In other words: If your mom and dad worked their butts off and were able to buy a home or property and pass it on to you, their children, you now HAVE to sell the property upon inheritance, because you cant come up with the inheritance taxes. Heres the break down of what this Manchurian Candidate is proposing to do in order to prevent land ownership from the Little People, you and me and our children. Americans for Tax Reform breaks down the details: 2. Stealth increase in the death tax rate from 40% to nearly 60%. Under current law, when you inherit an asset your basis in the asset is the higher of the fair market value at the time of death or the decedents original basis. Almost always, the fair market value is higher. Under the Obama proposal, when you inherit an asset your basis will simply be the decedents original basis. Example: Dad buys a house for $10,000. He dies and leaves it to you. The fair market value on the date of death is $100,000. You sell it for $120,000. Under current law, you have a capital gain of $20,000 (sales price of $120,000 less step up in basis of $100,000). Under the Obama plan, you have a capital gain of $110,000 (sales price of $120,000 less original basis of $10,000). There are exemptions for most households, but this misses the larger point: the whole reason we have step up in basis is because we have a death tax. If you are going to hold an estate liable for tax, you cant then hold the estate liable for tax again when the inheritor sells it. This adds yet another redundant layer of tax on savings and investment. Its a huge tax hike on family farms and small businesses. Its like a second death tax (the first one has a top tax rate of 40% and a standard deduction of $5.3 million/$10.6 million for surviving spouses). Conceivably, an accumulated capital gain could face a 40% death tax levy and then a 28% capital gains tax on what is left. Do the math, and thats an integrated federal tax of just under 60% on inherited capital gains.
Posted on: Tue, 20 Jan 2015 14:41:17 +0000
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