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In the constantly changing area of estate planning and taxation, understanding the implications of new tax rules is crucial for both estate planners and beneficiaries. The Internal Revenue Service (IRS) Revenue Ruling 2023-02, issued on March 29, 2023, brought significant changes to the treatment of assets held in irrevocable grantor trusts, particularly affecting the step up in basis provision. We will explore the nuances of this ruling, its impact on estate and capital gains taxes, and considerations for estate planning strategies, especially in light of current estate tax exemption amounts.
For a quick rule of thumb, if an asset is counted in a person’s estate, and subject to estate taxes, it would qualify for a step up in basis, though there are limited exceptions to this. Even if an asset is subject to estate taxation, the tax may be zero if the value is below the estate tax exemption.
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