evans and davis badge
Taxes remain a certainty amid uncertain times

Originally Published in the Oklahoman.


“Our new Constitution is now established and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.”

— Benjamin Franklin

With Inauguration Day now in our rear-view mirrors, there are still many questions to be asked of the Biden Administration.

For many Americans, thoughts swirl around complex matters such as the vaccination, capital gains tax, or what a new stimulus package might bring for the economy and its impact on inflation. For others, 2020 turned their world upside down and their focus is simply on returning to “normal” and planning their next adventure somewhere outside of their own backyard.

With the Democrats controlling the White House and Congress, there is a lot of uncertainty, but two things remain certain: death and taxes. This phrase has been a consistent theme throughout the history of our great nation and will continue through the sorrow of this pandemic and our own inevitable demise.

When our number is called, our time is up and that is a given.

Since 2010, however, many Americans have not had to worry about the second piece of that puzzle: the “death tax.” The death tax in the United States is over 100 years old and has changed dozens of times.

In 2010, there was no estate tax and, starting in 2011, the exemption amount went to $5 million per person. This figure has steadily increased over the last 10 years through a series of compromises and balancing between the Republicans and Democrats in the legislative branch.

Politics aside, with assistance from the House and Senate, President Joe Biden is sure to implement a death tax that returns to historical norms and again becomes a certainty for many more Americans. Will it be lowered to $5 million adjusted for inflation per the automatic sunset in 2025? Should we expect a return to Clinton-era levels of around $1 million per person? Only time will tell.

Additional uncertainty and potential changes that have yet to be addressed that could also come to light in 2021 include eliminating the step-up in basis at death for inherited assets, a cap on annual gifts to family and friends, and rules related to real estate.

If you are a real estate investor, you will want to pay close attention to the potential removal of the 1031 exchange and increase in capital gains tax. In its most basic form, the 1031 exchange has allowed investors to swap one investment property for another while deferring the capital gains taxes.

For those investors reading this piece, the impact on the real estate market could be one that results in a stagnant body of brick and concrete spread across the commercial and residential sectors. In conjunction with the potential removal of the 1031 exchange, there have also been whispers of the capital gains tax being increased to ordinary income tax levels.

Although Benjamin Franklin said there are only two things that are certain, I would venture to say there are more in 2021: death, taxes, and the unparalleled hope to return to “normal.”

Mitch McCuistian is an attorney and partner with the law firm of Evans & Davis. The firm is headquartered in Edmond with offices across the United States. The firm has 18 attorneys and focuses exclusively on estate planning, business law, probate, and trust administration.