>Really the only problem here is the step-up cost-basis at death that you mention. This is indeed a big problem
Why is that a problem?
Why is that a problem?
I also think it's not right to create this kind of arbitrary, large tax break that only applies in specific circumstances. I think if we're going to have a capital-gains tax (and maybe we shouldn't), then we should keep it simple and not have carve-outs.
If I sell my house while I'm on my death bed, I pay all the taxes. If I wait a week to die first, and then my heirs sell, no tax. This is wrong and unnecessary.
Maybe I'm cold-hearted, but "make it someone else's problem after I die" seems like a pretty decent incentive not to sell.
Or I have a neighbor house that’s a rental, but it’s still owned by the same (now) 90+ year old woman who used to live there, but who moved out 20 years ago. Her 70+ year old son is managing it now… Does she really still want to own this house, or is inertia and fear of taxes holding her back from selling? I don’t know.
I'm not sure it is a problem -- it just affects the true value of the property/asset.