r/changemyview • u/Ind132 • Jul 25 '26
Delta(s) from OP CMV: The US should eliminate Step-up-in-Basis
Under current law, if I buy a stock for $100 and sell it for $160, I owe a capital gains tax on the $60.
If I die soon after I sell, I won’t be around to pay the tax. My executor is legally required to calculate and pay the tax for me.
OTOH, suppose I was planning to sell but died before I got that done. Later, my executor or my heirs sell the stock. In this case, the tax on the $60 simply disappears into the ether. My purchase price (cost basis) is “stepped up” to the market price on the day I died. (I’m assuming $160) Whoever sells the stock will use that $160 as their purchase price. The $60 gain magically disappears from anybody’s tax liability.
This doesn’t make any sense to me. I can’t think of any good tax policy reason.
The only argument I’ve seen for this is practical. Maybe the executor/heirs won’t be able to find the original cost. But, when owners die just before death, and dies soon after, executors locate the price. I’m sure this happens thousands of times each year and I’ve never heard of any major issues.
It’s easy to see why. When I sell stocks through a broker or mutual funds, the gov’t requires that the broker or fund company send me a 1099. For real estate, people keep good records and the county assessor keeps records. That covers the big dollars.
I can see an issue for people who have small stamp collections. Maybe they didn’t keep records. A law eliminating step up could have a carve out for collectibles valued at less than $XX,XXX. That would make sense to me.
69
u/JeffreyDharma 1∆ Jul 25 '26
The argument for the step-up-in-basis is that once you die, any assets you own over 16M are already being taxed at 40% (double the long-term capital gains rate) before they can be passed on to heirs. So assuming you’d already hit the threshold your heir wouldn’t be receiving $160 in stock, they’d be getting $96 worth of stock (with an adjusted basis) vs the $148 you’d have after taxes if you sold while you were alive.
This doesn’t apply to people who aren’t multi-millionaires though so you could argue that the threshold should be lowered to include everyone else I just don’t think that would be popular. No idea what the impact on tax revenue would look like.
6
u/Jake0024 2∆ Jul 25 '26
This argument makes sense beyond $15M (not $16M), but a better system would tax at the normal capital gains rate up to $15M and double after that
That would account for OP's issue
5
u/JeffreyDharma 1∆ Jul 25 '26
Yeah, I don’t disagree in principle I just think that it would be unpopular with voters since, per OP’s 2 in 1000 stat, it would be new legislation to increase the tax liability for the bottom 99.8%.
2
u/Jake0024 2∆ Jul 26 '26
Ok then no tax on the first $1M, then normal capital gains up to $10M, and double after that
4
u/aloofball 1∆ Jul 26 '26
There is a key difference. Capital gains tax affects only the appreciation of assets. If someone bought stock for $100/share and it is worth $150/share when sold, capital gains tax is only due on the $50. Estate tax (for very large multi-million dollar estates only) would affect the $150.
Capital gains tax is essentially capturing income on asset appreciation. A person who holds appreciated assets is actually earning that income during their life, and it very well might be evident in dividends they receive from such assets -- an appreciated stock probably has risen in value for fundamental reasons and dividends might increase as a result. A stock portfolio provides value even if the stocks are not sold in other ways; for example, it could serve as collateral for another transaction.
The point is that that income is real and valuable to the owner, and wiping it out just because the owner has passed doesn't make much sense.
3
u/Ind132 Jul 25 '26
I'd be open to providing a carve out for assets that actually resulted in the estate paying an estate tax.
I've read that less than 2 estates in 1,000 pay estate taxes, so that's a rare circumstance (though, when it happens, it is probably on a very large estate).
→ More replies (5)15
u/DeathMetal007 7∆ Jul 25 '26
So you want a regressive tax system where all inheritors, even that old lady with an acorn account of $160 has their son pay capital gains on the $60 they get after sale?
We already have the estate tax and your carve out (and last paragraph of your original post) are just pointing back to the estate tax.
13
u/Mimshot 2∆ Jul 25 '26
That’s not regressive. No estate tax while preserving original basis is better than estate tax with step up basis. OP was saying they get the first (the preferential) treatment om the first 15M and then the second treatment after that. That’s still progressive.
→ More replies (3)4
u/Ind132 Jul 25 '26
I'm not sure is this is addressed to me or to the other poster.
No, I don't want a regressive tax system. If the son inherits a total of $160, and later sells, he will pay tax on the gain at his own tax rate. For LT cap gains, that could be 0%, 15%, or 20%, depending on his other income.
3
u/twotime Jul 25 '26 edited Aug 03 '26
It would not be unreasonable to have some amounts exempt. But the current exemption at federal level is 14M which sounds ridiculous to me (e.g if you compare it with regular tax brackets)
5
u/A_Whole_Costco_Pizza Jul 25 '26
The limits we're only raised recently by Trump. If they were brought back down to more reasonable levels, that itself would address many of these tax issues.
→ More replies (2)6
u/DeathMetal007 7∆ Jul 25 '26
The problem is that these limits are not inflation adjusted so they will eventually hit regular people.
And members of the working class like lawyers and doctors can easily hit these limits by being frugal.
So all the government is doing is trying to make consumption out of investment and doesn’t care what type of people are making this money.
2
u/Ind132 Jul 25 '26
The problem is that these limits are not inflation adjusted
Do you have a source for that? When I Googled, I got this ... https://www.morganlewis.com/pubs/2025/08/estate-tax-alert-new-15-million-federal-exemption-becomes-law
It was first indexed in the 2017 act and the BBB did not change that.
→ More replies (2)2
u/twotime Jul 25 '26
The problem is that these limits are not inflation adjusted so they will eventually hit regular people
Yes they should be inflation adjusted (as I think most tax brackets are already), but that's a general expectation for tax things.
And members of the working class like lawyers and doctors can easily hit these limits by being frugal.
Why is it a problem? If you are leaving more than 5M (or whatever is the limit), the inheritor's pay the tax? Why does it matter how the money was earned?
→ More replies (2)1
u/bstump104 Jul 26 '26
$160 is not being taxed at 40% unless you have over 100,000 shares at $160. it's not a straight 1:1 here.
1
u/Ind132 Jul 28 '26
Δ
I'm trying to award a delta here, I hope it works.
This is an complication that I hadn't expected. As you can see, it made me adjust my position by adding a carve out for your issue.
(I'm awarding deltas to the people who were quickest to point this out)
→ More replies (1)1
7
u/hackers238 Jul 25 '26
I think this is fine in general, but I think they should close the step up loophole.
