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1. you'd be paying income tax on the $250k bonus 2. if I understand correctly, you/your wife would have to pay capital gains on the stock when it is sold (the v

• mikeyouse 13y ago
  if I understand correctly, you/your wife would have to pay capital gains on the stock when it is sold That's exactly the problem, unrealized capital gains at death are treated with a 'stepped-up basis.' [1] Because of this provision, any appreciation of the affected property that occurred during the decedent's lifetime will never be taxed. Thus, this provision provides an incentive for taxpayers to retain appreciated property until death and sell depreciated property while they are alive. So you would bequeath your wife assets worth $250k, and she'd receive assets worth $35mm, with no tax due. Hence why there's an estate tax. [1] http://en.wikipedia.org/wiki/Stepped-up_basis http://en.wikipedia.org/wiki/Stepped-up_basis (Note: Wife may have been a bad example to start with due to legally shared property and all that, but this would be true if you left it to your children)