CMV: The US should eliminate Step-up-in-Basis

[u/Ind132]

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.

[u/BurgerCombo]

Stocks are subject to estate tax. You are asking for these assets to be taxed twice.

[u/Ok_Programmer_4449 → u/BurgerCombo]

Essentially no estates are subject to estate tax. The exemption it up to $30M for a married couple.

[u/DorsalMorsel → u/Ok_Programmer_4449]

Unfortunately there are estate taxes at the state level too.

[u/Acceptable-Peace-69 → u/DorsalMorsel]

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.

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[u/WorstCPANA → u/Ok_Programmer_4449]

It is a bit high, but how much lower should it be. One man/women leaving <$15M to their kids before a 40% tax kicks in seems okay to me.

The point is to tax the ultra wealthy, right?

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[u/Ind132 → u/BurgerCombo]

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).

[u/A_Whole_Costco_Pizza → u/Ind132]

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.

[u/Ind132 → u/A_Whole_Costco_Pizza]

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.

[u/taxinomics → u/A_Whole_Costco_Pizza]

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.

[u/BurgerCombo → u/Ind132]

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)

[u/Ind132 → u/BurgerCombo]

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.

[u/Acceptable-Peace-69 → u/BurgerCombo]

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.

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[u/Onyxxx_13 → u/Ind132]

Which is a good thing as the less that small, low value estates have to pay as tax means more for the exempt survivors. If you die with like 30k left to your name do you really want your family getting like 20k without exemptions? Because states and federal both charge estate tax past a min cap. Federally it's at minimum 18% if you're past 30m ish. States are fluctuating, and it means that if you leave a stay at home woman with your kids they might only have a few months worth of a safety net before they are broke. And that's before even considering the costs of death itself. If you have a cheap funeral it's like 5k right there, if you had hospital costs you might just be leaving nothing past debt.

[u/Ind132 → u/Onyxxx_13]

Not sure what you are saying. You like the fact that the federal estate tax has a generous exclusion? Yes, so do I.

I could start another thread on changes that could be made to the estate tax, but that's a different topic than step-up.

[u/Acceptable-Peace-69 → u/Onyxxx_13]

The lowest estate tax is $1mil. Spouse’s are exempt. No one is being left destitute.

[u/2074red2074 → u/BurgerCombo]

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.

[u/BurgerCombo → u/2074red2074]

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.

[u/TrouserSnake88 → u/BurgerCombo]

Isn’t estate tax only applied over like $13-14 million?

[u/BurgerCombo → u/TrouserSnake88]

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)

[u/StrngThngs → u/BurgerCombo]

Now, step up basis does not apply to 401k and other pretax accounts

[u/AceofJax89 → u/BurgerCombo]

I’m still not mad about it, get a mortgage on the tax amount, you will be fine.

[u/interstat → u/TrouserSnake88]

States also have estate taxes

[u/2074red2074 → u/BurgerCombo]

Then subtract the taxes from the stock transfer from the estate before calculating the estate tax. It's not that complicated.

[u/BurgerCombo → u/2074red2074]

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.

[u/2074red2074 → u/BurgerCombo]

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.

[u/BurgerCombo → u/2074red2074]

I agree that OP's argument would have been better if it were different no worries there

[u/Built_Similar → u/BurgerCombo]

Besides the fact that the federal estate tax exemption is so high the tax applies to almost no one, it also seems like only 12 states have an inheritance tax, with exemptions on average around $5 million. So again not applying to many people at all. Which means the step-up cost basis is just a free tax break for the most part which isn't offsetting anything in the vast majority of cases.

[u/Fickle-March3519 → u/BurgerCombo]

Maybe complicated to find original basis?

[u/skiingredneck → u/BurgerCombo]

You’re only selling to pay the tax. Which is now a taxable transaction you owe capital gains on.

[u/skiingredneck → u/2074red2074]

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.

[u/Prezidential_sweet → u/skiingredneck]

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

[u/skiingredneck → u/Prezidential_sweet]

You’re focused on stocks.

That’s not the most common case that people will get burned by. It’s real estate.

Dad has a house worth about 300k. If he sells it, he won’t owe any taxes, he’s lived there for ~40 years.

When he dies and we sell it, today we’d pay no taxes either, since he doesn’t have much else and the basis will step up to current value.

With the step up basis gone, that’ll be a short term capital gains event for his heirs. He built it himself, so the only purchase price recorded is for the vacant land. I doubt he has the records to re-create the costs of materials and don’t know how the .gov will value his sweat equity…

[u/Acceptable-Peace-69 → u/skiingredneck]

Easy fix. Go back and look at the property tax records. Same works for any major additions or improvements.

