PROPERTY ACQUIRED BY GIFT.—Sec- 4 tion 1015 of such Code is amended by adding 5 at the end the following new subsection: 6 ‘‘(f) BASIS MUST BE CONSISTENT WITH GAINS REC- 7 OGNIZED IN DEEMED REALIZATION.—The basis of any 8 property to which subsection (a)(2) applies shall not ex- 9 ceed the amount for which the property was treated as 10 sold under section 1261.’’. 11 (d) CONFORMING AMENDMENTS.— 12 (1) Section 7477(a) of such Code is amended 13 by striking ‘‘chapter 12’’ and inserting ‘‘chapter 1 or 14 12’’. 15 (2) Section 7517(a) of such Code is amended 16 by striking ‘‘chapter 11’’ and inserting ‘‘chapter 1, 17 11’’. 18 (e) EFFECTIVE DATE.—The amendments made by 19 this section shall apply to transfers by gift (including 20 transfers treated as gifts by reason of the amendments 21 made by this section), or at death by decedents dying, 22 after December 31, 2021. 23 VerDate Sep 11 2014 01:36 May 26, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H2286.IH H2286 pbinns on DSKJLVW7X2PROD with BILLS 10 •HR 2286 IH SEC. 2. EXCLUSION OF CERTAIN AMOUNTS OF REALIZED 1 CAPITAL GAIN. 2 (a) IN GENERAL.—Part III of subchapter B of chap- 3 ter 1 of the Internal Revenue Code of 1986 is amended 4 by inserting before section 140 the following new section: 5 ‘‘SEC. 139I. EXCLUSION OF GAIN FROM TRANSFERS OF AP- 6 PRECIATED ASSETS AT DEATH. 7 ‘‘(a) IN GENERAL.—Gross income shall not include 8 so much of the net capital gain for the taxable year from 9 transfers at death to which 1261(a) applies as does not 10 exceed $1,000,000. 11 ‘‘(b) INFLATION ADJUSTMENT.— 12 ‘‘(1) IN GENERAL.—In the case of any taxable 13 year beginning after 2022, the $1,000,000 amount 14 in subsection (a) shall be increased by an amount 15 equal to— 16 ‘‘(A) such dollar amount, multiplied by 17 ‘‘(B) the cost-of-living adjustment deter- 18 mined under section 1(f)(3) for the calendar 19 year in which the taxable year begins, deter- 20 mined by substituting in subparagraph (A)(ii) 21 thereof ‘calendar year 2021’ for ‘calendar year 22 2016’. 23 ‘‘(2) ROUNDING.—If the dollar amount in sub- 24 section (a), after being increased under paragraph 25 VerDate Sep 11 2014 01:36 May 26, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H2286.IH H2286 pbinns on DSKJLVW7X2PROD with BILLS 11 •HR 2286 IH (1), is not a multiple of $10,000, such amount shall 1 be rounded to the next lowest multiple of $10,000.’’. 2 (b) CLERICAL AMENDMENT.—The table of sections 3 for part III of subchapter B of chapter 1 of such Code 4 is amended by inserting after section 139H the following 5 new item: 6 ‘‘Sec. 139I. Exclusion of gain from transfers of appreciated assets at death.’’. (c) EFFECTIVE DATE.—The amendments made by 7 this section shall apply to transfers at death by decedents 8 dying after December 31, 2021, in taxable years beginning 9 after such date. 10 SEC. 3. INFORMATION REPORTING OF CERTAIN GIFTS. 11 (a) IN GENERAL.—Subpart B of part III of sub- 12 chapter A of chapter 61 of the Internal Revenue Code of 13 1986 is amended by adding at the end the following new 14 section: 15 ‘‘SEC. 6050Z. RETURNS RELATING TO CERTAIN GIFTS AND 16 BEQUESTS. 17 ‘‘(a) IN GENERAL.—In the case of an applicable 18 transfer, the individual making such gift, or the executor 19 in the case of a transfer at death, shall furnish to the 20 Secretary the following information: 21 ‘‘(1) The name and taxpayer identification 22 number of the person to whom such transfer was 23 made. 24 ‘‘(2) A description of the property transferred. 25 VerDate Sep 11 2014 01:36 May 26, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H2286.IH H2286 pbinns on DSKJLVW7X2PROD with BILLS 12 •HR 2286 IH ‘‘(3) The fair market value of the property 1 transferred and the basis of such property to the 2 transferee. 3 ‘‘(b) APPLICABLE TRANSFER.— 4 ‘‘(1) IN GENERAL.—For purposes of this sec- 5 tion, the term ‘applicable transfer’ means— 6 ‘‘(A) any gift (other than a covered secu- 7 rity (as defined in section 6045(g)(3))) which is 8 taken into account under section 1261, and 9 ‘‘(B) so much of any transfer at death 10 (other than such a covered security) which is so 11 taken into account under section 1261 and the 12 gain from which is includible in gross income 13 for the taxable year of such transfer. 14 ‘‘(2) DE MINIMIS.— 15 ‘‘(A) GIFTS.—For gifts not exceeding the 16 limitation for such year under section 2503(b) 17 and not taken into account under section 1261, 18 see subsection (d) thereof. 19 ‘‘(B) TRANSFERS AT DEATH.—For amount 20 of gain excluded from gross income in case of 21 a transfer at death, see section 139I(a). 22 ‘‘(c) STATEMENTS TO BE FURNISHED TO PERSONS 23 WITH RESPECT TO WHOM INFORMATION IS REQUIRED.— 24 Every person required to make a re [Text truncated for display. 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