Winne Banta Basralian & Kahn – Tax Update !

The Time Has Come

The House Ways & Means Committee released the tax-related portions of the $3.5 trillion social infrastructure bill, which would increase ordinary income, long-term gains, and corporate income tax rates, limit QSBS (qualified small business stock) exclusion for high-income taxpayers, include assets in an irrevocable grantor trust in grantor’s estate, and effectively reduce by one-half (1/2) the gift and estate tax exclusion amounts. These are expected to be proposed in the reconciliation package. Effective date for increase in long-term gains rates would be date of the introduction of the bill (9/13/21).  Please note that these provisions are not yet passed into law.


Gift/Estate Taxes

  • Reduce the gift and estate tax exclusion amount from $10 million (inflation-adjusted) to $5 million effective  Jan. 1, 2022, rather than Jan. 1, 2026
  • Include assets in an irrevocable grantor trust in a decedent’s estate
  • Change the treatment of grantor trusts including that future exchanges between the trusts and their grantors would be taxable events
  • Ignore valuation discounts on the transfer of nonbusiness Nonbusiness assets are passive assets that are held in the production of income and not used in the active conduct of a trade or business

Income Taxes

  • Impose a 3% surtax on taxpayers with adjusted gross income of more than $5 million
  • Increase the top ordinary income tax rate to 39.6% (from 37%) effective 1/1/22 and the top long-term capital gains tax rate to 25% (from 20%), effective 9/13/21
  • Subject profits from businesses to the 8% net investment income tax
  • Permanently disallow a deduction for excess business losses for non-corporate taxpayers
  • Increase the holding period for capital gains treatment for carried interests to five years from three years
  • Subject digital assets (including cryptocurrencies) to constructive and wash sale rules
  • Prohibit additions to IRAs with an account balance in excess of $10 million, and increase required minimum distributions from large IRAs and Roth IRAs

Corporate Taxes

  • Increase the corporate income tax rate to 26.5% (from 21%). Replaces flat corporate income tax with a graduated rate structure.

Clients should feel free to contact one of the attorneys in our Tax, Trusts & Estates Department if they have any questions. As always, we are here to serve you.

Co-Chairs of the Tax, Trusts & Estates Department

Martin J. Dever, Jr.

Jonathan Kukin

Partners of the Tax, Trusts & Estate Department:

Arthur I. Goldberg

Peter J. Bakarich, Jr.

Associates of the Tax, Trusts & Estate Department:

Doris Brandstatter     

Victor Manuel Nazario III

Marley A. Guerrera    

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