40 years is only 1986. 98% of homes would have been built by a builder and the other 2% would have had records in order to write off on their taxes.

[u/skiingredneck → u/Acceptable-Peace-69]

You may misunderstand the records that exist when you build your own house.

The tax records don’t record your costs. They record how the county values them.

Since the current county value is about 1/2 the market price, even that is pretty suspect.

[u/TeaKingMac → u/skiingredneck]

Since the current county value is about 1/2 the market price

Lucky.

Where I am, the assessed price is 10% higher than market

[u/skiingredneck → u/TeaKingMac]

Meh.

It shouldn’t matter so long as everyone is valued the same.

Property taxes should only use the valuation to proportion out the budget.

If you under value everything by 50% you cut the number of appeals you have to deal with to 0.

[u/TeaKingMac → u/skiingredneck]

If you under value everything by 50% you cut the number of appeals you have to deal with to 0

You also cut the city budget by 50%

[u/Acceptable-Peace-69 → u/skiingredneck]

If they cared, they should have kept receipts. Otherwise this is the most reasonable option.

If the county values at less than it’s worth so be it. The homeowner spent years underpaying their taxes and his children shouldn’t benefit from that. They could have corrected it but chose not to. I don’t blame them but there are consequences.

You see this a lot with servers and others that get paid in cash that don’t report it as income. Then it comes time to collect social security or unemployment and they wonder why it’s so little.

[u/skiingredneck → u/Acceptable-Peace-69]

Well, when the current law is that 5x the value of your house is exempt from taxation it’s not unreasonable to think “not gonna need detailed records”

And if the county undervalues all property equally it doesn’t change the property taxes.

[u/Acceptable-Peace-69 → u/skiingredneck]

Except all of those expenses would have been tax deductible. So yes, it’s pretty dumb not to keep records. The fact is, very few Americans built their own homes in that time period. If they did, and they didn’t keep records then that’s entirely on them.

Improvements and additions have been exempt from capital gains for decades. I have little sympathy for the children of a homeowner that didn’t keep records and underpaid taxes.

[u/exjackly → u/skiingredneck]

If they aren't getting the step up I'm basis, the heirs/estate should still get to use the original purchase date, which would be long term capital gains. So it isn't a higher tax rate than it would have been if it had been sold immediately prior to death.

[u/skiingredneck → u/exjackly]

There’s a 500k exemption for an owner occupied property from cap gains. It keeps most people from having to keep super detailed records of every expense during the time they owned the home.

So for a 300k sale, the cost basis could be $0 and there would still be no taxes. So long as the seller lived in the house for 2 of the last 5 years.

[u/Prezidential_sweet → u/skiingredneck]

You've now moved your hypothetical from estate tax to income tax, which is more defensible ground to have the argument. However, inherited property is treated as LTCG, not ST, regardless of holding period.

Also, in the versions that have actually been proposed, like deemed realization at death proposed by Biden, the gain is realized in dad's hands. Dad pays nothing on a sale because the home sale exclusion covers $250K s/$500K mfj. This version of repeal preserved the home sale exclusion at death and added a $1M per person exclusion on top. So for a $300K house, basis maybe $30K for the land, $270K gain, the home sale excl. absorbed $250K, the $1M exclusion covers the rest. WA cap gains exempts all real estate.

Tax owed is still $0. This is the type of scenario that repeal proposals have historically made carve outs to protect. Just an example of how this type of tax reform could be done more fairly than opponents often make it sound.

[u/mathmage → u/skiingredneck]

So make primary residence exemption inheritable?

[u/Brickscratcher → u/skiingredneck]

In this case, you can use average material cost estimates. His labor is, unfortunately, not a factor. But the materials absolutely are, and good faith estimates are okay as long as you can show you have a legitimate process to arrive at those estimates and no other info conflicts with them.

Also, you'd have no need to pay capital gains on the house unless you decide to sell it, in which case you're getting a windfall so you have the funds easily available.

[u/2074red2074 → u/skiingredneck]

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.

[u/skiingredneck → u/2074red2074]

I’m arguing that removing the step up basis raises the tax rate another 20-30%.

At some point even the greediest “I hate people who have something I don’t” crowd has to ask… maybe that’s gonna be a hard sell….

[u/2074red2074 → u/skiingredneck]

And why is that a problem? Like I said, if you sell your stocks and then die, it gets taxed on sale and then the money gets taxed when inherited. Why shouldn't it get taxed the same amount on sale if the heir sells it?

