This questions resolves to "Yes" if, before 2035, an asset that is part of an inheritance will be taxed at its original basis rather than getting a "stepped up basis" to a new basis value when the asset is transferred.
An example:
Dad has $1M in stocks that he bought for $100K
Dad dies. We love you Dad.
Kid inherits Dads stocks and then sells the stocks for $1M.
Today, Kid would not owe any capital gains taxes, as the basis will have "reset" to $1M upon the transfer.
But if the stepped up basis is eliminated, then Kid would need to pay capital gains tax on $900K difference between the sale price and the original basis.
More context: https://en.wikipedia.org/wiki/Stepped-up_basis
@mattsly I think we can improve/clarify the description on this if we workshop it a bit.
Two questions to start:
I think if the step up in basis rule is modified, it is somewhat likely that there will be a situation where "it does not affect most people" due to an exemption amount, either via the estate tax exemption or a new exemption on the step up in basis amount allowed. Maybe the assets in your example could still have a basis of $1M for Kid, but if they were worth $10M instead, the basis for Kid would only be $5M or w/e. Any insight on how this market should handle a situation like that?
I think it's possible there is a situation where a tax code change is....very far along? Promised? Passed? And then un-passed or canceled before anyone actually gets affected by it. Will this resolve upon "someone actually was affected by the change" or "the rule is officially changed for next year" (even if it gets undone later).