In estate planning these days, there is uncertainty and there is UNCERTAINTY. Over the last few years we’ve gotten pretty good at developing techniques to deal with uncertainty, but the UNCERTAINTY surrounding the proposed regulations related to 26 USC § 2704 leaves me not only bewildered but flummoxed, flabbergasted and gobsmacked to the point I would gladly welcome a carryover basis regime if it would remove the UNCERTAINTY. (Fortunately, very few of my clients would be affected by the regs but it would be nice to have more of those clients and i have no idea how i would advise them on this issue, not right now anyway.)
However, the Trump administration’s proposed estate tax repeal could negate the effect of such a proposal (depending on what replaces the estate tax) since the transfer of business interests at death would not cause a taxable event. Speculation abounds over what kind of transfer tax regime might take the place of the estate tax if it is repealed, with some predicting a retention of the gift tax, reimplementation of a carryover basis regime, and/or a tax imposed on unrealized capital gains at death.