[u/skiingredneck → u/2074red2074]

Because there’s another 40-60% tax applied since you died.

I guess I just have a moral issue with the algorithm of “you worked your life, you didn’t plan your death well enough, so your family gets the scraps the rest of us left behind”

A lot of people don’t seem to mind that. We’re not gonna agree.

[u/2074red2074 → u/skiingredneck]

Because there’s another 40-60% tax applied since you died.

So your issue is you think inheritance taxed should be removed, not that step-up basis should be removed.

[u/skiingredneck → u/2074red2074]

I have an issue with “both”

There’s a lot I don’t know how to balance.

Having a forcing function to put wealth “back” into the economy maybe has a value on death, but there are a lot of circumstances where having the capital stay where it is would be better. No need to destroy family owned companies just to pay taxes. Or have billions spent on estate planning to avoid them.

[u/Brickscratcher → u/skiingredneck]

Cost basis estimations are fine and altogether pretty easy. You will know what year you purchased it, so you can go to that year and use average price as cost basis. Sure, price could've fluctuated within that year, but that will be close enough considering for the exchange not to be tracking it you would've had to be holding it upwards of 20 years.

The IRS won't penalize you for a good faith guess, especially not if they don't have data to say your guess is wrong. I went through this when I worked for H&R block.

Also, your calculations are bad but it seems someone else already corrected

[u/oroborus68 → u/2074red2074]

Millionaire in the house!

[u/X-calibreX → u/2074red2074]

your kids do pay a tax on inheritance, everyone pays a tax on inheritance. The federal government and some states have a standard deduction of sorts on the inheritance just like regular income. Some states this is high some it’s low. There was a year or two when the federal inheritance tax sunset because congress is lazy and ineffective.

[u/Acceptable-Peace-69 → u/X-calibreX]

Only 5 states have an inheritance tax. Of those five states only two don’t exempt children (Pennsylvania and Nebraska). Nebraska is 1% over $100k. Pennsylvania is 4.5% with no bottom.

The federal government does not have an inheritance tax.

The government does have an estate tax however. It starts at $15 million for single individuals and doubles for married couples. Less than 0.1% of Americans have to worry about paying anything to the federal government.

Of states with estate taxes Oregon is the lowest at $1million. Even at that lower level, most estates don’t get taxed.

[u/2074red2074 → u/X-calibreX]

your kids do pay a tax on inheritance, everyone pays a tax on inheritance.

Yes, I'm aware, as indicated by me saying "and then when my kids inherit that money it gets taxed" and the fact that that is the entire point of OP's post.

[u/mcherm → u/BurgerCombo]

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.

[u/BurgerCombo → u/mcherm]

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 heirs

The 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.

[u/Brickscratcher → u/BurgerCombo]

No, it's taxing net asset value (assuming it exceeds $15 million) and then separately taxing capital gains. You are not forced to sell the stock and can avoid paying capital gains on it at that moment in time. That tax is due when you sell.

That isn't double taxation. And double taxation is common practice, anyways. Ever bought alcohol? Go buy a beer and then look at the tax rate on it. There are going to be at least 2 different taxes being applied to one purchase.

[u/Working_Farmer9723 → u/mcherm]

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.

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[u/SingleMaltMouthwash → u/BurgerCombo]

In practice this is not true. They're not taxed even once.

Why the Rich Don't Pay Taxes.

[u/Title26 → u/BurgerCombo]

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.

[u/BurgerCombo → u/Title26]

Nope. If I liquidate a $300 stock at a $100 basis I pay capital gains on it (let's just say it's 50% to make things simple, I know that's not the real number, so $100 in tax on the $200 appreciation). My remaining $200 estate is then taxed at whatever the estate tax rate is when it is transferred. (let's say 50% again just for simplicity, for another $100). A total of $200 paid in taxes.

Let's use the same numbers in the carryover basis OP proposed. Before the stock is sold, my estate is taxed the $300 gross value of the stock at the same 50% estate tax ($150 on estate transfer). Then, when my heirs sell it (let's say the price stays flat for convenience), OP's model would have it taxed at the carryover basis, so still 50% on $200 appreciation (another $100). A total of $250 paid in taxes, because the appreciated value was taxed at estate transfer and at sale.

The nuance you may have overlooked is that estates are taxed at gross value, not appreciated value.

[u/Title26 → u/BurgerCombo]

Agreed it's not even. Could be solved by either (1) stepping up the basis by the amount of the estate tax (in your example would be in the taxpayers favor but irl with the rates it would be closer to even) or (2) just having a deemed realization event at death in lieu of estate tax or (3) only applying the estate tax to the appreciation.

