THE EVERETT ADVOCATE – FRIDAY, MAY 7, 2021 Page 17 SCHOOL | FROM PAGE 1 School Committee Memberat-Large Millie Cardello said she also did not know about the hearing until April 27 and had a prior commitment that could not be rescheduled. “I apologize to the community for not being there,” she said. “I would’ve been there had I been notified properly.” However, Tahiliani said the meeting was posted seven days in advance. “Our students and those who called in seemed to know about it,” she said. “We should be doing better; we should be showing up for our students.” School Committee Chairman Frank Parker said that on April 20 he notified the committee of when the hearing would be held. “When you’re not part of the process, this is what can happen,” he said. “I’ll continue to get these notices out; I ask that you read them.” Enrollment discrepancies In other news, Parker called attention to the fact that in October 2020 there were 6,620 students enrolled in the district. That was the figure the committee sent to the state for funding purposes. However, the April enrollment figure showed 6,934 students. “Ladies and gentlemen, that’s a difference of 314 students,” he said, adding that the cost per student is $8,000. “That’s a miss of $2.5 million. That’s a concern of mine; it’s something that we should all be concerned about.” DeMaria said the state delegation is aware of the problem and has earmarked $40 million for districts with enrollment discrepancies. However, Parker said his recent conversation with Tracy Novick, field director for the Massachusetts Association of School Committees, suggested otherwise. “Her number was $60 million, and she said the six largest districts could eat up all that money pretty quickly,” he said. Students return to EHS Tahiliani said Everett High School freshmen will have the option of returning to school on May 10 while sophomores, juniors and seniors can return on May 11. She said 37 percent of parents plan on sending their students back to school and the remaining 67 percent will continue with remote learning. “Certain parents did not want to have their students reacclimate to returning to in-person [learning] at this point in the school year,” she said. “YOUR FINANCIAL FOCUS” JOSEPH D. CATALDO STEP-UP IN BASIS PROPOSED TAX LAW CHANGE P resident Biden’s proposed repeal of the step-up in basis provisions of Internal Revenue Code Section 1014, if passed by Congress, will create a sweeping change in the tax code that will affect millions of American taxpayers. The step-up in tax basis provisions provide for the fair market value of all assets owned or constructively owned by the taxpayer at the time of his or her death to become the new “cost basis” going forward in the hands of the recipients of those assets (e.g. surviving spouse, children, relatives, etc.) pursuant to the terms of the Last Will and Testament transfer on death account, or a Living Trust, for example. As long as the assets are includible in the taxable estate of the decedent, regardless of whether or not a federal or Massachusetts estate tax has to be paid, the step-up in basis is achieved. This provision allows for a single-family home originally purchased for $75,000 to be left to one’s children at the time of death of a parent, while creating a new cost basis in the hands of the children equal to the fair market value at the time of death. If, for example, at the time of death, the fair market value of the home is $500,000, that will be the new cost basis. The children would be able to sell the home soon thereafter for $500,000 without having to pay any capital gains tax. One of the original purposes of the legislation was to avoid the unmanageable task of requiring the children to attempt to compute the cost basis of the home by going back 50 or more years to determine the original purchase price, capital improvements, closing costs, refinance costs, etc. By establishing the fair market value as the starting point after the date of death, all of those issues are avoided. No need for canceled checks, settlement statements, credit card statements, invoices, etc. No need to defend oneself in an IRS audit that most likely could not be won. Therefore, in the above example, if the Biden administration proposal is passed, if one assumes there were $75,000 in improvements over the years, there would be a $350,000 capital gain. If there were two children, the federal capital gains tax would be approximately $26,250 each and the Massachusetts capital gains tax would be $8,750 each, for a total of $70,000. This is certainly an increase in taxes to be paid by a lot of middle-class taxpayers. Millions of middle-class American taxpayers currently do not have to be concerned about such a capital gains tax in these circumstances. If the tax law is changed, it will be unavoidable. What’s important is not so much whether or not you agree or disagree with abolishing the step-up in basis provisions of the tax code, but whether or not you realize this will affect just about everybody, not just the rich and famous. This will also affect appreciated stock that a mother or father may leave to his or her children. Even a $100,000 stock portfolio built up over years of investing may have a cost basis of only $25,000. Without the benefit of the step-up in cost basis provisions, the children, upon a later sale of the stock, will realize a $75,000 capital gain and incur a $15,000 combined federal and Mass capital gains tax. The repeal of this long-standing provision will have profound implications for millions of taxpayers, not just the wealthy. Such a repeal would also create a disaster from a taxpayer compliance standpoint as well as from an IRS enforcement standpoint. Such a new tax law would amount to nothing less than a middle-class tax hike, and this would have nothing to do with the proposed increase in the capital gains tax rate for those who earn more than $400,000 per year.
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