[mindslight]

Stepped up basis came out of the idea that one was already paying estate tax. Now that estate tax has disappeared for many, it seems ridiculous.

The IRS has no problem requiring you to maintain paperwork across generations. For example I've got some series EE savings bonds I inherited from my grandmother, where income taxes were partially paid (you can effectively switch just your savings bonds to an "accrual" accounting method with a specific election). I've got to keep track of this aspect until they mature, so I can subtract the already-taxed income on my own taxes. Same thing.

The answer to your hypothetical is that Alice would have to pay the capital gains, but only when she sold the house. Which is the same thing that would happen currently if grandpa gave away his stuff to Alice/Bob in his lifetime.

[sokoloff]

For an unsophisticated Grandpa George, he may have intended a roughly even split based on the notional value of the paid off house being the same as the rest of the estate, while the net result would be different after paying CG.

I guess I’m just not too fussed about the government not getting a lick when someone dies and would rather the family and other heirs receive whatever they’re able at what amounts to a sad time.

[maerF0x0]

not trying to say blockchain is the answer to everything, but an asset ownership chain (keyed by the asset, so a tree if you think of it as all assets) . Would be a fantastic system of record for keeping cost basis of assets history.

Eg my home has a linked list of ownership w/ cost basis details back to it's inception/root.