Reply #45: One thing to consider about that… [View All]

[TicketyBoo]

I don't think the stepped-up basis rule should apply to any assets that are not tied to a residence, a farm, or a family business.

It would wreak havoc with the stock market.

Let's say Warren Buffett knows his time is nearly up. He pulls all of his billions out of the stock market and pays capital gains taxes on it because his kids are going to have to, anyway, plunks the proceeds into the Gates Foundation, and then where are we? It would be like an earthquake hitting the stock market every time a major investor saw his time of death was close at hand.

It's beneficial to the stability of the financial system to be able to pass things on, unburdened by capital gains taxes. These heirs are likely going to have to sell things off to pay the estate tax. It would be a little unfair to hit them twice on the same gain.