You say that would be double taxation, but that's only because bezos avoided taxation entirely on that appreciation while alive, a nice perk the vast majority don't get. So really with the most modest reform you tax the appreciation 20% cg then estate tax on the remainder. Considering all that appreciation compounded without tax for years, they still make out astoundingly well
I think this is the right analysis. If Bezos has sold all that stock the day before he died, he would have owed capital gains on it and the remainder would be inherited. That's roughly the same situation as described with the liquidity event moved a few days yet it's not "double taxation".
No that’s just bad estate planning… kind of like how a pair of rich siblings could gift each other $1 million and it would be taxed as income for both despite neither experiencing any change in wealth. Income taxation is impossible to implement without logical inconsistencies.
> how a pair of rich siblings could gift each other $1 million and it would be taxed as income for both despite neither experiencing any change in wealth
No. Gift taxes are paid by the gifter. Gifts are not income for the recipient. Additionally, there are annual and lifetime exclusions for gift tax.
Yeah as soon as I wrote that I looked at the gift tax rules and shrugged. Either way, both gifts are being “taxed” although the arcane gift tax rules seem to imply that no actual tax will be paid unless and until one of them reaches the lifetime threshold of ~$11M.
Moreover, if Bezos had earned that as income instead of capital gains, it would have been “doubly taxed” upon inheritance; in effect, this rule (as with many others) merely excludes capital gains from taxes that apply to earned income.
The argument that the step up basis avoids double taxation appears to be slight of hand. By the same rationale, you should earn a tax credit for sales taxes paid during the tax year.
The offset, such as it is, is that estates below a certain threshold pay a lower rate of 18%. So the tax was designed to make the wealthy pay more, irrespective of whether it does a good enough job there.
But to be clear, if someone wants to argue for say a 45-50% estate tax (or even a higher CG rate), that's fine! My point in the article was just that this should be done as an oped, not a faux-bombshell news feature.
To me this read like "avoiding taxation" == "refusing to realize significant proportions of one's gains". I don't see anything wrong with that. We all do it (if we aspire to financial independence).
But capital gains are usually on purchase price vs sale price. If you paid 20% cg on inheritance, presumable the purchase price would change/reset the the value on that date?
Bezos didn't avoid CG, he deferred it. By not paying CG, he also didn't cash out, meaning to cash out the inheritor will have to pay all the CG Bezos would have paid? i.e Bezos full tax amount on stock was deferred to the inheritor. Unless they get to dispose / realise gains on those stocks for only 40% - but I read it as they receive the unrealised stocks, and need to pay 40% tax to do so.
>You say that would be double taxation, but that's only because bezos avoided taxation entirely on that appreciation while alive, a nice perk the vast majority don't get.
Isn't this pretty easy to pull off? Just buy a home (most americans own their home), and get a reverse mortgage when you're retired.
