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There is a simple fix to this. You have to get rid of the stepped-up basis. Then anything passed down will be taxed at the prevailing tax rates. All these extra

There is a simple fix to this. You have to get rid of the stepped-up basis. Then anything passed down will be taxed at the prevailing tax rates. All these extra rules and tricks wouldn't be needed. This is extremely unpopular because the upper 20% of society wouldn't be able to pass down their homes and what is left of their retirement accounts tax-free. That is why you have a stepped-up basis with an exclusion limit that has an extremely punitive tax rate that encourages gaming the system. But you can see the political equilibrium. Regular folk think big inheritances are being taxed while they get to pass on their house tax free and the big inheritances go through all kinds of loopholes to avoid actual taxation. It is very American.

toast0 6y ago
The step-up in basis is super useful though, because you can't ask the decedant what their cost basis was, and it's not always easy to find that out (especially if their record keeping was poor). The current exemption amounts are rediculous though. Something closer to $1M with inflation adjustment and a lein/payment plan option for illiquid assets such as the family business/farm would make a lot more sense.
- avernon 6y ago
  If they can't obtain the cost basis then it should be zero. The vast majority of people have assets like stocks and property where records are maintained by third parties. And if its so old or so disorganized to not know, then a cost basis of zero probably isn't too far off.