Re:Who died and left the US $7B?
by AnthonyMouse on Thursday October 10, 2024 @06:13PM
(#41804101)
> I’m saying we should eliminate the step up in basis for inherited assets. In what scenario would that force someone to sell something?
The proposal has been floated recently that unrealized capital gains should be taxed. This would nominally mitigate a major problem with your proposal, which is that it would heavily discourage people from switching from long-held mediocre investments with a low tax basis to better investments. So they're often proposed together or as the mechanism to remove the step-up in basis, i.e. it's unconditionally stepped up to market value every year but then you have to pay the tax immediately.
But if you tax unrealized gains then you force the sale of assets any time the tax is more than the owner's liquid cash, which is its own major problem.
Whereas if you don't do this, now you haven't solved the original problem that the owner suffers a huge tax penalty for switching from a long-held mediocre investment to a better one.
The proposal has been floated recently that unrealized capital gains should be taxed. This would nominally mitigate a major problem with your proposal, which is that it would heavily discourage people from switching from long-held mediocre investments with a low tax basis to better investments. So they're often proposed together or as the mechanism to remove the step-up in basis, i.e. it's unconditionally stepped up to market value every year but then you have to pay the tax immediately.
But if you tax unrealized gains then you force the sale of assets any time the tax is more than the owner's liquid cash, which is its own major problem.
Whereas if you don't do this, now you haven't solved the original problem that the owner suffers a huge tax penalty for switching from a long-held mediocre investment to a better one.