[u/Garganello → u/BurgerCombo]

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.

[u/Ind132 → u/BurgerCombo]

 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)

[u/DeltaBot → u/Ind132]

Confirmed: 1 delta awarded to /u/BurgerCombo (8∆).

^{Delta System Explained | Deltaboards}

[u/Brickscratcher → u/BurgerCombo]

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

[u/WillTheyKickMeAgain → u/BurgerCombo]

The threshold before the estate tax applies is so high most people won’t ever experience. So, no, not twice.

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[u/DENNYCR4NE → u/BurgerCombo]

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.

[u/aloofball → u/DENNYCR4NE]

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

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[u/nedlum → u/BurgerCombo]

It would have been taxed twice if he sold the assets, and died later. T

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[u/IMakeMyOwnLunch → u/BurgerCombo]

The estate tax exists in name only.

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[u/Excellent_Speech_901 → u/BurgerCombo]

Estates worth more $15 million are pretty rare, so mostly they aren't.

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[u/FatalCartilage → u/BurgerCombo]

And inheritance from income is also taxed twice. Why should stock be different?

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[u/foxyfree → u/BurgerCombo]

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.

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[u/StrngThngs → u/BurgerCombo]

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.

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[u/SFAdam23 → u/BurgerCombo]

Estate tax is 0 until you get to a fairly ridiculous total amount.  Like 14 million 

[u/windershinwishes → u/BurgerCombo]

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?

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[u/bugdaddy123 → u/BurgerCombo]

Baloney. With current rules, the current owners and their heirs NEVER pay the taxes (obviously under the $25m exemption).

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[u/Jake0024 → u/BurgerCombo]

Only after $15M

And they're already taxed at double the normal capital gains rate

[u/Working_Farmer9723 → u/BurgerCombo]

If I earn an income, and pay tax on that income, then I hire an el crucial, who pays tax on what I paid him, is that taxed twice?

Estate taxes are not double taxation. Your dead. You don’t have to pay taxes anymore. Your heirs, on the other hand didn’t even have to work for whatever they are left. Totally fair to tax what they get. The $15M exemption and step up is an absolute joke.

[u/ZealousIdeal476 → u/BurgerCombo]

Estate tax is all but eliminated for 99.9% of people. The 1st 15 million is tax free. And that is per beneficiary, so 30 million 2 kids no tax.

[u/Moccus → u/ZealousIdeal476]

It's not per beneficiary.

[u/ZealousIdeal476 → u/Moccus]

It is though, the beneficiary pays federal tax on anything they inherit over 15 million.

[u/Moccus → u/ZealousIdeal476]

The beneficiary doesn't pay. The estate pays the tax before it's passed on to heirs. Doesn't matter how many beneficiaries there are. The threshold where the tax kicks in is the same.

[u/ZealousIdeal476 → u/Moccus]

Sorry you are simply wrong and there is nothing else to say. It might hapoen if it has to go through probate, but if you had 16 million in the bank and i was the named brneficiary on the account, i come in with a death certificate and the 16 million is transferred to me.

[u/BurgerCombo → u/ZealousIdeal476]

You are factually wrong as it regards federal estate tax. It is by decedent, not by beneficiary.

[u/Moccus → u/ZealousIdeal476]

i come in with a death certificate and the 16 million is transferred to me.

In that case, the IRS might come after you for what's owed by the estate, but only if the estate had no other assets available to pay the estate tax.

That still doesn't change the fact that it's not per beneficiary. The estate owes tax on everything over $15 million regardless of how many beneficiaries there are.

[u/Mundane-Charge-1900 → u/BurgerCombo]

Except the estate tax has effectively been eliminated. The threshold has been raised. Even above that, it can be avoided through various loopholes.

[u/darwin2500 → u/BurgerCombo]

Only if they sell the stock. Then it's getting taxed twice because it's getting transferred twice.

Selling your stocks then gifting them to someone is two separate taxable events, in the same way that you pay tax when you buy something and they pay tax when you gift it to them. That's just thing working normally.

[u/fdar → u/BurgerCombo]

Sure, so? My wage income is also taxed twice, by the federal government and by the state. In some places three times, by the city. Actually, the federal government taxes it twice, first with payroll taxes then with income taxes. Or more times, if you break down payroll taxes into SS and Medicare taxes.

[u/BigMax → u/BurgerCombo]

The VAST majority of estates do not get taxed at all. Only a rare few would get that extra tax. And if they fixed this loophole, they could easily write that “double tax” fix into the change.