Ca. Tax Lawyer Fall 2014, Volume 23, Number 3

Using a "Formula" General Power of Apportionment to Resolve Income Tax Basis "Step Up" Issues in the Age of Portability and a Request for Clarification Regarding Revenue Procedure 2001-381

By Dennis Leonard and Jason R. Schingler2


On December 17, 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 became law (the "2010 Act"). The 2010 Act introduced "portability" into the federal tax law. Portability resulted in a national discussion about its potential impact on estate planning and associated tax matters.

On January 2, 2013, the American Taxpayer Relief Act of 2012 became law (the "2012 Act"). Among other things, the 2012 Act: (1) made portability permanent; (2) increased the "basic exclusion amount" for estate and gift taxation, plus an annual inflation adjustment; and (3) increased effective federal income tax rates for certain many taxpayers. These law changes caused both taxpayers and practitioners to reconsider the "best" approach to estate planning. In particular, with fewer taxpayers subject to estate and gift tax, income tax considerations have become more prominent.

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