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I wish reporters highlighted the stepped up basis tax loophole that causes the bizarre behavior, rather than claiming that grandmothers just can’t “afford” to s
by yonran 3y ago
I wish reporters highlighted the stepped up basis tax loophole that causes the bizarre behavior, rather than claiming that grandmothers just can’t “afford” to sell. Many grandmothers would “afford” to sell their house if there were no tax benefit to holding it until death. Same with the “Buy, borrow, die” behavior that ProPublica reported on (https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax https://www.propublica.org/article/the-secret-irs-files-trov...). Instead of advocating for an esoteric unconstitutional wealth tax, why didn’t they advocate for closing the loophole that creates the incentive?
- onlyrealcuzzo 3y agoWhat is the tax benefit of stepped-up basis over 1031-ing into RE rental properties and a cheaper primary residence? In California - obviously prop 13 if someone in the family plans to keep the house.
- yonran 3y ago1031 exchange by itself only defers taxes (which can be helpful for cash flow purposes). People combine it with the stepped up basis loophole to avoid taxes completely. As for Proposition 13/58 inheritance, note that Proposition 19 (2020) restricted the inheritance benefit to only family homes and farms, so I don’t think inheritance is a widespread benefit anymore. Proposition 19 also made the property tax basis portable, so the increasing property tax is no longer an impediment to grandma moving.
- sokoloff 3y ago(AIUI,) You can't 1031 exchange an owner-occupied property into a rental property. (1031 is a "like kind" exchange treatment and you can't take personal-use property and directly 1031 into business-use property.)