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Most people have probably never heard of a “stepped up basis,” but it might just be the most important tax loophole in America — one that billionaires use to pass vast sums of wealth down to their heirs by avoiding capital gains taxes.

This supremely obscure and yet wildly consequential rule concerns assets passed from one person to another when they die. If a parent buys a stock for $1 and leaves it to their child (or for that matter, anyone) in their will, the tax code changes — or “steps up” — its base value, from the original price to whatever it was worth when the person died. Say that stock was worth $100 when the person died. If the child sells it later for, say, $150, the child would owe taxes only on the $50 upside, instead of the entire $149 profit the family made off the stock over the course of two generations. In April, former Senator Heidi Heitkamp of North Dakota called it “one of the biggest scams in the history of forever.”

For a select few families with vast fortunes amassed over many generations, it means that they can pass down millions or billions of dollars in stock, investments or real estate without having to pay income or capital gains taxes on many decades, or possibly a century or more, of gains. The windfall grows each time the money is transferred, endowing those families with disproportionate power for generations to come.

https://www.nytimes.com/2021/09/24/opinion/biden-tax-loophol...
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