[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2286 Introduced in House (IH)]
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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 property
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 Representatives of the
United States of America in Congress assembled,
SECTION 1. DEEMED REALIZATION OF CAPITAL GAINS AT TIME OF GIFT OR
DEATH.
(a) Treatment as Sale.--
(1) In general.--Part IV of subchapter P of chapter 1 of
the Internal Revenue Code of 1986 is amended by adding at the
end the following new section:
``SEC. 1261. GAINS FROM CERTAIN PROPERTY TRANSFERRED BY GIFT OR UPON
DEATH.
``(a) In General.--Any property which is transferred by gift or at
death shall be treated as sold for its fair market value on the date of
such gift or death.
``(b) Exceptions.--
``(1) Spouse or surviving spouse.--This section shall not
apply to a transfer of property to the transferor's spouse or
surviving spouse if such spouse or surviving spouse is a
citizen of the United States.
``(2) Certain tangible personal property.--In the case of
tangible personal property, this section shall apply only to
the following:
``(A) Property held in connection with a trade or
business.
``(B) Property held for investment.
``(C) Collectibles (as defined in section 408(m)
(determined without regard to paragraph (3) thereof)).
``(3) Charitable contributions.--This section shall not
apply to any transfer to an organization described in section
170(c).
``(c) Special Rules for Trusts.--
``(1) Certain grantor trusts.--In the case of any property
which--
``(A) is held in a trust of which the grantor or
another person is treated as the owner under subpart E
of part I of subchapter J of chapter 1, and
``(B) is includible in the gross estate of the
grantor or such other person under chapter 11,
such property shall be treated as transferred under subsection
(a) when the grantor or such other person ceases to be treated
as the owner of such property, or such property ceases to be
includible in the gross estate of the grantor or such other
person (including by reason of the death of the grantor or such
other person, or the distribution of such property to a person
other than the grantor or such other person).
``(2) Other trusts.-- In the case of any property held in
trust and not described in paragraph (1), such property shall
be treated as transferred under subsection (a) upon the
transfer of such property to a trust.
``(3) Transfers from and modifications of trusts.--Any
modification of the direct or indirect beneficiaries of a trust
(or the rights of the beneficiaries to trust assets) or any
transfer or distribution of trust assets (including to another
trust) shall be treated as a transfer described in subsection
(a), unless the Secretary determines that any such transfer or
modification is of a type which does not have the potential for
tax avoidance.
``(4) Dynasty trusts.--
``(A) In general.--Any property that is
continuously held in trust and is not subject to
subsection (a) for a period of 30 years shall be
treated as transferred pursuant to subsection (a) at
the end of such 30 year period.
``(B) Property held in trust on the effective
date.--Any property held in trust on January 1, 2022,
that has been continuously held in trust for more than
30 years as of such date shall be treated as
transferred pursuant to subsection (a) on such date.
``(C) Certain grantor trusts and qualifying spousal
trusts.--For purposes of this paragraph, property shall
not be treated as held in trust during any period when
such property is held by a trust described in
paragraphs (1)(A) and (1)(B), or when such property is
held by a qualifying spousal trust.
``(5) Qualifying spousal trust.--
``(A) In general.--Paragraphs (1), (2), (3), and
(4) shall not apply in the case of a qualifying spousal
trust, and the property of such trust shall be treated
as transferred under subsection (a)--
``(i) upon the death of the spousal
beneficiary,
``(ii) upon the distribution of such
property from such trust to any person other
than the spousal beneficiary who is a citizen
of the United States, or
``(iii) at such time such property ceases
to be held by a qualifying spousal trust.
``(B) Qualifying spousal trust.--For purposes of
this section, a trust is a qualifying spousal trust
if--
``(i) such trust is a qualified domestic
trust (as defined in section 2056A),
``(ii) the sole current income beneficiary
of such trust is the spouse or surviving spouse
of the transferor of property to such trust,
and
``(iii) such transferor (during the life of
such transferor) or such spouse or surviving
spouse has the power to appoint over the entire
trust.