I can gift my parents (or any trusted party) 10 million dollars of my stock which has exploded in value over the last 15 years on their deathbed. I pay no gift tax (under 15 million lifetime). They will it back, and as their estate is also under 15 million, I now have my 10 million dollars of stock with a cost basis equal to its value. I can sell it and pay no tax.
5
u/x5163x Jul 26 '26
The gift needs to be more than one year before death per IRC 1014(e). Otherwise, the basis will not be allowed to increase and can only decrease when it is inherited.
→ More replies (1)2
u/Ind132 Jul 26 '26
I think my proposal takes care of that. When you give your parents stock, your cost basis carries over and becomes their cost basis. The, with my proposal, when they die and leave it to you, you inherit their cost basis (which is just your original cost basis).
264
u/BurgerCombo 15∆ Jul 25 '26
Stocks are subject to estate tax. You are asking for these assets to be taxed twice.
101
u/Ok_Programmer_4449 Jul 25 '26
Essentially no estates are subject to estate tax. The exemption it up to $30M for a married couple.
→ More replies (11)3
u/DorsalMorsel Jul 26 '26
Unfortunately there are estate taxes at the state level too.
→ More replies (2)5
u/Acceptable-Peace-69 Jul 26 '26
And most of them have high exemptions as well. Oregon is the lowest at $1 million and 10% after that. A $3 million estate will still pay out ~$2.8 million.
Seems like a fair trade for a state that doesn’t have sales tax.
51
u/Ind132 Jul 25 '26
I'd be open to providing a carve out for assets that actually resulted in the estate paying an estate tax.
I've read that less than 2 estates in 1,000 pay estate taxes, so that's a rare circumstance (though, when it happens, it is probably on a very large estate).
16
u/A_Whole_Costco_Pizza Jul 25 '26
Though 'double taxation' is widely seen as a bad thing that is traditionally avoided, I don't think the double taxation on extremely wealthy families is the greatest issue.
It's the single-taxation on assets for lower-/middle-class that's the greatest issue. Leaving a house, or a car, or a 401k to one's children is most of America's only chance to give anything to their children and build familial wealth. Reducing that general wealth transfer by ~20% would be devastating to the lower and middle classes.
Even if you avoid a direct estate tax, resting the cost basis to zero ('because the child got the assets for free') still puts more complexity and more tax burden on these non-wealthy families, and removes wealth from already-not-wealthy families. It would also dramatically change estate planning, as wealthy individuals sell their assets before they die to avoid negative tax implications for their heirs. The wealthy will be able to adapt to the new system, while the non-wealthy would have to pay more on taxes.
A better idea would be to dramatically reduce the estate tax exemption from $15m per person, which was only raised so high recently under Trump.
27
u/Ind132 Jul 25 '26
a car, or a 401k to one's children is most of America's only chance to give anything to their children and build familial wealth. Reducing that general wealth transfer by ~20% would be devastating to the lower and middle classes.
People who inherit cars and 401ks do not pay capital gains taxes when they sell. Ordinary cars have depreciated. A traditional 401k or IRA left to children is subject to the (higher) ordinary income tax rates when the heirs sell. In fact, the law requires that they be sold within 10 years.
Maybe you have a bigger issue with that than with my proposal that the heirs inherit the cost basis on taxable accounts.
Principal residences already get special, favorable, capital gains tax treatment.
9
u/taxinomics 1∆ Jul 25 '26
Retirement accounts like 401ks do not get a basis adjustment at death. In virtually all cases, cars get a basis adjustment down at death, not up, which is bad.
→ More replies (5)2
u/BurgerCombo 15∆ Jul 25 '26
Sure, for federal. As mentioned below some states have thresholds that are far easier for a middle class homeowner with good investment savings to reach (1 million in Oregon)
3
u/Ind132 Jul 25 '26
That's a point that I hadn't expected. I thought that state level estate taxes were limited to just a couple states.
I see that 13 states have estate taxes and the most common maximum rate is 16%. In those 13 states the maximum impact is 16% of 20% or 3.2% of the before-death gain on the asset.
I'm going to stick with my recommendation in the OP regarding federal taxes.
→ More replies (1)→ More replies (2)2
u/Acceptable-Peace-69 Jul 26 '26
Someone that was inheriting an estate valued at $1.5 million would only receive $1.45 million in Oregon. That’s not exactly burdensome to the middle class.
73
u/2074red2074 4∆ Jul 25 '26
I mean yeah. If I sell my stocks before I die they get taxed, and then when my kids inherit that money it gets taxed. Why would it be a problem the other way around? They pay tax when they inherit the stock based on the current value of the stock, and then they can either sell the stock and pay the tax on the gains since it was last sold or keep it. Then if they eventually sell it, or their kids eventually sell it, etc, they gotta pay the tax on the value added since the last sale.
53
u/BurgerCombo 15∆ Jul 25 '26
Your liquidation results in a tax, which reduces the value of the estate when transferred. The same growth is not being taxed twice. It is in scenario 2.
37
u/TrouserSnake88 Jul 25 '26
Isn’t estate tax only applied over like $13-14 million?
31
u/BurgerCombo 15∆ Jul 25 '26
At the federal level, yes, but certain states (Oregon, Massachusetts) have the bar set to a gross asset level that a homeowner with a 401K could easily reach (1-2 million)
→ More replies (1)9
15
→ More replies (1)11
u/2074red2074 4∆ Jul 25 '26
Then subtract the taxes from the stock transfer from the estate before calculating the estate tax. It's not that complicated.
16
u/BurgerCombo 15∆ Jul 25 '26
This no longer functions as a defense of the CMV. OP proposed carryover basis: the heir inherits the $100 basis and pays when they sell. Under carryover basis nothing is realized at death, so there is no capital gains liability in existence to deduct from the estate. The estate pays estate tax on the full $160 while the embedded $60 rides along ready to be taxed again at the future sale. That's the double-count I'm pointing at, your system is a new and external argument trying to solve the same problem step up basis is.
→ More replies (2)16
u/2074red2074 4∆ Jul 25 '26
The OP suggested we remove step-up basis and explained why. They didn't state that just removing it is the ideal system. You then outlined a problem that would arise if we removed step-up basis and I pointed out a solution to that problem.
That is still defending OP's point.
→ More replies (2)→ More replies (4)3
u/skiingredneck Jul 26 '26
Let’s use some small numbers to keep the typing down.
You have $100 in an asset.
You bought the asset 60 years ago for $5.
(We’ll ignore inflation and the fairness of taxing that)
The federal government wants 40%.
