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Killing the IRS

Okay. Let’s say you inherit $10MM of silver and there is no step up in basis and no unified credit or it’s been otherwise exhausted.

The estate owes 40% tax on the silver so you need to sell it. You owe 39.6% on the sale to the government plus 10% to the state. So after income taxes you you have $5,040,000 left. $4MM goes to the estate tax leaving you with $1.04 MM which is a combined 89.6% tax rate.

I'm definitely an idiot when it comes to estate tax law, but why would the estate have a tax rate applied to the silver assets as if it was a fully taxable income, and then an additional estate tax applied before distribution to the inheritors?

isn't a lot of the argument with set up basis that either the estate needs to pay a tax on the total amount at death, or there is no estate tax, but there is no step up basis with the transition of assets? My understanding is very few people argue you need a 40% estate tax plus no step up basis for capital gains.
 
Estates are taxed on their value at the date of death. Estates also file income tax returns on any income generated post death.
 
it's not 90%

accountant propaganda
If you have 10 of something before a transaction and 9 of it goes to the government and one passes through then that's effectively a 90% tax. That's not accountants propaganda that's just math.
 
If you have 10 of something before a transaction and 9 of it goes to the government and one passes through then that's effectively a 90% tax. That's not accountants propaganda that's just math.

the estate doesn't have 1 at the end of the transaction.

stop pretending it's all the same thing
 
I think it’s fine for a dying person to be able to direct the distribution of their assets how they see fit.

And fine fer tha gub’mint to take some in taxes, in a reasonable and progressive fashion.
 
That’s fine you feel that way.

I just happen to fundamentally disagree that the government should take 90 percent of an asset I earned during my lifetime.

Neither one of us will ever convince the other to change that position.
 
You’re dead. The game is over. You won.
 
In how many inheritance situations is the government actually taking 90% like in Cav’s scenario? 1%? 0.01%?
 
In how many inheritance situations is the government actually taking 90% like in Cav’s scenario? 1%? 0.01%?

Currently there are none. The reality is that only about 0.2 percent of estates owe any estate tax at all. But there are proposals out there and people that advocate that approach. That example was only used to highlight the effect that eliminating the step up in basis could have.

In reality, I think changes need to be made to the estate tax and I would rather pay taxes after I’m gone than while I’m living. I think the exemption should be lowered and a progressive rate enacted.
 
the estate doesn't have 1 at the end of the transaction.

stop pretending it's all the same thing
Effectively it is the same thing. People don't care if estate value when it's passed down is taxed at the estate level or at the inheritor level they just care about the amount of taxes paid relative to the amount of value that is passed down. You're about the only person I've ever seen that think that this distinction matters.
 
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I'm definitely an idiot when it comes to estate tax law, but why would the estate have a tax rate applied to the silver assets as if it was a fully taxable income, and then an additional estate tax applied before distribution to the inheritors?

isn't a lot of the argument with set up basis that either the estate needs to pay a tax on the total amount at death, or there is no estate tax, but there is no step up basis with the transition of assets? My understanding is very few people argue you need a 40% estate tax plus no step up basis for capital gains.

The Biden greenbook and bills proposed by Senator Van Hollen and Pascrell make death a realization event triggering capital gains on top of the estate tax (with certain exemptions and the devil is in the details as between all three proposals). That's different than just doing away with the basis step up, but it means Cav's example applies whether you actually sell the appreciated property or not.
 
the estate doesn't have 1 at the end of the transaction.

stop pretending it's all the same thing

Unless I'm missing something, under Cav's example, the estate does have 1at the end of the transaction - the estate is the taxpayer for both the capital gains and the estate tax.
 
Corporations have the theoretical difference of being able to retain profits indefinitely. Estates are just a transitory vehicle to pass along the decedents assets to the beneficiaries, so the difference between the estate getting taxed and the beneficiary is a form over substance distinction.
 
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