Originally Posted by Barry-xlovecam

You really have it all wrong.

There is to gain or loss on a capital asset until it is sold (or possibly bartered in trade).

• I own a house -- I will it to my son.
• I die -- my son moves into the house and lives there?
• Where is the gain or loss?
• The house just has a new owner by inheritance and new occupant.
• If my son sells the house then there is a real issue;
• His cost basis is FMV at the time of inheritance when determining the gain or loss.
• In essence he paid no cash for the house -- the cost basis should be -0- as it is all profit.

If you buy a house you bought it with after tax earnings -- so why should your heir pay tax -- unless there is a realized gain. When you die why should your wealth still have its tax standing? It makes no difference to you -- you are dead.

Stocks and bonds (as well as other financial instruments) are treated for FMV the same way.


Persons that get the capital stock in a corporation get it for funding that new corporation with after-tax monies.

People that exercise stock options pay for them at the option price and pay income tax on the option price. When they sell the stock acquired they pay capital gains tax or income tax if the stock is sold in less than one year.
If you hold and don't sell something there is no realized gain for tax purposes.

It would be more honest and simple (as well as fairer) to just raise the personal income tax rate on people earning (realizing net income) over 20 times the federal poverty rate (about $300K) . Maybe add a super income tax rate (surcharge) too.