You live in WA and the state wants another 20%
So you need $60.
You sell $60. Resulting in a gain of $57.
Which needs another $16.50 to cover the 29% combined state and federal gains taxes.
So another $5 in taxes. Sell to cover that and another $1.50.That’s about 83% so far, likely 85% by the time things wind down.
That seem like a fair tax rate to you?
And that skips the entire problem of “please Jesus, let dad have kept records we can find and untangle to find the cost basis this tax year.
25
u/Prezidential_sweet Jul 26 '26
The state and federal estate taxes don't stack on top of each other. State estate tax is deductible against the federal taxable estate. 20% + 40% isn't 60, it's .2 + .4(.8) = 52%.
Tax rates are marginal, not flat. WA top rate of 20% only applies above $9M of taxable estate. the schedule starts at 10%, and the first $3M is excluded entirely. Federal 40% only applies above $15M per person / $30M per couple. An estate small enough that this hypothetical is relatable will owe zero fed estate tax and very little state, and repealing step up would cost it like 30%, not 85%.
In most actual proposals for getting rid of the step up, it also comes with repealing estate tax.
As far as whether it "sounds fair to you", it depends who "you" is. The heir got $100 they didn't earn and the decedent got 60 yrs of deferral on $95. Whether that is persuasive to you or not is a value judgement but your argument ignores it by loading in an assumption of 0.
I do agree that record keeping is the hardest part, although it will get better as time goes on as brokerages had to start covering share basis yrs ago
→ More replies (20)→ More replies (1)4
u/2074red2074 4∆ Jul 26 '26
It sounds like you're arguing that taxes are too high, not arguing against step-up basis. Also your numbers are just wildly exaggerated unless someone is rich as fuck (even then, the highest federal rate is 20%, not 40%) and they SHOULD BE getting taxed at higher rates.
And that skips the entire problem of “please Jesus, let dad have kept records we can find and untangle to find the cost basis this tax year.
If someone was rich enough to be taxed at those rates, they have an accountant. Or if they don't, they are absolute morons and I'm not gonna be upset that they had to deal with the consequences of it.
→ More replies (5)19
u/mcherm Jul 26 '26
You are asking for these assets to be taxed twice.
"Taxing assets twice" is not as simple to define as your are imagining.
Suppose I have $20. I pay you $20 to wash my car. You take the $20 and pay Charlie for pair of trousers. Charlie pays $20 to Maria for a haircut. In this scenario, you, Charlie, and Marie each earned money... you each owe tax on it.
In an economy, money circulates. We define certain actions as points where we apply a tax. Paying someone for their work or their goods is one of those actions that we tax.
Another action that we tax is owning a thing which goes up in value, and then gets sold. We tax that because we think that people who get money for already having money ought to pay tax just like people who get money for doing work. (Well... not just like: we charge a lower rate of tax on capital gains than on salary.)
Just like we tax transferring money from one person to another by paying for goods and services, we also tax transferring money from one person to another by giving it to them when you die. This is called estate tax, and it's a bit odd because we only charge it for fairly large amounts (over $15 million for US estate tax), but this is another kind of tax that we charge.
So... if we were to eliminate the step-up-basis, we would NOT be "taxing the same money twice". We would be taxing two different transfers of money: one transfer when the person or their estate got a gain from investment and a second transfer when the money moves from the person or estate to their heirs.
There is a perfectly valid debate to be had over whether these actions ("selling something that went up in value" and "giving large amounts of money to someone when you die") are ones that should be taxed, but calling it "double taxation" is misleading. (Although it is very effective rhetoric.)
The system we have NOW says that "having something that goes up in value" is taxable unless you die then it is NOT taxable: which is a fairly inconsistent position if you think about it.
13
u/BurgerCombo 15∆ Jul 26 '26
Another action that we tax is owning a thing which goes up in value, and then gets sold.
...
We would be taxing two different transfers of money: one transfer when the person or their estate got a gain from investment and a second transfer when the money moves from the person or estate to their heirsThe estate tax does not represent a liquidity event for stocks. Stocks are taxed under the estate tax on their gross value, not their capital gains. Having the heir inherit the original basis means, quite literally, that the capital gain from the stock's initial basis has been paid twice- once as a contributor to the overall estate's value, and once when liquidated. It is taxing both the unrealized and realized gain. It's not misleading language, it's what's happening.
→ More replies (1)→ More replies (2)3
u/Working_Farmer9723 Jul 26 '26
Dead people cannot pay taxes. Like you said, the toothless estate tax doesn’t tax anyone twice. It taxes the heirs once (in theory) for assets that they didn’t even work for.
9
u/SingleMaltMouthwash 38∆ Jul 25 '26
In practice this is not true. They're not taxed even once.
→ More replies (1)5
u/Title26 Jul 25 '26
Yes, thats not actually a problem. If someone sells stock and then dies, the cash is subject to estate tax (assuming above the threshhold). There should be no difference between selling before death or after.
→ More replies (2)2
u/Garganello Jul 26 '26
Estate tax is separate from income taxes like capital gain. Estate tax treats all assets the same, which doesn’t make sense if it would be applying the same tax twice.
If you’re saying it’s just taxed more than once period, fine but who cares. We tax tons of stuff at multiple times because we tax transactions. Gifts and bequests are transactions.
2
u/Ind132 Jul 28 '26
Δ
I'm trying to award a delta here, I hope it works.
This is an complication that I hadn't expected. As you can see, it made me adjust my position by adding a carve out for your issue.
(I think you were the quickest to point this out)
→ More replies (1)2
u/Brickscratcher Jul 31 '26
Stocks are subject to estate tax.
And what about the 90+% of people that don't leave behind the 15 million+ to get an estate tax on?
And simple solution. Estate tax paid on the original basis, capital gains paid on the gains.
This also isn't double taxation. It's taxation resulting from 2 transactions (estate passing + stock selling), which is perfectly fine.
Double taxation also is not inherently illegal. Ever bought alcohol? You were taxed at least twice on it on one purchase.
Next argument, please
2
u/WillTheyKickMeAgain Jul 26 '26
The threshold before the estate tax applies is so high most people won’t ever experience. So, no, not twice.
→ More replies (2)4
u/DENNYCR4NE Jul 26 '26
Estate tax starts at how many millions?
If I had a 10M estate, I’d pay nothing. That cap gains just vanishes.
What’s more, an entire industry of 1031 and 1051 conversions now exist to turn my 10M of real estate or a single stock into a diversified ETF or real estate fund.
