Growth
May 2025
Growth is a common goal. Most want their estate to increase in size over multiple generations. Fortunately, favorable income tax rules for the transfer of property at death do not impede growth.
Reporting requirements for entities have also increased. Certain entities are now required to report information regarding beneficial owners.
Growth like an oak
Middleton Oak is a live oak near Charleston, South Carolina. The tree has grown for a thousand years. Unimpeded by drought, it lives on the banks of the Ashley River and has reached a massive size. The trunk is over ten feet in diameter.
Estates similarly grow unimpeded by income tax at death because the Code contains an exclusion for gifts and inheritances. This may come as a surprise because most agree that the only certainties in life are death and taxes.
I.R.C. § 102(a) provides that gross income does not include property received by gift, bequest, devise, or inheritance. In other words, property received under a will or under statutes of descent and distribution is not includible in gross income. Treas. Reg. § 1.102-1(a).
Middleton Oak.
This favorable exclusion is beneficial for both small and large estates alike because it is not subject to any dollar limitation.
EXAMPLE: A owns various property interests with an aggregate value of $1 million. A dies and A’s will bequeaths all property to B. B’s gross income does not include the property interests of $1 million bequeathed to B. I.R.C. § 102(a).
EXAMPLE: A owns various property interests with an aggregate value of $100 million. A dies and A’s will bequeaths all property to B. B’s gross income does not include the property interests of $100 million bequeathed to B. I.R.C. § 102(a).
This exclusion, however, is subject to certain exceptions, notably with respect to income. I.R.C. § 102(b).
For more information, please consider the treatise for income tax issues in estate planning, “Income Taxation of Property Acquired from a Decedent.”