Step-Up In Cost Basis Reinstated for 2010

Congress passed and President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “Tax Act”) late in December.

There was been quite a bit of focus on the extension of the "Bush tax cuts", but the Tax Act also provides some much needed relief to taxpayers from the estate tax, gift tax, and generation skipping transfer tax, including a profound impact upon taxpayers that have used and continue to use 1031 Exchanges in the sale and reinvestment of real estate assets.

The Tax Act also effectively reinstates the ability to transfer property at death to a taxpayers' heirs with a step-up in cost basis.  This essentially means that the capital gain tax and the depreciation recapture taxes go away at death.  Taxpayers can still continue to structure 1031 Exchanges through out their lifetime in order to continually defer the payment of their capital gain taxes and then pass the property on to their heirs with out passing on the capital gain taxes.