(04-29-2021, 07:05 AM)StroudCrowd1 Wrote:

(04-29-2021, 05:00 AM)The Real Marty Wrote: The worst part is applying capital gains taxes to inheritances.  Now, assets are inherited on a stepped up basis, but under the proposal as I understand it, not only will the stepped up basis be eliminated, but also, capital gains taxes will be assessed at the time of the inheritance.  

So, for example, if you inherit a house from your parent, and they've owned the house for many years, you will be assessed a capital gains tax on the increase in the value of the house since that parent bought it.

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I just hope the endorsement deal pays him enough to make up for the loss he will take if and when those cryptocurrencies crash.

If what you say is accurate,, does that mean when you sell it, capital gains are only paid on the profit made between the sales price and the value of the home at the time of inheritance? Does this mean an appraisal of all assets is required upon the death of a parent?

No.  Currently, if you sold the hypothetical home, you would pay capital gains tax on the sale price minus the value of the house when you inherited it.  Under the new tax proposal, capital gains tax would be assessed when you inherit the house, and calculated based on the value at the time of inheritance minus the price paid for it many years ago when the parent bought it.  

Currently, appraisal of all assets at the time of the inheritance is strongly recommended, so if you sell something, you calculate your capital gain based on the stepped up basis, that is, the value when you inherited it.  

Example: your parent bought the house 30 years ago for $100,000.  When you inherit it, you get an appraisal, and the value is appraised at $500,000.  A year later, you sell the house for  $510,000.  Under current law, you would pay capital gains tax when you sell the house, and the capital gain that would be taxed would be $10,000.  You would owe $2,000 capital gains tax if you sold the house.  You would owe nothing if you don't sell the house.  

Under the proposed law, you would pay capital gains tax when you inherit the house, and the capital gain to be taxed would be $400,000.  You would owe $80,000 in capital gains tax when you inherit the house, even if you don't sell it.

This would be a breathtaking redistribution of wealth on a scale never seen in this country, and no one would be exempt from it.

I assume they will build in some exemption level, to give the proposal a chance to pass the Congress, but so far, I haven't seen it.

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