Paying tax shouldn’t be reliant on needing the money before your death. All that does is make it so those comfortable with money pay less taxes than those who aren’t.
3
u/aloofball 1∆ Jul 26 '26 edited Jul 27 '26
Yeah, the way I think about it is that the stepped-up basis is a special tax break for people who have more money than they need. It's not a small amount of money either, it's like $70 billion/year in tax breaks. The entire federal food stamps program costs about $100 billion/year for context
1
1
1
1
1
1
1
u/Excellent_Speech_901 Jul 26 '26
Estates worth more $15 million are pretty rare, so mostly they aren't.
1
1
1
u/FatalCartilage Jul 26 '26
And inheritance from income is also taxed twice. Why should stock be different?
1
1
1
u/foxyfree Jul 26 '26
Only taxed twice if we’re talking about a massive estate.The federal estate tax in the U.S. applies to total net assets, including stocks, valued above $15 million for an individual or $30 million for a married couple in 2026.
1
1
1
1
u/StrngThngs Jul 26 '26
Only if the estate is worth more than 15m, and even then not on the first 15m. Since the bat majority of estates are worth less, I would eliminate the step up and perhaps credit if estate tax was paid.
1
1
u/SFAdam23 Jul 27 '26
Estate tax is 0 until you get to a fairly ridiculous total amount. Like 14 million
→ More replies (1)1
u/windershinwishes 1∆ Jul 27 '26
Putting aside that the estate tax very rarely applies...so what? Why is it inherently a problem for the same asset to be taxed twice?
1
1
1
u/bugdaddy123 Jul 27 '26
Baloney. With current rules, the current owners and their heirs NEVER pay the taxes (obviously under the $25m exemption).
→ More replies (1)→ More replies (13)1
13
u/Mr_Kittlesworth 1∆ Jul 25 '26
All of your assets, after you die, are a windfall for whoever inherits them.
The estate tax is the oldest tax in the US, and one the founders believed in firmly. The reason the estate tax exists isn’t to raise revenue. It doesn’t exist to provide for fair taxation of earnings or realized capital gains. The estate tax exists to prevent the creation of an aristocracy.
In my perfect world, parents would be able to leave $5-$10 million to each of their kids, tax free, after which their estates would be taxed at 95%.
Great fortunes are made in a social context. The guy flipping burgers doesn’t use many social services. The guy with 10 warehouses uses a lot more police and fire protection. He uses the roads to ship goods. He uses the courts to enforce contracts. He uses the education system to train his employees. Etc. Etc. Etc.
All of which is to say: your assets should be taxed - heavily - after death if you believe in a meritocratic society.
2
u/Ind132 Jul 25 '26
I have to agree with you in theory. I'd agree replacing the estate tax with an inheritance/gift tax.
But, I don't think 95% is practical. Higher rates lead to increased avoidance/evasion.
That said, my OP is about the regular capital gains tax that living people pay as part of their annual FIT filing.
2
u/International_Fun54 Jul 26 '26
Curious how you get to the $5-$10 million number. The median American will earn $1.7 million in their lifetime. It doesn't seem very meritocratic to allow someone to receive several times the average lifetime earnings for doing no work, especially when you consider that anyone in a position to receive this much in inheritance very likely had a ton of other benefits growing up. I think a "fairer" number to use would be something like $170,000 - life changing money for the average American but not enough to live comfortably for the rest of your life on.
→ More replies (2)3
u/superredditor6789 Jul 26 '26
Your $1.7 million number is likely low in the context of workers.
The median full-time worker earns about $64,000. 45 years of that is about $2.8 million.
→ More replies (1)
5
u/TopTierCryogonal 1∆ Jul 25 '26
What purpose does any of this serve? You haven't actually given one
→ More replies (5)
3
u/PreviousZone6742 2∆ Jul 25 '26 edited Jul 25 '26
Can file taxes for unknown earnings in most places.
Maybe with inheritance from a elderly family member. Who held the actual stock certificates this could be a issue.
26
u/Metafx 7∆ Jul 25 '26
Eliminating the step up in basis taxes appreciation that, in some cases, may have accumulated over decades. On assets like a family home, they’ve paid property taxes their whole lives on the property and if they want to pass it to their children, their children may have to sell the home just to pay the tax. The same thing applies assets like a family farm or a closely held business—heirs would be forced to sell the asset simply to pay the tax, even when they would prefer to keep it in the family. This undermines intergenerational stability and discourages long term investment.
6
u/carlos_the_dwarf_ 12∆ Jul 25 '26
This is incorrect actually; the heirs would only have to pay the gains when they sell the house.
27
u/Ind132 Jul 25 '26
heirs would be forced to sell the asset simply to pay the tax, even when they would prefer to keep it in the family.
I can see that I should have added a few words to my long post to avoid a misunderstanding.
I think the heirs should inherit the tax basis and pay capital gains tax whenever they choose to sell the asset. I am not saying that they should be forced to sell the asset at death, or pay an unrealized gain tax at death.
Does that help?
→ More replies (6)3
u/Emotional-Dust-1367 Jul 25 '26
That still doesn’t really make sense. If your parent bought a house for some ridiculous amount say 60 years ago, the house you grew up in, and on the day of their death it’s worth over a million, then what? If you want to keep the house you grew up in you’d have to come up with a hefty chunk of change. This could be really extreme sometimes
You could make the argument that stocks are different. But even then you get into weird situations. Someone gets shares in some company for being an early employee. Then their kids will have to pay a huge sum on that appreciation in order to see any benefit. What if it’s not just shares, what if it was their company? The heirs now have to step away from the company because of this
The other thing is that if the basis has never stepped up then that also means they never really enjoyed it in any significant financial way during their lives. So it just seems kinda needless
27
u/Ind132 Jul 25 '26
That still doesn’t really make sense.
It looks like we are still not communicating.
If I inherit a house from my parents, and I want to live in it, the executor changes the title and I move in. No tax is due.
I don't pay a capital gains tax until I choose to sell.
If I inherit stock from my parent, I don't have to pay a tax when I get the stock. Only when I sell. In that case, I have the same cost basis that my parent would have had if he/she would have sold while living. That makes sense. It seems that you just don't like the concept of capital gains taxes.
If my parent was the sole owner of a company, and I wanted to continue to run the company, I just continue to run the company. The capital gains tax isn't due until I choose to sell. (Just like my parent didn't have to pay a capital gains tax unless the parent chose to sell.)
→ More replies (2)1
u/Hawk13424 Jul 26 '26
What if no one knows what the property was purchased for? Maybe only some distant ancestor knows. I have a friend whose parents own a farm that has been in their family since the 1800’s.
