[credit_guy]

Aren’t you omitting something here? Like the fact that the step up in basis happens after the inheritance tax is paid?

If I buy stock for $10 million and in 40 years it appreciates to $70 million (an average 5% annual growth), and then I die, my kids will pay inheritance tax on the $60 million capital gain. Then the new basis will become $70 million. What exactly do you propose it to be?

[kozd]

If they want to step up the basis, shouldn't they have to pay capital gains taxes on the difference?

The estate tax's average effective rate of 17 percent (2017) is below the capital gains rate.