``(d) Exclusion of Certain Gifts.--In the case of gifts made to any
individual during the taxable year, so much of the dollar amount of
such gifts to such individual as does not exceed the amount in effect
for the calendar year under section 2503(b) in which the taxable year
begins shall not be taken into account under subsection (a) for such
taxable year.
``(e) Regulations.--The Secretary shall prescribe such regulations
as may be necessary to prevent the avoidance of the purposes of this
section.''.
(2) Clerical amendment.--The table of sections for part IV
of subchapter P of chapter 1 of such Code is amended by adding
at the end the following new item:
``Sec. 1261. Gains from certain property transferred by gift or upon
death.''.
(b) Coordination of Related Party Loss Rules.--Section 267 of such
Code is amended by adding at the end the following new subsection:
``(h) Property Treated as Sold at Death.--Subsection (a)(1) shall
not apply to any property that is transferred at death and treated as
sold under section 1261.''.
(c) Treatment of Basis for Gifts and Bequests to Which Tax
Applies.--
(1) Elimination of carryover basis for gifts.--Section
1015(a) of such Code is amended--
(A) by striking ``If the property'' and inserting
the following:
``(1) Gifts before january 1, 2022.--If the property'';
(B) by inserting ``, and before January 1, 2022''
after ``after December 31, 1920''; and
(C) by adding at the end the following new
paragraph:
``(2) Gifts after december 31, 2021.--If the property was
acquired by gift after December 31, 2021, the basis shall be
the fair market value of such property at the time of the
gift.''.
(2) Rules for transfers between spouses.--
(A) In general.--Section 1041(b) of such Code is
amended to read as follows:
``(b) Transferee Has Transferor's Basis.--In the case of any
transfer of property described in subsection (a), the basis of the
transferee in the property shall be the adjusted basis of the
transferor.''.
(B) Transfers at death.--Section 1041(a) of such
Code is amended by inserting ``(including at death)''
after ``transfer of property''.
(C) Conforming amendments.--
(i) Section 1014 of such Code is amended by
adding at the end the following new subsection:
``(g) Property Acquired From Decedent Spouse.--In the case of
property which passes from the decedent to (or in trust for the benefit
of) the decedent's surviving spouse in a transfer described in section
1041(a)(1), the basis of such property in the hands of the transferee
shall be determined under section 1041(b) and not this section.'', and
(ii) Section 1015(e) of such Code is
amended by striking ``1041(b)(2)'' and
inserting ``1041(b)''.
(3) Basis must be consistent with gains recognized in
deemed realization.--
(A) Property acquired from decedent.--Section 1014
of such Code, as amended by the preceding provisions of
this Act, is amended by adding at the end the following
new subsection:
``(h) Basis Must Be Consistent With Gains Recognized in Deemed
Realization.--The basis of any property to which subsection (a) applies
shall not exceed the amount for which the property was treated as sold
under section 1261.''.
(B) Property acquired by gift.--Section 1015 of
such Code is amended by adding at the end the following
new subsection:
``(f) Basis Must Be Consistent With Gains Recognized in Deemed
Realization.--The basis of any property to which subsection (a)(2)
applies shall not exceed the amount for which the property was treated
as sold under section 1261.''.
(d) Conforming Amendments.--
(1) Section 7477(a) of such Code is amended by striking
``chapter 12'' and inserting ``chapter 1 or 12''.
(2) Section 7517(a) of such Code is amended by striking
``chapter 11'' and inserting ``chapter 1, 11''.
(e) Effective Date.--The amendments made by this section shall
apply to transfers by gift (including transfers treated as gifts by
reason of the amendments made by this section), or at death by
decedents dying, after December 31, 2021.
SEC. 2. EXCLUSION OF CERTAIN AMOUNTS OF REALIZED CAPITAL GAIN.