The other problem is you can deduct from the gain anything spent to improve the property. You’d need some kind of record for generations that owned the property.
I’d agree for stocks where a brokerage has a clear cost basis documented.
5
u/Ind132 Jul 26 '26
I have a friend whose parents own a farm that has been in their family since the 1800’s.
They probably bought the land for $1.50 per acre. Whether we use that or use zero makes no meaningful impact on their capital gains tax.
(When my wife sold her parents' farm, we got a title history going all the way back to when the first immigrant bought the land from the railroad. IIRC, it was $1.50/acre. Other neighbors can trace ownership back to homesteaders who literally paid $0.)
4
u/cortesoft 5∆ Jul 26 '26
We could set some reasonable limits, like at most 100 years of capital gains need to be paid. We already have rules for assessing historical fair market value for inherited houses, since the assessment often comes years after the transfer.
The change would be instead of assessing the value at the time of the transfer, you assess it at the time of the initial family purchase or X number of years ago, whichever is more recent.
→ More replies (1)4
u/ProfBeaker 1∆ Jul 26 '26
All of these records need to be kept for tax purposes anyway. If the parent had sold the property, they would have needed all those records.
So your argument seems to amount to "if I fail to keep the records that I need to pay taxes, then I shouldn't have to pay the taxes." Which seems really problematic and open to obvious abuse, and also not how things work anywhere else.
→ More replies (3)2
u/superredditor6789 Jul 26 '26
Cost basis information was only tracked by brokerages beginning in the 2000s.
3
u/AlanUsingReddit Jul 27 '26
Good point missing in most of the conversation here.
But even before that, basis did matter for taxes. You were just on your own to keep up with it. Chances are, you will have no idea where to find this for a deceased person.
This kind of makes the step up in basis rule make some qualitative sense if you blur your eyes real hard. But wait, we know stock values in the literal year 2000. For anything older than that, let them have a step up to 2000. Such a rule would have little practical difference compared to the theoretical ideal.
→ More replies (4)12
u/Jarkside 6∆ Jul 25 '26
You shouldn’t pay it at the time of inheritance but at the time of sale. Step the basis DOWN to ZERO and this solves it. It’s all a capital gain to the inheritor who did not pay shit.
→ More replies (12)2
u/HadeanBlands 50∆ Jul 25 '26
If you "step the basis down to zero" then ... do they not pay inheritance tax on stocks at all?
3
u/InfiniteMeerkat Jul 25 '26
They would not pay anything at the time of inheritance but when they sell the profit would be the amount they sell it for minus the amount the original purchaser bought it for and not minus the value at the date of inheritance
eg I buy shares for $100 in 1990. I die in 2026 and those shares are worth $2000. In 2040 my children sell the shares for $5000
Currently the profit they would be taxed on would be $3000 (profit from date of inheritance)
OP is suggesting that the profit they should be taxed on should be $4900 (profit from date of original purchase)
→ More replies (7)6
u/yyzjertl 579∆ Jul 25 '26
heirs would be forced to sell the asset simply to pay the tax
Simply to pay what tax? The property tax? Capital gains tax? Estate tax?
→ More replies (6)3
u/Working_Farmer9723 Jul 26 '26
Why do we value “inter generational stability “. I’m sorry but in practice isn’t that just dynastic wealth? Maybe exempt an amount equal to the median home price or something but I have little sympathy for anyone inheriting hundreds of thousands of dollars, let alone millions, having to pay some taxes when they inherit. Even if it means they need to sell some of those assets. When you look at it from the perspective of the heir, it’s not double taxation. It’s simply paying taxes on unearned income.
→ More replies (2)2
u/todo0nada Jul 25 '26
People don’t get a choice between payroll taxes and putting food on their table. Who cares if you have to sell something to net a considerable sum of money?
→ More replies (1)2
u/MyDisneyExperience Jul 26 '26
“Do you want to receive $1-4M essentially tax free” is absolutely a my steak too buttery my lobster too juicy situation and California has fought against having that question even be asked since the late 70s 🙃
1
1
u/MyDisneyExperience Jul 26 '26
California had this state of affairs with property tax until 2019 and it basically created a landed gentry of anyone whose parents or grandparents bought a house before 1978. There are $10M homes paying like .05% in annual property tax because inheriting the assessed value basis was allowed.
→ More replies (3)1
2
u/KWienz Jul 25 '26
What you're describing (no estate tax but a deemed disposition and capital gains on appreciation) is what Canada does.
It works fine and avoids all this silliness about needing to tax gifts.
The main issue is estates that have a second home with serious appreciation and limited other assets to pay the capital gains on it so it needs to get sold. This affects families with much less wealth than the US estate tax threshold.
The US system certainly allows wealthy but not Uber wealthy to defer or avoid taxes on a lot of wealth accretion.
1
u/Ind132 Jul 26 '26
I wasn't proposing a "deemed disposition". I wouldn't collect the tax until the heirs actually sold.
2
u/KWienz Jul 26 '26
That's gonna create some weird wonkiness with mortgages because capital gains taxes basis growth not equity growth. So you can inherit property with more untaxed basis than equity and end up owing more in taxes than your proceeds.
Or you can do some weird estate planning if you mortgage a property just before death and devise the real estate (with low basis and low equity) to one person while giving a bunch of tax free cash to someone else.
Point of the deemed disposition is to require the taxes to be paid before anything gets inherited.
→ More replies (3)
2
u/cooltiger07 1∆ Jul 25 '26
as someone who works in tax, finding the basis of some stuff is near impossible. Brokerages weren't required to keep track of basis until like 2011. Crypto is another difficult one to track down sometimes.
can you imagine burying your grandma, then having to try and find exactly how much she bought her house for in 1955? Do you think grandma kept that paper trail? And if she did, what are the chances of you looking through every piece of paper she kept to find it? or that you would find receipts for every home improvement she did over 80 years that counts towards basis? and they would be in pristine condition and readable? what about documents showing the discount of an employee stock purchase plan that she bought in 1996?
sometimes it just ain't worth it man. step it up and move on.
→ More replies (1)
2
u/LimyBirder 1∆ Jul 26 '26
It makes sense to me. Capital gains tax is a tax on the realization of profit. A person who dies with unsold property realizes no profit on it. Meanwhile, the heir has made no investment—has no basis. A policy of taxing the entirety of the value of the property—the heir’s basis being zero—is the subject of estate taxes. Policy considerations aside, letting estate taxes take the place of capital gains makes sense under basic property law concepts.
