[Pearls Before Swine]

Re the first part.. You are correct that this proposal changes cost basis. But, what it changes is the cost basis of the person who inherits.

Under present law, the cost basis is stepped up to market value at the time of death. Whether that results in estate taxes on settlement depends on how big the estate is.

If you think about the motivation, and not the details (which you can check with any accountant), the motivation is to cripple the amount which any family can pass on. The way it does that is subtle—it burdens the inheritor with an additional tax that did not exist before. And it can be a very large one, in the case of the family property.

So, the proposal won’t make the initial transfer from the parents to the first inheritors any more expensive, but it will tax heavily any sale by those inheritors. Am I clear? It’s tough when talking about these convoluted parasitic laws.

[par4]

Agree, but my point was that the change is in the cost basis and that's where the issue lies. For example, when I purchased my first house, it was the late 70's. I paid nearly 80K. If I still held that house and passed it on, it would have a value of 380K today.

So far, so good - under the present laws, my inheritors value it ar 380K, sell it and that's it, no capital gains tax. Or sell it for 350K and take a loss.

Under this proposal, as I read it, they sell it for 380 and pay capital gains tax on 300K (paid 80, sold for 380). Sounds fair except....

That 80K I spent in 1977 has a value today of a lot more than 80K. Where's the adjustment for inflation on the intital purchase? 80K in 1977 was a lot of money, a brand new car was 3 or 4 thousand dollars. Heck, a new Cadillac DeVille was under 10K. So that 80K then is like 250K today. Without inflation adjustments it's not a true cost basis.

This will affect thoise who have no knowledge of estate planning.