Step Up Basis Changes - More Libbie BS

Assuming the US and all 50 states move to a zero income tax, wouldn’t that imply increased money supply, disposable income, and inherent inflation?

Or are you in favor of a national sales tax / consumption based tax?

As I noted upthread here, the entire notion that the IRS changed the law is not correct. Most followed the view that the step-up basis did not apply to a irrevocable trust and advised their wealthy clients appropriately. There were a number of scam-artist advisors who sold this crappy position and are getting their butts handed to them. Will it be challenged, yes.

Taxpayers should always pay the right amount of tax and challenge the IRS.

 

Agreed. The flip to this is you get a sweet government contract and bill them

 

They can and do just print it, no need to steal from us.

 

This thread is an absolute cartoon.

 

There are lots of ways to avoid estate tax exposure if given enough time and a willing client. As others have pointed out though very few people are impacted by the estate tax at its current levels.

 

He's very very angry about this tax he's never ever going to have to pay.

 

I'm more a moderate who is fairly-well-off, and I seriously question some of the tricks we allow to the wealthy to use to protect their assets and estates. I have a fair amount of assets (in both taxable and tax-deferred accounts), pay a ton in taxes today, and will continue to pay a ton in taxes even after I stop working.

Step up basis on death - I'm not sure having a step-up ever made logical sense. If we've decided that we're going to tax the sale of appreciated assets, I see no reason why that basis should be arbitrarily adjusted because someone dies. Sell the day before - pay tax on capital gain. Sell the day after - no captal gains! Makes no sense... Having this massive loophole enables the gamesmanship of the buy, borrow, die strategy. I think it makes sense for basis to be maintained on transfer, and tax can be calculated and paid when assets are sold. Although I realize that may be difficult in practice, as basis information is often lost/neglected when assets are transferred.

If someone is estate planning to minimize taxes by placing assets in a trust, why should the cost basis of assets held by the trust be impacted in any way by the life or death of the person who moved those assets into the trust? Isn't the whole point of the trust to dis-associate those assets from the former owner and their finances?

Random aside: I'm also not a fan of how we treat capital gains as a special class of income. I'm all for having an exemption (even a large exemption, say the first $50k - plenty for 'normal' people) before capital gains become taxable. But any gain above that exemption threshold should be added to wage and other income, then subject to normal deductions, tax brackets, etc. Just my 2¢...

 

No, I do not...

 

I do have kids. And I'm at the point where my parents are both octogenarians. It would be nice if I got something when they passed, but the wife and I planned as if we are getting nothing. I told my kids to do the same. I much rather have self-sufficient kids that aren't waiting on me to die so they can live well.

The reality is, my parents will never have to worry about this tax. Extremely unlikely my wife and I will have to either. And if we are fortunate and do eventually qualify for this tax, it means we have accumulated great wealth, and there will still be plenty left over after I pass and pay this tax. I would also not give a dime to my kids unless they were already self sufficient, unless there are other mitigating circumstances like an accident or illness leaves them incapable.

 

Good thoughts.
I used to be a big supporter of lower capital gains tax rates but over time have changed my mind. I get that lower rates are supposed to incentivize L/T investment and we have personally benefitted from the lower rates .

However, the idea that someone working on a daily basis pays a higher rate than someone who kicks back and lives off passive investments just doesn't make sense to me. In fact it seems like an unneeded benefit for the well heeled.

 

Even though the money they are using to “kick back and live off” was already taxed? Most investors who have accumulated wealth in investments have already paid income tax on those savings. Very rarely is someone wealthy off an inheritance; it just isn’t the norm.

 

Was it though? My net worth today is probably 5x what I've actually saved/invested. Sure, I paid taxes on some of that, but some of it was tax-deferred contributions. I certainly don't see a problem taxing the gains, and certainly not for distributions taken from the tax-deferred accounts. It seems unfair to suggest that only labor/wages should be taxed. Wealthy people living off investments should pay tax too - somebody's gotta keep the lights on, whether that's in the form of roads, military, etc.

 

He should worry more about potential taxes on clown shoes and noses.

 

We call that the FSU tax

 

All money has "already been taxed." And then paid back out by the government and re-circulated, and then taxed again. That is the nature of economics in a country with a government.

You pay taxes on transactions. When you transfer money, that is a transaction. Same as when you buy something, pay an employee, obtain capital gains from an investment, or just about anything you do with money other than sit there and look at it (or lose it by poorly investing). An inheritance is a transfer of money from one person to another. As such, there is no logical reason why that transaction should be exempt while other transactions are taxed.

Which is why the massive concern over a tax that only hits people who are going to become wealthy off of an inheritance is stupid.