Under current law, someone who dies with appreciated assets—including homes, businesses and stocks in taxable accounts—doesn’t have to pay capital-gains taxes on that increase. Instead, the heirs have to pay capital-gains taxes only after they sell and only on gains after the original owner’s death. That “stepped-up basis” is a longstanding feature of the tax code, but it has come under increasing attacks from Democrats who see wealthy people’s profits escaping the income tax.
“The stepped-up basis loophole is one of the biggest tax breaks on the books, providing an unfair advantage to the wealthiest heirs every year. This proposal will eliminate that loophole once and for all,” Mr. Van Hollen said in a statement.
The congressional Joint Committee on Taxation estimates that the current rule saves taxpayers more than $41 billion a year.