President Biden has indicated he might eliminate the step up in income tax basis on death under Code Section 1014. That might revert to the tax system to what is referred to as a “carry over basis” system. So, the $1,000 you paid for the $100,000 of stock would carry over as the basis to your heirs.
Worse, there is the possibility that the Biden administration might try to enact in the alternative a system analogous to the Canadian estate taxation regime where there is a capital gain tax assessed on death.
There might be a combination of approaches, perhaps giving taxpayers an option to choose to remain subject to an estate tax and thereby also obtain a step up in income tax basis, or to instead face the loss of step up and avoid a capital gains tax on death. A recognition of gain at death would a be very far-reaching change that will have a significant impact on planning.
Consider that under current law many who are elderly or infirm intentionally hold highly appreciated assets until death to obtain a basis step up. In some instances, taxpayers create lines of credit to borrow against appreciated securities to avoid selling them. If a capital gains cost will be triggered on death that may eliminate the incentive to hold assets changing many estate planning, investment and other decisions.