Estate Tax Repeal and Stepped-up Basis


#1

It is unclear whether Trump’s proposed repeal of the estate tax also repeals stepped-up basis and reverts to carry-over basis. If it does, that will be a huge new tax on middle class and upper middle class taxpayers who now avoid capital gains taxes on built-in gain of assets in an estate, especially those who would otherwise completely avoid estate taxes because of the estate tax exemption.

Also, can you imagine the difficulty of heirs determining the carry-over basis of long-held assets by the descendent?


#2

It’s also interesting to note that few are presently agitating about “death taxes” – the moneyed sorts who created that label and spun up the mythology that estate tax reduction was really just a thoughtful plan to help family farms and small businesses, have largely lost interest because exemptions are already very high and they already have plenty of options to reduce or avoid estate taxes beyond those exemptions.

And yes, as you suggest, one of the reasons to keep very high exemptions is to allow for the wealthy to have it both ways – to avoid estate taxes while also allowing their heirs to get stepped up basis for inherited property for purposes of capital gains tax. I suspect that many of the wealthy former critics of “death taxes” would at this point be more concerned about losing stepped up basis than with the complete elimination of estate taxes.


#3

The step-up in basis is probably the single biggest loophole in the tax system - it’s pretty much the only way income can escape ever being taxed. Most of the other preferences simply postpone tax.

All brokerages are now required to keep track of basis, so in most more recent cases determining the basis won’t be an issue. There will absolutely be an issue for some folks though, when they find a stock certificate in their deceased parent’s attic, so to speak. That can probably be addressed with a “best efforts” standard of some sort.

The estate tax repeal is truly a 0.1% issue. How Trump can claim this bill won’t benefit him personally is mind-boggling.


#4

In the past, I can remember that this was also called the Paris Hilton tax as she could avoid paying millions of taxes if this tax did not exist. Now we can call it the Donald Trump tax or the Walton Family tax or any number of billionaires tax. However, depending upon how this new tax (reform-my ass) cut bill will be structured, this could come back and bite some of these very rich people in the ass, but as we all know, under this administrations direction and influence from the Goldman Sachs architects, this will not happen.


#5

Do democrats have nothing more to do than invent ways to ‘create’ taxes to fund the other fantasies that they dream up? No asset has a difference in value from its base until it is disposed of. A home bought by a family member for $1m and transferred to a relative is still just a house with a basis of $1m … unless you are a democrat looking for ways to fleece people who work and save their assets. No one is materially better off… sure the inheritor appears to be but in fact what they received is a house… period… and in receiving the house they become responsible for the maintenance, upkeep and any property taxes… forward or arrears. ONLY, when they sell it does it have any value ANY cash value.

The whole subject of taxing an inheritance is stupid… the money stays in an agreement no less personal than married people passing assets to each other… even if that $1m home was owned by one of them prior to the marriage. (Should the new spouse be liable on marriage for their new windfall?)(Hey… an new tax creation idea… tax the married rich! Call it a marriage tax) One of two things will happen with that asset when it is transferred from the deceased to the beneficiary. It will be held, in which case its ‘value’ is that of a dwelling and nothing more…. Or… it will be sold. The proceeds of that sale will be nothing more than the cash equivalent of the house. While the person may feel like a millionaire, they are no wealthier than they were before the house was sold. The money is worth nothing unless it is used… it is after all only paper.

One of three things will happen with that money… It will be put into a ‘richie rich’ style safe to be admired and played with and will, because of the fantastic work of our federal reserve, deprecate to dust… or… it will be spent. It will be squandered by some inept receiver, as a windfall to be blown… in which case they will by boats and cars and electronics and prostitutes and vacations in hotels and that money will vanish into the pockets of the people who make, service and sell all those products… plus all appropriate sales taxes…. Or the person will see the value of the money and in one way or another put that money to work… they will either state a business and hire people or they will invest it in business who hire people… and they will pay taxes on the profits of ‘using’ that money Either way, society will get full use of that money… or in the case of them holding it, no one will get ‘use’ of it.

My question; except for the absolute obsession of taking things from people that they rightfully own. What does it matter to you if I have $1m in cash in my pocket or just one dollar. I take nothing away from you and if I take it and throw it into a fire pit, you become no more wealthier… the fed is exceedingly efficient at makings sure there are enough printed bills to stuff the pockets of any who earns it…

Other than armed robbery, what is an estate tax good for but to keep otherwise productive people down… because as I said… if they sit on it, it is worth nothing… if they squander it… society gets the benefit of its being spent… the one that is really damaged is the one who can and would make good use of it… but you robbed them of the opportunity…


#6

Fine make the estate tax apply to all or none.

Either works as long as everyone from the 100 dollar estate to the billion dollar estate is treated equally.

That’s what your all about correct, equal treatment or is this different???

If we repeal the estate tax, will trump benefit? No he will b dead.
Look at warren Buffet donating hill wealth to the gates foundation to avoid Federal income Tax yet that’s ok with you.


#7

p.s. Scrapping the alternative minimum tax is also a boon to the middle class as more are ensnared in the alternative tax each year.

But as long as it doesn’t hit you, TAX THE BASTARDS.


#8

The assets of inheritance have already been taxed. Those that have not (tax deferred) are taxed. It is interesting that layabout liberals want to steal what the father earned (and paid taxes on) from the son, so they can buy the votes of the fathers who earn nothing and have no idea who their sons are.


#9

Can the people keep more of their money please?

It’s not the government’s fucking money!

1773-2009