(a) In General.--Part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting before section
140 the following new section:
``SEC. 139I. EXCLUSION OF GAIN FROM TRANSFERS OF APPRECIATED ASSETS AT
DEATH.
``(a) In General.--Gross income shall not include so much of the
net capital gain for the taxable year from transfers at death to which
1261(a) applies as does not exceed $1,000,000.
``(b) Inflation Adjustment.--
``(1) In general.--In the case of any taxable year
beginning after 2022, the $1,000,000 amount in subsection (a)
shall be increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
the taxable year begins, determined by substituting in
subparagraph (A)(ii) thereof `calendar year 2021' for
`calendar year 2016'.
``(2) Rounding.--If the dollar amount in subsection (a),
after being increased under paragraph (1), is not a multiple of
$10,000, such amount shall be rounded to the next lowest
multiple of $10,000.''.
(b) Clerical Amendment.--The table of sections for part III of
subchapter B of chapter 1 of such Code is amended by inserting after
section 139H the following new item:
``Sec. 139I. Exclusion of gain from transfers of appreciated assets at
death.''.
(c) Effective Date.--The amendments made by this section shall
apply to transfers at death by decedents dying after December 31, 2021,
in taxable years beginning after such date.
SEC. 3. INFORMATION REPORTING OF CERTAIN GIFTS.
(a) In General.--Subpart B of part III of subchapter A of chapter
61 of the Internal Revenue Code of 1986 is amended by adding at the end
the following new section:
``SEC. 6050Z. RETURNS RELATING TO CERTAIN GIFTS AND BEQUESTS.
``(a) In General.--In the case of an applicable transfer, the
individual making such gift, or the executor in the case of a transfer
at death, shall furnish to the Secretary the following information:
``(1) The name and taxpayer identification number of the
person to whom such transfer was made.
``(2) A description of the property transferred.
``(3) The fair market value of the property transferred and
the basis of such property to the transferee.
``(b) Applicable Transfer.--
``(1) In general.--For purposes of this section, the term
`applicable transfer' means--
``(A) any gift (other than a covered security (as
defined in section 6045(g)(3))) which is taken into
account under section 1261, and
``(B) so much of any transfer at death (other than
such a covered security) which is so taken into account
under section 1261 and the gain from which is
includible in gross income for the taxable year of such
transfer.
``(2) De minimis.--
``(A) Gifts.--For gifts not exceeding the
limitation for such year under section 2503(b) and not
taken into account under section 1261, see subsection
(d) thereof.
``(B) Transfers at death.--For amount of gain
excluded from gross income in case of a transfer at
death, see section 139I(a).
``(c) Statements To Be Furnished to Persons With Respect to Whom
Information Is Required.--Every person required to make a return under
subsection (a) shall furnish to each person whose name is required to
set forth in such return a written statement showing the information
described in subsection (a).
``(d) Timing.--The returns and statements required under this
section shall be furnished at such time and in such form and manner as
the Secretary shall by regulation prescribe.''.
(b) Clerical Amendment.--The table of sections for subpart B of
part III of subchapter A of chapter 61 of such Code is amended by
adding at the end the following new item:
``Sec. 6050Z. Returns relating to certain gifts.''.
(c) Effective Date.--The amendments made by this section shall
apply to transfers after December 31, 2021, in taxable years beginning
after such date.
SEC. 4. EXTENSION OF TIME FOR PAYMENT OF TAX.
(a) Extension of Time.--
(1) In general.--Subchapter B of chapter 62 of the Internal
Revenue Code of 1986 is amended by adding at the end the
following new section:
``SEC. 6168. EXTENSION OF TIME FOR PAYMENT OF CAPITAL GAINS ON CERTAIN
ASSETS REALIZED BY REASON OF DEATH.
