It provides a large artificial financial incentive to hold onto a property that you otherwise would sell.
I also think it's not right to create this kind of arbitrary, large tax break that only applies in specific circumstances. I think if we're going to have a capital-gains tax (and maybe we shouldn't), then we should keep it simple and not have carve-outs.
If I sell my house while I'm on my death bed, I pay all the taxes. If I wait a week to die first, and then my heirs sell, no tax. This is wrong and unnecessary.
I don’t know, I think there are a lot of people that might not want to be owners anymore, but they just can’t bring GM themselves to sell and pay the taxes. Especially if they are, say, 60 and in dubious health anyway. So they hold, and hold, and hold some more for decades. I could see my own parents on this situation possibly.
Or I have a neighbor house that’s a rental, but it’s still owned by the same (now) 90+ year old woman who used to live there, but who moved out 20 years ago. Her 70+ year old son is managing it now… Does she really still want to own this house, or is inertia and fear of taxes holding her back from selling? I don’t know.
I also think it's not right to create this kind of arbitrary, large tax break that only applies in specific circumstances. I think if we're going to have a capital-gains tax (and maybe we shouldn't), then we should keep it simple and not have carve-outs.
If I sell my house while I'm on my death bed, I pay all the taxes. If I wait a week to die first, and then my heirs sell, no tax. This is wrong and unnecessary.