NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Choosing Between an Estate Tax and a Basis Carryover Regime: Evidence from 2010

Robert Gordon, David Joulfaian, James M. Poterba

NBER Working Paper No. 22722
Issued in October 2016
NBER Program(s):PE

Executors of estates for decedents in 2010 could choose between an estate tax regime and a basis carry-over regime. For most executors, this created a tradeoff between a current estate tax payment and a future capital gains tax liability for beneficiaries who inherited assets with carryover-basis. Various features of a decedent’s estate, including the gross value of assets, outstanding debts, whether the decedent resided in a state with an estate tax, and the basis of assets held at the time of death, affected the relative tax burden under the two regimes. Some executors chose to file estate tax returns for decedents from 2010, but these estate tax filings resulted in very little estate tax revenue. Estate tax filers had more leverage, were more likely to be from a state with an estate tax or from married decedents, were less likely to have made lifetime gifts, and had larger charitable bequests – all factors that are associated with reduced estate tax liability. While it is not possible to tell definitively whether executors chose the most tax-efficient option when confronted with the two tax regimes, evidence from tax returns suggests that an increase of one percent of estate value in the difference between estate tax liability and prospective tax liability under the carryover basis regime reduced the likelihood of filing an estate tax return by between 0.3 and 1.5 percentage points.

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Document Object Identifier (DOI): 10.3386/w22722

Published: Robert N. Gordon & David Joulfaian & James M. Poterba, 2016. "Choosing Between an Estate Tax and a Basis Carryover Regime: Evidence From 2010," National Tax Journal, National Tax Association, vol. 69(4), pages 981-1002, December. citation courtesy of

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