Vanderbilt Law Review

First Page



The present treatment of appreciated assets under section 1014' of the Code permits a great deal of accrued appreciation to escape the income tax. While decedents pay a greater estate tax because asset appreciation swells their estates, they pay no gains tax at death on this accrued appreciation. Moreover, the recipients of the decedent's property generally take a stepped-up basis for the property equal to its fair market value at the time of death. A great deal of criticism has been leveled at this system, and numerous proposals have been made for remedying the situation: imposition of a capital gains tax at death on accrued appreciation; implementation of a carryover-basis system similar to that accorded to gifts under section 1015; imposition of an additional estate tax; conversion to a rollover system of treating capital gains; and conversion to an accrual system of taxing capital appreciation. This Note will not attempt to forecast what change, if any, ultimately will be made in the treatment of appreciated assets at death. It will attempt instead to explain the principal features of both the current system and the proposals and will set forth the criticisms and defenses of each.