Hacker News Reader

Comment by ugh123 | Hacker News Reader

> If you don’t receive income then it obviously shouldn’t be taxed

Right, but you're ignoring the loop-hole OP mentioned where you borrow un-taxed money then deduct it. Kill the loop holes.

View on HN

There is no tax loophole. The only thing they are getting is higher leverage against borrowing, and the only difference would occur if that individual would go bankrupt in that the entity that they borrowed from wouldn't need to pay income tax.

So the only way to pay less tax is to surrender all your assets.

Or die and pass it to your children. Buy, borrow, die. Kill the step up basis loophole.

No it doesn't work that way. If you pass on the stock options, you pass on the tax burden.

I'm not sure if "options" is the relevant word in your post, but it does seem like capital gains tax is significantly reduced in inheritances? Here's an example source that says the cost basis gets reset to its value at approximately the deceased's death [1], and gains relative to that cost basis are likely much smaller (and thus a much smaller tax burden) than those relative to their initial acquisition price possibly decades earlier, no?

[1] https://www.fidelity.com/learning-center/life-events/cost-ba...

Even according to you article, fair market value at the time of transfer is subject to same tax. Can you phrase what exactly you are trying to say?

I included options because that's how ultra wealthy get their wealth from and it has market value of 0 so company could give lot of them.

Also anyone can get majority of your earning in stocks, not just ultra rich. Companies want to pay in stocks, and it's a win win for both, if there is a loophole.

My understanding is that it's not subject to the same tax it would have been as income, since the federal estate tax only applies to value above ~14 million per individual. So, my understanding is that a married couple can pass 25 million in stocks to their heirs and pay nearly no taxes on it because it's under the estate tax threshold and the capital gains cost basis got reset on their death. But not everyone can do this because you need enough assets or other business the bank wants to handle for them to be happy lending you money for years, and only people with a lot of assets have either of those things.

(I'm happy to be wrong about this, since it seems unfair, but AFAIK this is how it works?)

Reply on news.ycombinator.com