WHAT IS CAPITAL GAINS BASIS PLANNING?

Capital gains basis planning is an attempt to increase the basis in a property so that when it’s sold, there’ll be less capital gains tax to pay. We know under the tax code, at least as it’s currently written, when someone dies, the basis will be adjusted to fair market value at the date of death. The question is whether or not we can increase basis during lifetime. Sales between family members when arm’s length can also increase basis in the hands of the purchaser. If that purchaser is a trust established by the donor or the senior generation, then it may be possible to sell that property without recognizing any further gain.

Note: The Tax Cut and Jobs Act of 2017 signed into law in December 2017 increased the exemption amounts mentioned in these videos. The personal estate, gift, and generation-skipping tax lifetime exemption was increased to $11.18 million per person. The annual gift tax exclusion was increased to $15,000 per donee per year.

Both amounts are indexed for inflation and may increase year over year until December 31, 2025, when the law sunsets and reverts to 2017 values