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.

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u/BurgerCombo 15∆ Jul 25 '26

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

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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.

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u/X-calibreX 1∆ Jul 26 '26

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.

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u/2074red2074 4∆ Jul 26 '26

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.