Step-up in basis at death
Unrealised gains on inherited assets are wiped out rather than taxed.
JCT line: "Exclusion of capital gains at death".
Requires holding substantially appreciated assets until death. The benefit is proportional to accrued unrealised gain, which is concentrated in a small share of estates.
Structural reading
The purest structural case in this list, because the original justification has expired. Fair-market-value basis was adopted in 1921 as an administrative convenience: reconstructing a dead person's purchase price was genuinely difficult before computerised custody records. That difficulty no longer exists for the overwhelming majority of assets. What remains is a permanent exemption of a lifetime's accrued gain, which pairs with the capital gains preference to make holding until death the tax-optimal strategy for any large appreciated position. The 1976 enactment and 1980 retroactive repeal of carryover basis, before it ever took effect, is the sharpest illustration in the federal code of a concentrated interest defeating an enacted reform.
Who gets it
The channels the benefit actually flows through, described by asset position, entity form and form of return. Never by named individuals.
Cost split by the concentration score. That score is a judgement rather than a published figure, so treat this as the scale of the split, not an audited allocation.
- Heirs receiving assets with large accrued unrealised gain
Basis resets to fair market value at death, so appreciation accumulated over a lifetime is never subject to income tax by anyone.
- Holders of concentrated, long-held positions
The benefit rewards never selling. Combined with borrowing against appreciated assets to fund consumption, it allows economic use of gains without a realisation event.
- Closely-held business and real property interests
Illiquid assets held across generations accrue the largest untaxed appreciation and receive the largest basis reset.
Who pays
All taxpayers. The forgone revenue is permanent rather than deferred, since the gain is extinguished rather than postponed.
Sector aggregate.
This transfer follows a general pattern, asymmetric organisation, sustained expert attention, and scheduled expiry dates.
How rent-seeking works →Legislative history and accountability
Enacting statutes, major amendments, recorded votes with party breakdown, and live reform proposals.
Enabling legislation
- Revenue Act of 1921, basis at deathNov 23, 1921
Established fair-market-value basis for inherited property, originally as an administrative simplification when tracking a decedent's original cost was impractical.
No separate recorded vote on this provision, it passed by voice, predates recorded electronic voting, or moved inside a larger package voted on as a whole.
Major amendment
- Tax Reform Act of 1976, carryover basis (repealed before effect)P.L. 94-455Oct 4, 1976
Enacted carryover basis, requiring heirs to inherit the decedent's original cost. Delayed, then retroactively repealed in 1980 before ever taking effect.
Mixed coalitionEnacted by a Democratic Congress and signed by a Republican president. No separate roll call on this provision is recorded here.
- Economic Growth and Tax Relief Reconciliation Act of 2001P.L. 107-16Jun 7, 2001
Coupled estate tax repeal for 2010 with a one-year return to modified carryover basis, then reverted. The episode is the clearest evidence that the two provisions are understood by drafters as a linked pair.
Mixed coalitionPassed largely along party lines but with a bloc of minority-party support in the Senate. No separate roll call on this provision is recorded here.
Reform proposal
- Proposals to treat death as a realisation event above an exemption
Recurring proposals would tax accrued gain at death above a large per-estate exemption, with extended payment terms for illiquid farm and business assets. Introduced in successive Congresses without a floor vote.
Sources and data freshness
Published within the last year. Figures marked unverified are seed estimates that have not been reconciled line-by-line against the primary source document. See the methodology for how each score is constructed.