This is how un-checked wealth accumulates. Remember, it is very easy to make money if you have lots of money to start with and can weather almost any risk no matter how severe. When the smaller players bust out, the wreckage of their companies and lives is bought for pennies on the dollar.
Would you want to live in a world where the Paris Hiltons could coast into billions of wealth without having to do a single hard day's work in their life? Where they'd have enough money to fund a hundred generations of that?
Society advances when there's an incentive to working hard. Making money is one such incentive. When you can make money without working hard, it starts to break down. The inheritance tax is a way of keeping an element of hard work in the equation.
As for it being easy to make money if you start with a lot - why, this totally depends on the rules of the game in question! And if the game is fair and open, then it will be equally easy for the rich starter to squander all their wealth - since they don't actually produce wealth, but only consume what was inherited.
Libertarians are, first and foremost, about a free and honest game.
With all respect, this is not "extension", but rather "gross distortion".
> It prevents most of the money in circulation from accumulating in the hands of a very small number of individuals.
What if such accumulation was just? Would it still be wrong? If yes, then why? If no, then what's the problem? Shouldn't we worry about making game rules fair, rather than making sure outcomes are "equalized"?