Tuesday, January 20, 2015
Obama tax proposal on capital gains could hit some "undeserving" inheritance beneficiaries very hard, but it has zero chance of passing, or does it?
Here we go again, with real tax reform, to be proposed in Obama’s State of the Union message.
There is the populist idea of “soaking the rich” and maybe the rentier class, maybe the idea of “unearned” wealth, such a moral bone with the Left. The top long term capital gains rate goes from 20 to 28 percent. More important, with estates, the “stepped up basis” idea, where assets gains are based from their value on the date of inheritance, would be gone, and assets are sold, taxes on capital gains would be based on original value, which might be very hard to ascertain with old assets.
Matthew Yglesias has a story on Vox, January 17, 2015, here.
What would happen when someone inherits an old family home? If he or she sells it, would he or she have to base the gain on when the home was built, if it had always been in the family? That could make a HUGE difference, and could prevent someone from selling and moving. Could this apply to 2015 taxes?
That brings up what is more a retirement blog issue – downsizing if an empty nester. Older homes complicate the lives of those living alone. And they present a “moral” issue. Larger homes ought to be occupied by whole families. But preparing them, given the use of lead and asbestos in the past, often hard to document or detect, then becomes a huge problem, not talked about. In fact, that may be one reason why some jurisdictions in the DC area and many older communities in the East are prone to greenlight tear-downs and “MacMansions”, which provide easier property tax revenue.
The uncertainty, as to what Congress might do in the political environment, may well help explain some of the unsolicited prayers to me to become a financial planner or tax preparer a few years ago, when Mother was alive.
Vox says, these rather draconian measures, as to how they could impact some people, have zero chance of getting through a GOP controlled Congress. So, sit tight.