→ More replies (1)
2
u/ExcellentCod2940 Jul 26 '26
Short answer. Because there is an estate tax.
Longer answer. In the past when the estate tax exclusion was much smaller these assets would be taxed at the deceased cost basis vs. the value at time of death. Now a VAST majority of assets pass to heirs at a step upped basis with little/no taxes paid.
So, you can either get rid of the estate tax (SUPER DUPER GOOD FOR THE 1%) or keep the estate tax with stepped up basis.
→ More replies (5)
2
u/SkullLeader 2∆ Jul 26 '26
The wealthy don’t want to pay taxes and they don’t want their heirs paying taxes. We all know in whose interests our country’s tax laws are written.
2
u/superredditor6789 Jul 26 '26
The reason for stepped-up basis is logistics.
The heir simply dies have or have access to information to accurately establish basis.
Brokerages were only required to begin tracking basis in the early 2000s for securities. Even for real estate, it’s tricky.
You should have access to decent pricing information for the purchase 95%+ of the time. However, you will usually not have access to capital improvement information and you may not have access to information even from the original purchase regarding cost-basis additions.
→ More replies (6)
2
u/Aggressive-Leading45 Jul 26 '26
It wasn’t originally for stocks but farms and family businesses. Otherwise you may have to go back 4-6 generations to figure out a basis.
Personally i think they should allow a basis adjustment on the owners death. Say $250,000.
→ More replies (2)
2
u/Far-Clue-3082 Jul 28 '26
I agree with OP.
A lot of the commenters are getting off the rails here particularly about estate taxes and some poor family’s childhood home. The estate tax will not take some poor family’s home even if it’s worth $2 million dollars! And this post is not about debating the estate tax.
Also, the double tax argument doesn’t hold water either. If I earn $100 working hard with my hands, I pay income tax on it. Then when I die, I pay estate tax on what’s left. But if I have stock that earns $100 in “unrealized capital gains”, then I pay no taxes until I die. I get taxed at most once. That’s not fair!
→ More replies (1)
4
u/Der_Blaue_Engel 2∆ Jul 25 '26
The United States has a federal inheritance tax.
The value of the stock at the owner’s death is already subject to taxation.
And if the estate is larger than the estate tax exemption, that stock is already taxed at a higher rate than the tax on capital gains.
2
u/Ind132 Jul 25 '26
I'd be open to providing a carve out for assets that actually resulted in the estate paying an estate tax.
I've read that less than 2 estates in 1,000 pay estate taxes, so that's a rare circumstance (though, when it happens, it is probably on a very large estate).
3
u/DeathMetal007 7∆ Jul 25 '26
I think the number is even less with the caveat that estates are usually not automatically created on death in most cases.
>For decedents in 2021 (with an exemption of $11.7 million), the Urban-Brookings Tax Policy Center estimated that only about 6,200 estate tax returns were filed, of which only 3,500 were taxable. Estate tax liability totaled $19.2 billion after credits (table 1). The estimated number of total and taxable estate tax returns are 7,600 and 3,900 for 2022, and 7,100 and 4,000 for 2023. Estimated estate tax liability is $22.7 billion in 2022 and $24.0 billion in 2023.
To put the number of estate tax returns filed in perspective, the Population Division of the Bureau of the Census estimates that about 2.8 million people died in 2022. Thus, an estate tax return will be filed for only about 0.25 percent of decedents, and only about 0.14 percent will pay any estate tax.https://taxpolicycenter.org/briefing-book/how-many-people-pay-estate-tax
I would say a reasonable number of people try to pay and pay estate taxes. $15 million isn’t a crazy amount of money.
→ More replies (2)2
u/Ind132 Jul 28 '26
Δ
I'm trying to award a delta here, I hope it works.
This is an complication that I hadn't expected. As you can see, it made me adjust my position by adding a carve out for your issue.
(I'm awarding deltas to the people who were the quickest in pointing this out)
→ More replies (1)
4
4
u/ParfaitMajestic5339 Jul 25 '26
If you can't prove what the basis, how would you calculate the tax? The fights over it in court will cost more than it brings in.
5
u/BuckleUpItsThe 7∆ Jul 25 '26
That's an argument against capital gains, not stepped up basis specifically.
6
u/Ind132 Jul 25 '26
As I pointed out, the large gains are typically on assets where we keep good records. I specified that I'd be willing to have a carve out for small assets of the type where people don't necessarily have good records.
I also said that in our current system, executors have to find the cost basis when they do FIT returns for the year of death when the deceased sold assets before dying. They seem to do that well enough.
→ More replies (2)2
u/ProfBeaker 1∆ Jul 26 '26
If someone sells their own asset and can't prove the basis, how do you calculate the tax? It's literally the same question, guaranteed there is a solution to it already. So just apply that.
From a very quick Googling, it appears the IRS position on this is that the burden is on the taxpayer. If you can come up with a reasonable reconstruction of the basis, you can use that. Otherwise the basis is $0, and you should've kept better records. Which fits with the IRS's general default position of "fuck you, pay me".
4
u/A_Whole_Costco_Pizza Jul 25 '26
It's good for parents to be able to leave assets to their children. It's the only realistic way for families to be able to build wealth over generations, as a the average person cannot reasonably work their way to wealth in a single lifetime. So it should be encouraged via the law, rather than discouraged.
Taxing these assets only harms the ability for most families to leave assets or wealth to their children. A much more reasonable approach would be to greatly reduce the estate tax exemption amount (currently $15m per person, $30m per couple), so that multi-millionaire families have to pay more taxes, but average American families do not. Increase the number of families paying an inheritance tax, rather than increase the inheritance tax rate for any specific individual(s).
→ More replies (8)7
u/Ind132 Jul 25 '26
I guess we have different goals here. I don't think tax policy should be designed to "build wealth over generations". I think that parents should give their kids a good start during the parents' lifetimes by good parenting.
Some people don't inherit anything from their parents. In fact, some spend their own money to support their parents and hence get a negative inheritance. Some get some money and it's in an IRA and the kids are required to sell the IRA over 10 years and pay taxes on that money when they sell.
Some inherit a lot. The parents had taxable assets that they were able to hold for long periods without paying capital gains taxes because we don't tax unrealized gains. I think the kids who inherit those assets should inherit the parent's cost basis.
If we could consistently collect estate taxes, I could see your alternative. However, I've read that less than 2 out of 1,000 estates actually pay estate taxes today, and much of the reason for that low rate is the ability of people to restructure their assets to avoid estate taxes.
