By Allan Sloan and Cezary Podkul / ProPublica

There are times when two seemingly unrelated tax policies intersect to create windfalls for fortunate people who are in the right place at the right time.

That is likely to be the case when it comes to calculating the tax benefits that will go to the billionaires and other very rich people joining the Trump administration. Among those who stand to benefit but haven’t been identified until now is Donald Trump’s son-in-law, Jared Kushner, even though he’s not taking a formal government job.

No, this isn’t going to be another screed on the tax code provision that provides a temporary tax break to high-net-worth people who take government positions and have to dispose of some of their holdings to avoid conflicts.

Rather, we want to show you how combining this tax break with repeal of the estate tax — a cherished Republican goal that could be achieved this year – can turn a temporary tax benefit into permanent tax avoidance, enriching the appointees and their heirs.

We’re dealing with substantial money here: at a minimum, tens of millions of deferred capital gains taxes; at a maximum, hundreds of millions. We can’t tell until we analyze filings that appointees haven’t yet made with the Office of Government Ethics. One wild card is their holdings outside of the publicly traded companies with which some of them are associated, because we don’t know what they would have to sell, how much of a gain they would have and how much in capital gains taxes they could defer. Rex Tillerson, for example, owns $28 million to $100 million in land and securities other than ExxonMobil, according to a Dec. 31 report he filed with the ethics office that listed more than 400 holdings.

Other very-well-off Trump appointees whose pending jobs will almost surely make them tax deferral candidates include Wilbur Ross, who made vast sums restructuring bankrupt steel companies; Gary Cohn, former No. 2 executive at Goldman Sachs; Steven Mnuchin, who made a huge profit buying a dead savings institution from the FDIC, reviving it and selling it to CIT, and also has extensive private holdings; Andy Puzder, chief executive of privately held CKE, a big restaurant chain; Linda McMahon, former chief executive of World Wrestling Entertainment; and Betsy DeVos, a scion of a rich family who married into the family of the co-founder of the Amway multilevel marketing firm, now known as Quixtar.

Kushner, who succeeded his father as head of the Kushner Companies, a former New Jersey real estate empire that’s now based in Manhattan, has said he’ll sell assets that pose a conflict with his new role as senior adviser to the president. So we asked his attorney, Jamie Gorelick of WilmerHale, whether Kushner would seek a “certificate of divestiture” from the government to allow him to defer taxes on gains generated by his sales. Her emailed answer: “Mr. Kushner will need a certificate of divestiture for certain divestitures that are required for his compliance with the ethics rules.”

Okay. Now, let’s back up a bit, and get into some of the details.

Under Section 1043 of the tax code, which was enacted in 1989, eligible federal appointees can defer capital gains taxes on securities and other assets that they’re required to sell to meet conflict-of-interest guidelines.

The idea was to avoid imposing large tax costs on people who want to join the government, usually for a lot less money than they’re used to making. As long as the appointees reinvest the sale proceeds in securities approved by the Office of Government Ethics, there’s no tax due on the gains until the replacement securities are sold.

If that happens, the appointees have to pay capital gains tax on the difference between the sale proceeds and the “cost basis”- the cost for tax purposes – of the assets they sold to avoid conflicts. If the replacement securities aren’t sold, the gains tax never comes due.

Now, watch. Under current estate tax law, the cost basis of assets owned by someone who dies is “stepped up” to the assets’ value the day of the person’s death, with no tax due on the gain.

However, people who have gotten substantial Section 1043 tax deferrals are likely to have estates that exceed the current estate tax threshold of about $5.5 million for an individual and $11 million for a married couple. So even if the appointee holds the replacement assets until he or she dies and avoids having to pay capital gains tax, under current rules those assets will be part of the appointee’s estate. The estate will pay up to a 40 percent tax on the assets, leaving less for inheritors.

“Our estate tax is a backstop to our income tax,” says Steven Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center. “It imposes taxes at death on income from property that previously escaped taxation, like capital gains that have never been realized.”

Repeal of the estate tax — which proponents routinely denigrate as a “death tax” even though only about one estate in 500 is big enough to be taxable — is an integral part of House Republicans’ proposed tax reform package.

Signs are that they intend to push hard to get the tax repealed quickly. “Our pro-growth tax reform blueprint includes fully repealing the death tax in order to protect family-owned businesses,” a spokeswoman for the Republican majority on the tax-writing House Ways and Means Committee emailed us.

Its committee chairman, Texas Republican Kevin Brady, also weighed in.

“I look forward to working with President-elect Trump on tax reform that permanently buries the death tax once and for all,” Brady said. “For too long, this double and triple taxation has threatened family-owned businesses — including women- and minority-owned businesses – from being passed down to their children and grandchildren.”

Rep. Richard E. Neal (Mass.) the top Democrat on Ways and Means, emailed us that “the estate tax is important not only because of the revenue it raises, but also for its role in making the tax code more fair. Dynastic wealth transfer and a landed aristocracy were not what our forefathers envisioned as pillars of our society.”

But Republicans are in power today, and the Democrats aren’t.

The last time a Republican Congress and a Republican president united in a repeal effort – in 2001, under George W. Bush – the estate tax was killed. Sort of. Rather than wiping out the tax all at once, for arcane budget reasons the Republicans merely raised the threshold and lowered the tax rate through 2009. The tax disappeared entirely in 2010, for that year only. It was scheduled to spring back to its 2001 form in 2011, which the 2001 Republicans had thought would never be allowed to happen.

But by then, Barack Obama had become president, the political dynamic had changed and the estate tax was resurrected in a compromise of sorts. It had a much higher threshold and a much lower rate than it did in 2001. It’s projected to bring in about $24 billion this fiscal year, according to Congress’ Joint Committee on Taxation.

It’s not clear exactly how estate tax repeal would work now. The Ways and Means Republican spokeswoman said repeal specifics are not available. “As we transform the blueprint into legislation, we are continuing to hear from the incoming administration about their ideas,” she said.

We contacted Democratic and Republican leaders in the House and Senate to see what they think of this, but could not get a response ahead of today’s inauguration. Trump’s spokespeople also did not respond.

Trump campaigned on a vague promise to tax unrealized gains above $10 million as part of estate tax repeal. That would have had the effect of substituting capital gains taxes for estate taxes on a handful of very large estates. But it’s uncertain how Trump’s proposal would work, or whether he will push legislative provisions that could cost his family and appointees serious money.

Hence our conclusion that a combination of Section 1043 and estate tax repeal would shower huge benefits on Trump appointees, including Kushner and his wife, Trump’s daughter Ivanka.

Under current law, the tax basis of assets is marked up, tax-free, to their value on the day the person who bequeathed the assets died. The 2010 estate tax repeal largely eliminated this provision, which meant higher capital gains taxes if heirs sold the assets.

However, even if the tax-free step-up in basis disappears as part of estate tax repeal, there are numerous ways that inheritors would be able to reap the benefits of the 1043 deferral for years or decades.

“A tax deferred is a tax saved,” tax expert Robert Willens says. And that’s the bottom line.

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