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Scenario $6$: Creative Estate Planning Meets the Step$-$Up in Basis

An elderly taxpayer with a $$100,000$ NOL carryforward owns the following assets:

Stocks: Basis $$50,000,$ FMV $$2$ million

Rental Property: Basis $$200,000,$ FMV $$1\mathrm{.}5$ million

Closely$-$held business: Basis $$10,000,$ FMV $$800,000$

The taxpayer is in poor health. Heirs are in high tax brackets.

Other details $($to make things interesting$)$:

Some of the rental property depreciation has been recaptured in previous years.

Questions:

Analyze the tax consequences of holding these assets until death $($step$-$up in basis$)$ vs$.$ gifting them during the taxpayer's lifetime.

How does the NOL carryforward factor into the decision, especially if it's about to expire?

Discuss strategies like gifting specific assets selectively, considering the different types of potential gain embedded within them.