In the Treasury Green Book released in May 2021

August 27, 2021 / Uncategorized

In the Treasury Green Book released in May 2021


on page 62 of the American Families Plan it states:

“Second, transfers of property into, and distributions in kind from, a trust, partnership, or other non-corporate entity, other than a grantor trust that is deemed to be wholly owned and revocable by the donor, would be recognition events….

Transfers by a decedent to a U.S. spouse or to charity would carry over the basis of the decedent. Capital gain would not be recognized until the surviving spouse disposes of the asset or dies, and appreciated property transferred to charity would not generate a taxable capital gain. The transfer of appreciated assets to a split-interest trust would generate a taxable capital gain, with an exclusion allowed for the charity’s share of the gain based on the charity’s share of the value transferred as determined for gift or estate tax purposes… (Emphasis added)

In addition to the above exclusions, the proposal would allow a $1 million per-person exclusion from recognition of other (emphasis added) unrealized capital gains on property transferred by gift or held at death.” (in other words, the donor cannot use his or her $1 million exclusion?)

As you can see from this language, if drafted into legislative text, you donor client would pay capital gain tax on the appreciation on assets transferred into the CRT based on the actuarial calculation of the life estate (or term of years) value.

It is totally illogical to pay any tax on a retained interest. Can a donor actually make a “gift” to himself or herself? See this:

“A transfer would be defined under the gift and estate tax provisions and would be valued using the methodologies used for gift or estate tax purposes.”

If this is true in the legislation, then a gift is not made. A person cannot make a gift to oneself.

This proposal is entirely ridiculous. Please contact your Congressional representatives! Send them this analysis.

In addition, why allow the wealthiest of donors who can afford to give away an asset completely an exclusion and punish the less wealthy philanthropic U.S. citizens who need to retain the income for support during their lifetimes with a capital gains tax realization event on a transfer to a charitable remainder trust or pooled income fund?

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