[berberous]

I agree with all of that. Hand wringing over tax loss harvesting seems silly to me.

I think there are very good historical reasons for basis step-up, namely, that it is unreasonably hard to expect heirs to figure out basis from a deceased, especially for illiquid assets. But since brokerages have to track basis since 2012, it would seem easy to, at least, disallow basis step-up for securities that have cost basis information held by the brokerage.

[compsciphd]

I've argued that heirs, if they don't have proof of the basis, should have to treat the basis as 0.

Why should the basis be what it is today vs zero? It's pretty simple, if person dies on day N, and we know what we would tax the item as if he sold it on day N-1, then we should be able to know what we should be able to tax it at if sold by the heirs on day N+1.

Zero would acknowledge that the heirs paid literally zero for it. conversely, if the the asset tremendously rose in value (i.e. an order of magnitude or more). then even with knowing the cost basis, one can effectively treat the cost basis as zero without significant effect on the heir (i.e. at a 33% tax rate, if it grows by an order of magnitude and you treat it as 0, instead of 10% of the current value, you only increased the amount of tax paid by 3.3% of the value). If it grows by even more than an order of magnitude, than the percentage drops (2 orders of magnitude and you are at 1/3 of a percent extra vs treating it as zero).

i.e. there really isn't much of a loss to the heir if one has to treat the asset as zero cost basis. and one can always provide said cost basis in the cases where the asset growth can't be measured in even a single digit order of magnitude (but once one breaks a single digit, then there's very little loss to the heir).

In general, I dislike trying to treat different assets classes differently, the rule should be no step up, track cost basis or you as the heir have to treat it as zero.

[dataflow]

> namely, that it is unreasonably hard to expect heirs to figure out basis from a deceased, especially for illiquid assets

But then can't they assume the cost basis is $0 if they can't provide documentation to back up something higher? I thought that's how it works in general when you don't have cost basis information available.

[berberous]

Sure, but that's probably going to unfairly impact the poor. Imagine a family of poor immigrants, where the father worked very hard and saved and left some asset to his non-rich children...you want to punish the children when the father dies suddenly and the children have no idea where to find cost basis information? There are pros and cons to any policy.

[compsciphd]

you can also limit step up cost basis, similar to how the "estate tax" is limited (and is high enough that even "normal" rich people aren't event impacted by it. But I'd limit the step up stricter than that. imagine the step up would be limited to 1-2mil of stepped up assets. poor people would still be able to benefit, nominally middle class/well to do upper middle class would also mostly benefit, but the rich would find the benefit effectively go to zero for them as their assets rise.

[EdwardDiego]

> Hand wringing over tax loss harvesting seems silly to me.

It seems very pertinent to me. Taxes pay for the common good.

If people are using loopholes or workarounds to not pay tax, then the common good suffers.

And we all benefit from the common good, even, maybe perhaps _especially_ the billionaires whose companies receive subsidies, or contracts from the government.

[tekla]

I as a average 1-job salary earner really enjoy the tax loopholes of my IRA and 401k.

[horns4lyfe]

A portion of taxes goes to the common good, another portion goes to graft and politicians per projects that accomplish nothing; sometimes both at the same time. Maybe we fix that first.

[refurb]

Seems like being tax efficient to me.

People realize the 401k was once a “loophole”? Some CPA found the law and started to use it and everyone piled on.