[rsj_hn]

So now we are in the weeds about inheritance tax, but the idea is that you pay 40% on your inheritance which clears your tax obligations for that inheritance and resets all the cost basis calculations, and then after that you pay gains when you sell from the time you inherited.

That is not a tax loophole.

E.g. if someone buys stock for $10, then the share price grows to $100 and they die, so that a family member receives $100 of stock, and then the share price goes up to $110 and the inheritor sells, then in the current system, the inheritor pays:

$40 on receipt of shares at $100 (cost basis for him is zero)

$4 on sale of shares at $110 (cost basis is now 100)

for $44 in taxes paid on that stock.

RSUs also work in the same way -- you pay taxes the moment you get them, and then if you keep them, when you sell your cost basis is the price of the shares when you were given them. That is important to know if you like to hold onto your RSU shares for a while -- know that your cost basis is not zero, but whatever the price of the shares were when you paid taxes for receiving them as income.

[peterdn]

> That is not a tax loophole.

In your opinion. However, some people clearly believe it _is_ a tax loophole, presumably including those you're discussing with upthread.

One of the talking points against inheritance tax is that it taxes the same money twice. If I'm a middle earner I pay taxes on my income, and I pay CGT when I dispose of assets to pay for my car or retirement or whatever. Taxes are then levied a second time on what's left when I die.

People above are pointing out that, in contrast, extremely wealthy people manage to avoid the income/CGT part by borrowing against their assets tax-free and repaying the loans once they die and after the assets can be stepped up. So yes, inheritance tax may still be paid, but a great deal of their day-to-day income while alive is untaxed. Inheritance tax should be _in addition to_ income/CGT rather than instead of it, and part of the perceived injustice is that the ultra-wealthy get to dodge this in ways "ordinary" people can't.

Based on that I personally would call it a loophole.

[rsj_hn]

> In your opinion. However, some people clearly believe it _is_ a tax loophole

Only people who are not familiar with basic accounting or tax economics can believe this.

> One of the talking points against inheritance tax is that it taxes the same money twice. If I'm a middle earner I pay taxes on my income, and I pay CGT when I dispose of assets to pay for my car or retirement or whatever.

OK, you are mixing two different things here. One is the "double taxation"(1) on assets in the inheritance tax. First, don't worry, only a handful of families pay this tax. But ignoring that, the double taxation applies to income not spent. It is irrelevant to this discussion, in which Bezos borrows to spend. If he didn't borrow and sold assets to spend, then those sold assets still wouldn't be taxed as an inheritance tax. So that double taxation unfairness complaint is again just a confusion about what is happening and has nothing to do with whether borrowing to spend is somehow tax avoidance.

Now as to the second point: "If I'm a middle earner I pay taxes on my income, and I pay CGT when I dispose of assets to pay for my car or retirement or whatever."

No, you only pay taxes on the gains. Think back to what we were discussing before -- you get $100 of stock, then it goes up by $10 and you sell. So you have two taxable events in which income is recognized - the income of getting $100 and then the income of getting $10. When you sell for $110, your cost basis is $100, not 0, because you already paid taxes on the $100. Thus there is no double taxation for you or for Bezos(2).

No one is treated differently here. It is the exact same re-upping you were complaining Bezos being given -- that re-setting is available to everyone else for any other kind of asset they have for any reason.

So here, too, this is just complaining about things that aren't actually happening in order to get a justification for complaints about "injustice". It's a lot of very angry people applying who/whom logic rather than getting the details right about how much is paid.

Now, if you want to talk about real tax loopholes -- for example, carried interest, mortgage interest deduction, differences in tax rates on long term versus short term gains, charitable deductions - yes, by all means let's get rid of these loopholes. Bezos pays too little taxes, not because he borrows, but because the long term cap gains rate is so low. Let's not treat LTCG differently from wage income. But trying to infer the money borrowed should be taxed at the amount borrowed is just insane. Borrowed money is not income. Bezos is not doing this to evade paying taxes, he is doing it to take advantage of spreads.

(1) It's not really double taxation, because what is taxed is the income received by the inheritor, who never paid any taxes on it before.

(2) Yeah, inflation is a legit complaint for both

[peterdn]

> But ignoring that, the double taxation applies to income not spent. It is irrelevant to this discussion, in which Bezos borrows to spend.

It's not irrelevant if Bezos spends his borrowed money on real estate and generally vacuuming up other assets that are likely to appreciate in value faster than his loans. It's not like he consumes all of it (or even most? I don't know, but I doubt it. How on Earth do you consume a billion dollars?).

> Thus there is no double taxation for you or for Bezos(2).

As I already explained there is for me if I don't consume all of my taxed gains before I die, or if I use it to purchase assets that outlive me.

> Bezos is not doing this to evade paying taxes, he is doing it to take advantage of spreads.

He's clearly doing it for both reasons. At least to avoid, not evade. I accept that he's legally not required to pay tax in this situation, but the whole point is I'm saying that should probably change!

> So here, too, this is just complaining about things that aren't actually happening in order to get a justification for complaints about "injustice". It's a lot of very angry people applying who/whom logic rather than getting the details right about how much is paid.

Dismissing this as "just complaining" is really missing the wider point. That is that "buy, borrow, die" is a well documented strategy that the ultra-wealthy use to avoid paying tax and that is widely considered a tax loophole (even by those familiar with basic accounting and tax economics). Whether it's a loophole or not isn't even really the point, rather that we should change things such that people who "buy, borrow, die" actually pay something like CGT.