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Wealth Tax
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Tax Strategies to Counter Biden’s Billionaire Tax

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The proposed Billionaire Minimum Income Tax would potentially levy a 20-percent minimum tax rate on U.S. households with net wealth over $100 million. It would force wealthy households to pay taxes on unrealized capital gains from assets like stocks, bonds, or privately held companies.

May 17th 2022
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Extraordinally wealthy clients all over America are flocking to their CPAs asking what to do if President Biden's Billionaire Minimum Income Tax Bill becomes law.

As a CPA or tax planner, the first thing for you to do is to plan a viable response strategy, working in concert with your clients. See which solutions they’re comfortable with. But here are a few ideas that come to mind:

1. Where is your client deriving their unrealized gains? If their gains originate from real estate holdings and the tax basis lies in their assets, your client could commission a cost segregation study to demonstrate the tax basis is lower than the amount judged by the IRS, and then pay tax on that amount (tax basis after depreciation) with bonus depreciation factored in to reduce the basis.

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2.  The problem of valuation looms over this proposal. For example, how do you assess the amount of unrealized capital gains on a business owner? As Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center, stated: “Their assets are in their businesses. And it’s very difficult to value those assets.” He pointed out that many European nations have rejected similar taxes because of the difficulty of assessing individual wealth.

Valuation for unmarketable securities is always disputed. Consequently, your client should seek out a valuation company that can locate comparables. Some CPAs are valuation specialists who undertake this kind of work.

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