``(a) 7-Year Installment Payment.--
``(1) In general.--In the case of any gain with respect to
eligible property that is recognized under section 1261 by
reason of the death of the taxpayer, the taxpayer may elect to
pay part or all of tax imposed on such gain in 2 or more (but
not exceeding 7) equal installments.
``(2) Date for payment of installments.--If an election is
made under paragraph (1), the first installment shall be paid
not later than the date on which the tax for the taxable year
in which the gain described in paragraph (1) occurs is due, and
each succeeding installment shall be paid on or before the date
which is 1 year after the date prescribed by this paragraph for
payment of the preceding installment.
``(b) Eligible Capital Asset.--For purposes of this section, the
term `eligible property' means any property other than personal
property of a type which is actively traded (within the meaning of
section 1092(d)(1)).
``(c) Portion of Tax Eligible.--The amount of tax to which this
section applies shall not exceed the excess of--
``(1) the tax computed under chapter 1 (determined after
application of section 1261), over
``(2) the tax computed under chapter 1 (determined without
regard to section 1261).
``(d) Election.--Any election under subsection (a) shall be made
not later than the time prescribed by section 6072 for filing the
return of tax imposed under chapter 1 (including extensions thereof),
and shall be made in such manner as the Secretary shall by regulations
prescribe. If an election under subsection (a) is made, the provisions
of this subtitle shall apply as though the Secretary were extending the
time for payment of the tax.
``(e) Proration of Deficiency to Installments.--If an election is
made under subsection (a) to pay any part of the tax imposed under
chapter 1 in installments and a deficiency has been assessed, the
deficiency shall (subject to the limitation provided by subsection
(a)(2)) be prorated to the installments payable under subsection (a).
The part of the deficiency so prorated to any installment the date for
payment of which has not arrived shall be collected at the same time
as, and as a part of, such installment. The part of the deficiency so
prorated to any installment the date for payment of which has arrived
shall be paid upon notice and demand from the Secretary. This
subsection shall not apply if the deficiency is due to negligence, to
intentional disregard of rules and regulations, or to fraud with intent
to evade tax.
``(f) Time for Payment of Interest.--If the time for payment of any
amount of tax has been extended under this section, interest payable
under section 6601 on any unpaid portion shall be paid annually at the
same time as, and as part of, each installment payment of the tax.
``(g) Regulations.--The Secretary shall prescribe such regulations
as may be necessary to the application of this section.
``(h) Cross-References.--
``(1) Security.--For authority of the Secretary to require
security in the case of an extension under this section, see
section 6165.
``(2) Interest.--For provisions relating to interest on tax
payable in installments under this section, see subsection (k)
of section 6601.''.
(2) Coordination with transferee liability.--Section 6109
of such Code is amended by redesignating subsections (g), (h),
and (i) as subsections (h), (i), and (j), respectively, and by
inserting after subsection (f) the following new subsection:
``(g) Period of Assessment in Case of Extension of Time for Payment
of Tax Under Section 1261.--For purposes of subsection (c), the period
of limitation for assessment against the transferor of any tax imposed
under section 1261 the payment of which is extended under section 6168
shall not be treated as expiring earlier than the due date for the last
payment under (a)(2) of such section.''.
(3) Clerical amendment.--The table of sections for subpart
B of chapter 62 of such Code is amended by adding at the end
the following new item:
``Sec. 6168. Extension of time for payment of capital gains on certain
assets realized by reason of death.''.
(b) Interest.--Section 6601 of such Code is amended by
redesignating subsection (k) as subsection (l) and by inserting after
subsection (j) the following new subsection:
``(k) Special Rate for Tax Extended Under Section 6168.--If the
time for payment of an amount of tax imposed by section 1261 is
extended as provided in section 6168, in lieu of the annual rate
provided by subsection (a), interest shall be paid at a rate equal to
45 percent of the annual rate provided by subsection (a). For purposes
of this subsection, the amount of any deficiency which is prorated to
installments payable under section 6168 shall be treated as an amount
of tax payable in installments under such section.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2021.
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