Pascrell is seeking new legislation to force the richest Americans to pay fair shares
Increased reform of the base would help to close the equity gap
PATERSON, NJ – U.S. Representative Bill Pascrell, Jr. (D-NJ-09), chairman of the House’s Supervision Subcommittee and Means of Supervision, today introduced HR 2286, a law designed to tax the capital gains of some of America’s wealthiest families certain transfers of estimated capital assets. The long-standing tax law allows the richest American families to pass enormous wealth on to their families without paying taxes on the appreciation of their wealth.
“America is being torn apart by an unfair tax system. Our two-tier tax code, with one code for working class Americans and another with special breaks for the people at the top, has destroyed public confidence in our tax structure that needs to be determined. ” said Chairman Pascrell. “This gap is one of the main causes of a broken system. If the world’s richest families can accumulate more and more wealth without paying their fair share, if not properly managed, this country will be destroyed. While Americans are squeezed and struggling to survive like never before, they view the growing wealth gap with despair and anger, and call for change. That change begins with closing the void and paying the richest Americans their fair share. “
As this legislation breaks new ground in the application of our tax laws, Chairman Pascrell welcomes comments and suggestions to clarify or improve the provisions of this legislation.
As chairman of the Oversight Subcommittee, Rep. Pascrell has made tax equity a top priority. Pascrell is the primary sponsor of the Carried Interest Fairness Act, legislation designed to fill one of the most egregious loopholes in federal tax law.
Section by section apply as the implementation law.
SECTION 1: Treats a transfer of property by gift or bequest generally as a sale of property. As a result, the donor of the property realizes a gain or loss at the time of a gift, and the deceased owner of the property realizes a gain or loss at the time of the bequest of the property to an heir. The realized amount is the excess of the fair value of the property at the time of the gift or legacy over the base of the donor or deceased in the property. The invoice provides an exception to this presumed rule of sale for gifts or bequests: (1) to a spouse who is a U.S. citizen, (2) to a charity, or (3) to tangible personal property that is not used in a business , real estate and collectibles held for investment. Additionally, the accepted sale rule does not apply to gifts that are subject to the annual gift tax exclusion ($ 15,000 per donor per recipient for 2021).
The bill provides that the recipient of a gift or legacy of property generally has a base in property equal to the fair market value of the property at the time of the gift or death of the deceased. In addition, the bill stipulates that the base cannot be higher than the amount for which the property was treated as having been sold by the donor or deceased. In the case of a gift or bequest to a spouse, gain or loss is generally not realized until the spouse dispose of the asset or dies.
Property written off transferred at the time of death and subject to the applicable sales rule is not subject to the related party loss restrictions set out in Section 267.
The bill contains special rules for trust transfers. First, if the founder of the trust is treated as the owner of the trust for income tax purposes (i.e. the trust is a “grantor trust”) or if the assets of the trust would be included in the gross assets of the founder after death becomes a gain or loss recorded if the founder is no longer treated as the owner of the trust assets in accordance with the trust rules of the founder or if the assets are no longer included in the estate of the approver (also due to the death of the approver or the distribution of the assets to a beneficiary other than the grantor) . Second, when a taxpayer transfers ownership to a trust not described above, a gain or loss is generally realized and recognized at the time of transfer to the trust. Third, in an effort to prevent the use of dynasty trusts, any property that is continuously held non-fiduciary for a period of 30 years is subject to the applicable sales rule, with the gain or loss realized and recorded at the end of each such 30 year period.
SECTION 2: Allows a taxpayer to exclude gains resulting from death transfers up to $ 1 million (indexed for inflation) from income.
SECTION 3: Generally requires reporting of information related to gifts or legacies subject to applicable sales rule. A person giving a gift, or the executor in the case of a transfer in the event of death, must provide the Minister of Finance and each recipient of an applicable transfer with a statement that includes the following information: (1) Name and tax identification number of the person to whom the Transfer has been made, (2) a description of the property being transferred, and (3) the fair value of the property and the basis of the property to the acquirer. Applicable transfers do not include transfers for which income is excluded under Section 2 of the Invoice or gifts that are excluded from the sales rule in Section 1 of the Invoice.
SECTION 4: Allows taxes to be paid on certain winnings earned and recognized on death in up to seven equal annual installments. This deferred payment option is generally only available for profits related to non-publicly traded assets. Interest accrues on tax payments accrued according to this rule.
 This rule contains exceptions for grantor trusts and certain trusts in favor of a spouse.
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