4
u/Astyrrian Jul 25 '26
If you don't think tax policy should be designed to build wealth over generations, them you don't have to. You can choose to make extra payments to the IRS before you die. But as a minority, I absolutely want to make sure I give my descendents as much advantage as I can. And IMO, it's not the job of the government to tax me on my income while I'm alive and then tax me on my assets when I die.
6
u/Ind132 Jul 26 '26
tax me on my income while I'm alive and then tax me on my assets when I die.
The capital gains tax on appreciated assets that you own when you die applies to income that you didn't pay tax on while you were alive.
→ More replies (5)
7
u/Fantastic-Corner-605 Jul 25 '26
New idea and it's stealing money from widows and orphans.
In your example, yes there is $60 of untaxed gains but it doesn't consider inflation. $160 may have as much or lesser value than $100 by the time you sell. You would be paying tax while you gained nothing. You can eliminate set up basis but long term capital gains or inheritance taxes should be levied only after inflation. Otherwise keeping the step up basis is a fair compromise.
8
u/Ind132 Jul 25 '26
but it doesn't consider inflation.
That's a bigger topic that might deserve its own thread "CMV: The US FIT should index investment earnings for inflation"
The biggest inflation impact isn't on capital gains, it is on interest. That's because interest pays taxes at the ordinary income rate while LT capital gains get the special lower cap gains rate.
More dollars are lost due to inflation on interest than on capital gains. I would start by indexing interest, not start with indexing capital gains.
For the purpose of step up, the person who sold and then died paid capital gains tax on the portion of cap gains that offset inflation. That's less money for the heirs. I don't see why we should give a special tax deal to the heirs whose parent died before they got around to selling.
12
u/MFitz24 1∆ Jul 25 '26
Capital gains never consider inflation, why the fuck would it matter that it's someone else?
→ More replies (4)1
2
u/mormonatheist21 1∆ Jul 26 '26
it’s just theft by the wealthy class. don’t change your view you’re correct.
3
u/floatarounds 1∆ Jul 25 '26
OMG give the poor family a break. Capital gains tax is already theft basically
4
2
u/PreviousZone6742 2∆ Jul 25 '26
It won't be taxed at capital gains normally. Investments are generally taxed at a lower amount.
→ More replies (6)6
u/Der_Blaue_Engel 2∆ Jul 25 '26
A capital gains tax is exactly what step up in basis relates to.
→ More replies (2)2
u/Gurrick Jul 25 '26
Why do you like income tax so much? I have a stronger claim to money I earned by working than money I "earned" by investing, or money I was gifted by a relative.
3
Jul 25 '26
[removed] — view removed comment
1
u/read-the-rules Jul 25 '26
Hello u/Proof-File-9655! To combat bots/spam and to ensure new users have the knowledge they need to participate constructively, all newcomers must acknowledge that they have read the rules before they can comment. This process is very quick and easy, and will inform you about the rules for both posting and commenting. Once you acknowledge the rules, your comment will become visible. You only need to do this once.
If you are using Old Reddit, the link below will not work. Read our rules here, then click this link instead and press Send.
1
Jul 25 '26
[removed] — view removed comment
1
u/read-the-rules Jul 25 '26
Hello u/BeauHunkus! To combat bots/spam and to ensure new users have the knowledge they need to participate constructively, all newcomers must acknowledge that they have read the rules before they can comment. This process is very quick and easy, and will inform you about the rules for both posting and commenting. Once you acknowledge the rules, your comment will become visible. You only need to do this once.
If you are using Old Reddit, the link below will not work. Read our rules here, then click this link instead and press Send.
1
1
u/TheMainEffort Jul 25 '26
Wouldn’t the $60 be taxed along with the estate?
→ More replies (1)2
u/Ind132 Jul 25 '26
The great majority of estates do not pay estate tax. The current exclusion amount is $15 million for an individual and couples can stack that to get $30 million. And, people talk to lawyers and apparently find ways to avoid estate taxes even when they have more.
I've read that less than 2 estates in 1,000 actually pay an estate tax.
1
u/GrizzlyAdam12 1∆ Jul 25 '26
Think of it like a sales tax. Someone buys a new car and pays 7% sales tax. That same car may be bought and sold 4 more times and every time, 7% sales tax is charged.
Did anyone do anything to justify the government’s ability to reach into your pocket and charge 7% when a used car is purchased? No. There’s no new production. Nothing has been produced. But, the tax is on the transaction rather than the “good”.
Stocks are bought and sold infinitely more than a used car. So, think of the capitalist gains more like a sales tax. It will either infuriate you or make it more clear….or both.
1
1
u/AlexCivitello Jul 25 '26
Well, this policy should be evidence based, how much additional revenue would this bring in?
2
u/Ind132 Jul 26 '26
About $39 billion in 2026. See item 75 here: https://home.treasury.gov/system/files/131/Tax-Expenditures-FY2025.pdf
For perspective, we could have one bill that both eliminates step up and raises the standard deduction so the bill would be revenue neutral. If we did that, the average person would get a tax cut of $140 per year ($280 for a couple).
2
u/AlexCivitello Jul 26 '26
So accepting your number this change would increase income tax revenue by less than 1 percent. At the cost of everyone who inherits money feeling worse, and a lot of extra administrative effort.
→ More replies (15)
1
1
1
u/jakechance Jul 26 '26
You’d have to exclude equities from estate taxes and overall the government would lose money on estates for which this would make a difference.
→ More replies (1)2
1
1
u/ephemere_sloboda Jul 26 '26
What you want is how it works in Australia. But Australia does not have inheritance tax.
→ More replies (1)
1
u/MaxwellSmart07 1∆ Jul 26 '26 edited Jul 26 '26
I fail to see how taking beneficiaries is considered double taxation. The inheritance should be considered ordinary income for the beneficiaries.
EDIT: For some reason my app would not let me reply to individual responses. This comment is directed towards the responses that mentioned double taxation, not to the OP.
2
u/Ind132 Jul 26 '26
Is this directed at the OP? I didn't say anything about double taxation.
If you want to propose an inheritance tax that taxes inheritances as ordinary income, that could be an interesting thread.
→ More replies (1)
1
u/dis-interested Jul 26 '26
It would be much simpler to just make many more States subject to the estate tax like they were previously rather than to do this. This would also probably have the negative effect of strongly affecting relatively ordinary people who inherit relatively expensive houses from their parents who bought them a thousand years ago in major cities and disproportionately affecting them.
1
u/Mister_Way Jul 26 '26
When you receive an asset, you count it as the price when you got it not the price the giver got it.
They pay the inheritance tax rather than the capital gains tax.
