Mark-to-Market Taxation

actually in this thread both topics are at issue if you read the original post.

on the transfer of assets to heirs, i don't understand why the current value (at death) of the estate wouldn't be taxed. who cares what its worth when its bought.

 

in other words if steve jobs never realized the gains then so what. the estate tax should be paid on the value of the estate, then mrs jobs should pay any tax on whatever she gains from time of her pocession till time of sell.

look at it like this, what if jobs dies when his estate is valued lower than when he bought the assets. the government still gets a benefit of the estate tax whether value is up or down.

 

Because there is an exemption when transferring assets to a spouse.

 

she's gonna die too, case solved, unless they just keep getting married

 

No - because the exemption reset the cost basis. Taxes will never be paid on that gain.

 

a tax will be paid when she dies in the form of estate tax, i doubt she sales all the assets at time of her husband's death if so yeah that's a crazy loophole. i would assume that they file joint returns, so the capital gains applies to her and steve.

 

That's true - if the money is still in the estate. If she sells her stock during her lifetime and goes on a spending spree or donates it all or whatever, the gain will never have been taxed. Basically, because he died, she gets access to the capital without it ever having been subject to a tax - that's what the idea of M2M is meant to avoid, although it's a stupid solution in itself.

 

okay lets backup

she and steve don't own the assets together, steve dies, she gets them in her name but they are reset to "cost basis". what does that mean, if it means to when steve bought them, then so be it, but what does that mean.

do they get reset to when she gets them, or when he bought them?

 

So let's say Steve Jobs had 100 shares of Apple at $10 ($1000).

They appreciate to $400/share and are now worth $40,000.

If Steve Jobs stays alive and sells them, he pays capital gains on the $39,000 in profit. If he dies, she gets them with a reset cost basis of $400/share. So now she can sell them for a profit of $0 and spend all $40,000 tax-free.

 

okay, yeah, that's a silly loophole. if they are not taxed in the estate tax, they should remain in the cost basis that he bought them for because the i would assume the whole purpose of not taxing them in the estate tax is that they share they've always shared the assets.