President Obama in his press release in advance of his annual State of the Union address in January of this year recommended elimination of the stepped-up basis at death. If this were to incur, it would impose a capital gains tax at death.  In order to avoid this alleged loophole, the President’s proposal was to treat bequests and gifts (other than to charitable organizations) as realization events. In other words, an event that would cause a recognition of gain.

Some commentators believe that this is an attempt to make up for estate tax revenues that will be lost due to the increases in the Allowable Exclusion Limit which is currently at $5,430,000. However, the proposal to impose a capital gains tax upon death or upon receipt of a gift is in addition to the current existing estate tax.

While Congress does not appear to have taken any action on this proposal, it bears watching in the future.