Page 16 THE MALDEN ADVOCATE–Friday, May 21, 2021 Virtual Alzheimer’s Support Group Offered by Forestdale Park June 24 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. Joseph D. Cataldo is an Estate Planning/Elder Law Attorney, Certified Public Accountant, Certified Financial Planner, AICPA Personal Financial Specialist and holds a Master’s Degree in Taxation. Heart, Hugs & Hope: A Virtual Alzheimer’s Support Group Offered by Forestdale Park June 24, 2021, 5:00 pm, hosted by Forestdale Park Assisted Living and Memory Care Community, 341 Forest Street, Malden. Dealing with Alzheimer's disease and related dementia isn't easy, so it is helpful to share your concerns and personal experiences with others who completely understand what you're going through. You will also learn about proven strategies to help you better care for your family member. Please call 781-333-8903 or email reception@forestdalepark.com for the details and the virtual meeting invite. Please note that this is a virtual event. SKATING CENTER www.Roller-World.com 781-231-1111 HELP WANTED Skate Guards • Snack Bar & Office Help Adults Prefered - Hours Can Be Arranged Open 7 Days Per Week Call Jerry at 617-620-9201 or Michelle at 781-233-9507 Located at 425R Broadway (Route 1 South), Saugus MBTA Bus Route 429 ~ LEGAL NOTICE ~ NOTICE OF PUBLIC HEARING Malden Community Preservation Committee Notice is hereby given that the City of Malden Community Preservation Committee will hold a public hearing on Wed. May 19, 2021, at 6:00PM Eastern Time (US and Canada), via remote hearing, at which members of the public are invited to attend to participate and provide comments. The CPC will invite the applicant for funds for improvements to Wallace Park Wall to present and will receive public comments on this proposal: Project Hearing for Wallace Park Wall Application Public Comment and Q&A If you would like to request a reasonable accommodation, please contact Maria Luise, ADA Compliance Coordinator at mluise@cityofmalden.org or 781-397-7000, Ext 2005 The hearing will be hosted by the City of Malden on Zoom and will be accessible to members of the public who are invited to attend and provide comments via the following link and/or telephone: https://cityofmalden.zoom.us/j/93302232709?pwd=QkEzWGZpdDE1QjNBcGhzQWl0Q1lJZz09 Passcode: 663321 Or Telephone: US: +1 929 436 2866 or +1 646 518 9805 Webinar ID: 933 0223 2709 Passcode: 663321 For further information, or to submit written comments and questions, please contact the City of Malden Community Preservation Committee via email at maldencpc@cityofmalden.org May 7 & 14, 2021
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