On May 28, the U.S. Treasury Department released the Green Book, which outlines specific tax provisions the Biden Administration seeks to enact this year. In addition to raising taxes, proposals call for eliminating the “stepped-up basis” for assets when they are passed on to an heir or heirs and limiting the 1031 like- kind tax exchange provision.
Without the stepped-up basis, inherited assets would be subject to capital gains taxes, which the administration wants to raise for long-term assets valued at more than $1 million to a top rate of 43.4% from its current maximum rate of 23.8%.
For 1031 (like-kind) exchanges, which allow the tax on capital gains from real estate transactions to be deferred as long as the profits are used to buy like-kind property of equal or greater value, the administration would limit the deferral to gains under $500,000. Forest landowners use such exchanges to swap properties for other income-producing land (generally additional forestland) and defer the tax on any unrealized gain.
FLA and our SET to GO teams are engaging with congressional staff about the effects of these tax proposals on private forest landowners.
In addition, Tom Straka, professor emeritus of forestry and environmental conservation at Clemson University in South Carolina and FLA Magazine Committee member, recently penned an op-ed in The Hill, laying out the importance of stepped-up basis for forest landowners. Read it here.