# What This Bill Does: A Plain Language Explanation

This bill fundamentally changes how the government taxes inherited wealth and large gifts. Right now, when someone dies and leaves property to their heirs, those heirs generally don't owe taxes on the increase in value that happened while the original owner was alive. This bill would change that by treating gifts and inheritances as if they were sold at their current market value, meaning the government would collect taxes on all that accumulated gain.

Here's what that means in practical terms: Imagine your parent bought a house for $200,000 thirty years ago, and it's now worth $800,000. Under current law, when you inherit it, you can sell it immediately for $800,000 and owe no federal income tax on that $600,000 gain. Under this bill, your parent's estate would owe taxes on that $600,000 gain when they die, even though the property was never actually sold. The tax bill would be calculated as if the house was sold at death for its current market value. This applies to most types of property—real estate, stocks, business interests, and collectibles—though there are some exceptions for transfers between spouses and charitable donations.

The bill does include some relief measures to soften the impact. Estates would get a $1 million exemption on gains from inheritances (adjusted for inflation each year), meaning only gains above that threshold get taxed. Additionally, heirs can spread the tax payments over up to seven years in equal installments, and the interest rate on these installment payments would be reduced to 45 percent of the normal rate. Small gifts under the annual gift tax exclusion amount (currently around $16,000 per person per year) would also be exempt. The bill would take effect for deaths and gifts occurring after December 31, 2021, and requires people making large gifts or estates to report detailed information about what was transferred and its value to the IRS.

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.

Pascrell, Bill

This bill treats property transferred by gift or upon the death of a decedent as sold at its fair market value (thus requiring recognition of gain realized over the property's basis). Under current law there is a step up in basis of such property which allows for an exclusion of gain for gifts and estate property. The bill allows an exception to this fair market value rule for U.S. citizen spouses, charities, and certain tangible property. The bill allows a taxpayer an exclusion from income for up to $1 million (indexed for inflation) in gain resulting from transfers at death. The bill imposes certain information reporting requirements for gifts or bequests subject to this bill's fair market value rule. It also allows taxpayers to pay any tax due in two or more, but not more than seven, equal installments.