On the docket at the Supreme Court is a case about the taxation of unrealized gains and the potential implications for estate planning and wealth management. Oral arguments were heard on December 5th, 2023.
Today, the U.S. Tax Code adheres to the principle that income is taxed upon the sale or disposition of an asset. The Moore’s oppose the constitutionality of the 2017 Tax Cuts and Jobs Act that imposes a transition tax on the non-distributed profits from assets between 1986 through the end of 2017, known as the Mandatory Repatriation Tax—a tax on the unrealized gains on appreciated assets held outside the United States.
Should the Court rule for taxing unrealized gains it would be a radical decision that would affect all wealth taxation in the United States. It would create complexity in the valuation of unsold assets, especially those held in private businesses. Liquidity issues would arise for taxpayers holding little cash or substantial stock portfolios. It could change the treatment of investments and lead to higher tax liabilities for an estate.
Oregon’s Senator Wyden, Chairman of the Senate Finance Committee and serves on the Joint Committee on Taxation is a big proponent of the Billionaire Minimum Tax Plan (BMIT). This plan would require households worth over $100 million to pay a 20% annual minimum tax on their full income including realized and unrealized capital gains. The bill tries to generate over $50 billion in new revenue over a decade and ensure that the wealthy pay their fair share.
This will never apply to most of us but should the court rule in favor and agree the Sixteenth Amendment to the Constitution allows for taxation, significant changes would happen to the federal tax code.
If you need assistance please reach out to our team at 301-468-3220 or use our contact form to get a meeting scheduled.
Contributed by Elizabeth Glines
