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The step up basis makes sense in a world where you still have to pay substantial inheritance taxes. But with minimal to no inheritance taxes, the step up is a giveaway.

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It’s also a practical policy. It’s far easier to know the stepped-up basis on the date of X’s death than it is to know the basis that X had in something once X is dead.

Which argues in favor of the inheritance tax mentioned.

There could be other solutions too -- say, require a virtual wash trade at time of inheritance, so the capital gains from the parent's lifetime are taxed at time of death and the child gets the stepped up basis. Somewhat different than an inheritance tax, but at least not a giveaway.

The full value of the shares (original basis plus step-up [or step-down] in basis) is already part of the estate and so is already subject to the inheritance tax rules.

It's just that the exclusion amounts are fairly high, so in practice the tax owed is often $0.

Right, the point of the person you replied to was about the scenario where inheritance taxes are small or non-existent - they literally said step up in basis makes sense when inheritance is taxed meaningfully.

I know. I read that. I was adding the practical point about basis establishment and record-keeping; I never disputed their other points.

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