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Unrealized capital gains aren’t income, so it’s not a tax loophole.

ceejayoz 2y ago
The ability to borrow virtually indefinitely against them (and other tax deferment techniques) is a tax loophole. 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... > So how do megabillionaires pay their megabills while opting for $1 salaries and hanging onto their stock? According to public documents and experts, the answer for some is borrowing money — lots of it. After decades of avoiding taxes on it, there's a final loophole! > The notion of dying as a tax benefit seems paradoxical. Normally when someone sells an asset, even a minute before they die, they owe 20% capital gains tax. But at death, that changes. Any capital gains till that moment are not taxed. This allows the ultrarich and their heirs to avoid paying billions in taxes. The “step-up in basis” is widely recognized by experts across the political spectrum as a flaw in the code.
- wmf 2y ago
  Step-up in basis is capped (somebody forgot to mention that) so it benefits the rich but doesn't save much taxes for billionaires.
  - ceejayoz 2y ago
    Do you have a a cite for this? Googling "step-up in basis cap" finds very little supporting the assertion, at first glance, and https://en.wikipedia.org/wiki/Stepped-up_basis https://en.wikipedia.org/wiki/Stepped-up_basis doesn't mention such a thing. I think you're may be confusing it with estate taxes. (Which the ProPublica article addresses in the subsequent few paragraphs.)
    - wmf 2y ago
      The step-up itself is not capped but the tax savings are capped by the estate tax limits. If your estate is less than $12M you pay no estate tax and your heirs pay no capital gains tax either; that's the loophole. But if your estate is much larger than $12M it has to pay back your loans, then pay estate tax, then the basis gets stepped up for whatever's left. There's little or no savings. AFAIK.
      - ceejayoz 2y ago
        As I said, the article addresses the estate tax. > And after death, the common understanding goes, there’s a final no-escape clause: the estate tax, which imposes a steep tax rate on sums over $11.7 million. ProPublica found that none of these factors alter the fundamental picture. > It’s clear, though, from aggregate IRS data, tax research and what little trickles into the public arena about estate planning of the wealthy that they can readily escape turning over almost half of the value of their estates. Many of the richest create foundations for philanthropic giving, which provide large charitable tax deductions during their lifetimes and bypass the estate tax when they die. > Wealth managers offer clients a range of opaque and complicated trusts that allow the wealthiest Americans to give large sums to their heirs without paying estate taxes. The IRS data obtained by ProPublica gives some insight into the ultrawealthy’s estate planning, showing hundreds of these trusts.
  - HDThoreaun 2y ago
    The rich put all their assets over the estate tax limit in a trust/philanthropic giving org that their heirs control. Now the heirs get their 26 million plus control of a billion dollar organization with no taxes.
Retric 2y ago
Unrealized gains on property and non cash transactions are still taxed, thus it’s still a loophole.

The ability to borrow virtually indefinitely against them (and other tax deferment techniques) is a tax loophole. 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... > So how do megabillionaires pay their megabills while opting for $1 salaries and hanging onto their stock? According to public documents and experts, the answer for some is borrowing money — lots of it. After decades of avoiding taxes on it, there's a final loophole! > The notion of dying as a tax benefit seems paradoxical. Normally when someone sells an asset, even a minute before they die, they owe 20% capital gains tax. But at death, that changes. Any capital gains till that moment are not taxed. This allows the ultrarich and their heirs to avoid paying billions in taxes. The “step-up in basis” is widely recognized by experts across the political spectrum as a flaw in the code.

wmf 2y ago
Step-up in basis is capped (somebody forgot to mention that) so it benefits the rich but doesn't save much taxes for billionaires.
- ceejayoz 2y ago
  Do you have a a cite for this? Googling "step-up in basis cap" finds very little supporting the assertion, at first glance, and https://en.wikipedia.org/wiki/Stepped-up_basis https://en.wikipedia.org/wiki/Stepped-up_basis doesn't mention such a thing. I think you're may be confusing it with estate taxes. (Which the ProPublica article addresses in the subsequent few paragraphs.)
  - wmf 2y ago
    The step-up itself is not capped but the tax savings are capped by the estate tax limits. If your estate is less than $12M you pay no estate tax and your heirs pay no capital gains tax either; that's the loophole. But if your estate is much larger than $12M it has to pay back your loans, then pay estate tax, then the basis gets stepped up for whatever's left. There's little or no savings. AFAIK.
    - ceejayoz 2y ago
      As I said, the article addresses the estate tax. > And after death, the common understanding goes, there’s a final no-escape clause: the estate tax, which imposes a steep tax rate on sums over $11.7 million. ProPublica found that none of these factors alter the fundamental picture. > It’s clear, though, from aggregate IRS data, tax research and what little trickles into the public arena about estate planning of the wealthy that they can readily escape turning over almost half of the value of their estates. Many of the richest create foundations for philanthropic giving, which provide large charitable tax deductions during their lifetimes and bypass the estate tax when they die. > Wealth managers offer clients a range of opaque and complicated trusts that allow the wealthiest Americans to give large sums to their heirs without paying estate taxes. The IRS data obtained by ProPublica gives some insight into the ultrawealthy’s estate planning, showing hundreds of these trusts.
- HDThoreaun 2y ago
  The rich put all their assets over the estate tax limit in a trust/philanthropic giving org that their heirs control. Now the heirs get their 26 million plus control of a billion dollar organization with no taxes.

Retric 2y ago

Unrealized gains on property and non cash transactions are still taxed, thus it’s still a loophole.