DP here, but you don't seem to understand what step up basis is. If the parent sold their stock before they died, they would pay capital gains on the difference between the sale price and their basis (purchase price plus dividends reinvested). The heir doesn't inherit the parent's basis. They get to use a new higher basis from the date of death. Therefore they don't have to pay capital gains on the difference between the original basis and the value on the date of death. It's a good deal for the heir. https://smartasset.com/financial-advisor/stepped-up-basis |
You simpleton. The money represented by the step-up basis is never taxed. If a parent buys stock at 10/share and it is inherited at 100/share, the capital gains on 90/share is never taxed. It's not taxed when the heir sells because the basis is stepped up. It wasn't taxed when the parent had it because they did not sell or the stock could not have been part of the estate. Obfuscating about taxing salary and dividends is completely beside the point, which may be because you don't understand the terms you're using. |
DP. This is exactly why companies don't pay dividends anymore. Instead they manipulate stock prices with stock buy backs. Dividends are taxed heavily. Capital gains are taxed less, and possibly not at all due to the step up in basis on death. Please don't with the "The money has already been taxed." |
Did I say "most people"? Most people don't actually know how taxes work. If they were smart enough to understand they would be appalled. |
This. This is the answer. Don't treat inheritances differently than any other income. Don't create an elaborate set of loopholes that can be exploited by the well off. Don't step up the capital gains basis when people die. Don't set an $11 million dollar estate tax exemption. And don't set the estate tax rate at 50% either. Just let it match the income tax rate. Problem solved. |
\ It won't be taxed again while your parents have it. It'll be taxed again before you get it after doing absolutely nothing to earn it. Signed, another Gen X-er who is likely to inherit several million dollars one day from parents and has already inherited several hundred thousand from grandparents, and is in favor of taxing all that much more heavily |
When my parents die, I strongly doubt they'll have an opinion on what tax rate I should pay on the proceeds of selling their home. They will be dead. Won't matter to them one way or the other. What you mean is people who otherwise will get tax-free windfalls will need to be OK with ... not getting tax-free windfalls. |
Small businesses get alot of tax deductions. They should either restructure their business to an ESOP or similar or accept the consequences of all those years of tax breaks. |
Oh, yes, I love listening to my in-laws spew conservative talking points about how to government can't take most of their hard-earned money they want to leave to the kids - they literally do not believe that the first $11M was exempt and are squirrelling away cash to avoid the excessive estate tax they think will be due on their maybe $100K estate if they try to leave it to their kids/grandkids through traceable channels. |
That's true but see above re: what the government wants to incentivize. To be fair, some of this is because of the lobbying power of the life insurance industry--it's not that the govt thinks life insurance is good for us, it's that the people who want to sell it have their ears. |
From the article:
"But Wolff also says, surprisingly, that inherited wealth isn’t a huge driver of inequality in America — it actually has had an equalizing effect. And there’s no indication that the next decades will be any different. The reason is deceptively simple: While much (much!) more money flows among the rich, for middle- and low-income people who receive gifts or inheritance, they represent a larger percentage of wealth. So large, in fact, that for some people, a gift from mom or dad is the thing that will keep them middle class." |
+1 Right? Talk about completely immature, naive and tone deaf (other PP). |
I'd like to see the data to back this up. Otherwise, I'm calling BS. But ultimately, I don't care. The current estate taxes (lack thereof) is crazy. We are incentivizing bad things. |
I know all about stepped up basis, thanks. That doesn’t change that the fact that the money underlying that asset has already been taxed multiple times. An rarely is an asset sold immediately at death, so heirs still pay a capital gains tax, just in a lower amount. |
How about we tax estates at 90% and have a flat income tax rate for the living of 10%. |