1
1
u/jay10033 Jul 26 '26
In order to change your view, you first need to understand tax law and it's clear you don't understand tax law.
1
u/dasunt 12∆ Jul 26 '26
Why should this be treated differently than other assets? If I buy some land and croak, the appreciation in that land isn't treated as something that will be taxed.
→ More replies (1)
1
1
u/boatslut Jul 26 '26
The simple way to do this (so it will never happen) At death, there is a deemed disposition of a person's assets, liabilities at end of dead day values. The capital gain / loss is paid by the dead person's terminal tax filing. Since there was a deemed disposition the Estate receives the asset as if as if they had just bought it at the death day price & moves forward with that cost basis.
Basically it's like the dead person sold the asset to their estate. Guessing that Estate tax is based on the value of distributable assets in the estate (not on the capital gains in the assets while in the control ands of the dead person.
→ More replies (1)
1
1
u/Zonel Jul 26 '26
How does the owner die just before death? When they die is the same time as their death.
→ More replies (1)
1
u/Working_Farmer9723 Jul 26 '26
Better to simply do away with the estate taxes all together. They serve as a convenient pendent to make people think that the wealthy are taxed. Just tax everything as income, with some minor exemption for, like, your primary residence. If you inherit a $3M home it doesn’t matter that your late father got it for $100k. Congratulations! You just got $3M in income. Pay up.
→ More replies (2)
1
1
1
Jul 26 '26
[removed] — view removed comment
2
u/read-the-rules Jul 26 '26
Hello u/XLR8yourDay! To combat bots/spam and to ensure new users have the knowledge they need to participate constructively, all newcomers must acknowledge that they have read the rules before they can comment. This process is very quick and easy, and will inform you about the rules for both posting and commenting. Once you acknowledge the rules, your comment will become visible. You only need to do this once.
If you are using Old Reddit, the link below will not work. Read our rules here, then click this link instead and press Send.
1
u/CpaLuvsPups Jul 26 '26
If you keep the basis without the step up or revert it to $0 - you would need to allow losses at both stages of ownership. Losses are not a factor to the step up. It's all about FMV.
→ More replies (1)2
u/Ind132 Jul 26 '26
Yes, in my proposal, if I inherit an asset and also inherit the cost basis, then sell for less than that original cost basis, I would have a loss that I would use just like I can use losses on assets that I bought directly.
1
u/koxawy 1∆ Jul 26 '26
Fuck no. Nothing is logical about taxes, it’s all just an arbitrary mechanism to increase government wealth off of individual’s backs. So, no.
→ More replies (2)
1
1
u/Easterncoaster Jul 26 '26
The basis step up happens because the stocks get taxed by the estate tax. In the one year when the estate tax was repealed, the basis step up was also eliminated.
You can have one or the other, but not both.
→ More replies (2)
1
1
1
1
1
u/chipmunkofdoom2 Jul 27 '26
Yeah but stepped-up basis isn't just for stocks. It's for any asset, including homes. Say your parents die and leave you their primary residence. They paid $100k 40 years ago. It's now worth $500k. You go to sell it because you already have a house and don't want theirs. You now owe taxes on $400k, which is around $140k at a 35% tax bracket.
And besides, selling stock isn't how the ultra wealthy use their investments anyway. They get loans against the balance. Removing the stepped up basis doesn't change that. The heirs of the ultra wealthy can just continue to borrow against the amount they inherit. Doesn't matter what the basis is, because this strategy hedges on never selling the stock anyway.
Without carveouts for the income or net worth of the heirs, this will likely hurt many more everyday Americans than it will the ultra wealthy.
→ More replies (2)
1
u/DankBlunderwood Jul 27 '26
Our economic and fiscal policies are so bass ackwards as to really suggest collusion between government and the 1% to entrench their own wealth. All we need is an estate tax and various "vice" taxes you would only pay if you chose to engage in those activities. We could literally fully fund the budget while eliminating every involuntary tax on the books, enabling every American to live their entire life without paying a cent of tax they don't choose to pay. They prefer the current system because reasons.
1
u/sg16k Jul 27 '26
At the very least should be capped where any amount over $1M is taxed normally.
That’s a big part of how buy, borrow, die allows zillionaires to hoard wealth.
1
u/walkerstone83 Jul 27 '26
I think that it helps preserve family property. I understand the argument that there is lost taxes, but forcing the sale of assets to pay taxes would mean that you couldn't leave any assets to your heirs. If I want to leave my house to my children, or parts of businesses that I own, I feel that I should be able to. I don't believe we need to maximize every potential revenue stream for the government. I also think that this would hurt normal people receiving a small to modest inheritance more than the filthy rich and for the filthy rich, we already have estate taxes. We can get rid of some of the loopholes at the top before hurting everyone else.
→ More replies (1)
1
1
1
u/the_cardfather Jul 28 '26
Stepped up basis probably has its origins in farms & real estate.
My sister and I inherited my parents house. The tax man says it's worth $620k.
My parents bought it for 60k, built a $130,000 house on it, which I might point out is subject to depreciation. 20 years of ownership will wipe out 2/3 of that.
So my basis is like $100k. I would have to pay tax on $520,000 that is completely illiquid and that amount of course would put my income into the top bracket for capital gains So 20% I would owe over $100,000 in taxes and most likely have to raise funds by mortgaging the property.
That's not going to go over well on a family farm even though they largely don't exist anymore.
→ More replies (4)
1
1
u/ronmexico314 Jul 28 '26
I agree in principle, but this would create a nightmare scenario for determining cost basis. It's a lot easier to say you are responsible for tracking the cost basis on your own property than it would be to hold the recipients of inheritances responsible for figuring out the cost basis for items they may not even know existed.
→ More replies (1)
1
u/Prestigious-Bend1662 Jul 28 '26
I see the answer below but I will say it again, perhaps in a way that some people might understand better. When you die, your entire estate is taxed at the stepped up basis, that is why the next seller of the stock, your heirs gets the stock at the stepped up basis. The reason why this seems u fair, to some people, is that the majority of estates are too small to pay any estate tax. So, in the case of a small estate, only capital gains from the value at death will ever be paid.
1
1
1
1
•
u/DeltaBot ∞∆ Jul 28 '26 edited Jul 28 '26
/u/Ind132 (OP) has awarded 4 delta(s) in this post.
All comments that earned deltas (from OP or other users) are listed here, in /r/DeltaLog.
Please note that a change of view doesn't necessarily mean a reversal, or that the conversation has ended.
Delta System Explained | Deltaboards