http://www.nytimes.com/2013/02/10/busin ... c=rss&_r=0
Note: I am not interested in discussing the proposed legislation in this article at all. I know pending or proposed legislation is not permissible to discuss.
Here is what I want to talk about; this snippet:
Can the rest of us mere moral bogleheads do the "step-up in basis" strategy too. Here is what I am asking. Suppose over a lifetime a work someone pays off their mortgage and accumulates say 2 million in savings held in Vanguard Total Stock Market. This hypothetically includes over 1.5 million in unrealized gains. Can this person take out a big reverse mortgage on their property, live the rest of their life on the reverse mortgage proceeds all the while paying the mortgage interest etc, and then pass on the 2 million minus debts tax free to their heirs because of the "step-up in basis" tax rule?A billionaire can borrow against his stocks, art and real estate, and spend that borrowed money without paying tax. All he has to do is pay interest on the loan. When he dies, his heirs can sell the assets to pay off the debt. Under an existing rule known as the “step-up in basis,” no matter how much the assets have appreciated in value, no one will owe income tax on that gain. And the rest of his fortune goes to his heirs without anyone ever paying income taxes on the appreciation in the assets.