Pelosi and Schumer would not give details on the deal. Maybe this is to give cover to the so-called moderates on the vote promised on September 27 on the $1.2 trillion “real infrastructure” bill. Edit: And put pressure on Manchin and Sinema.
Something like this? 
this White House document gives an idea of how they want to change the tax code. They want to tax unrealized capital gains and also to remove the step up in basis at death.
An important feature of our analysis that is less common in existing estimates of tax rates is that we include untaxed (“unrealized”) capital gains income in our more comprehensive income measure as they accrue.[3]
…
If a wealthy investor never sells stock that has increased in value, those investment gains are wiped out for income tax purposes when those assets are passed on to their heirs under a provision known as stepped-up basis.
No question it would be on their wish list.
But I find it telling that it was also not included in the House Ways and Means Committee discussions (step up basis on death) so they may have judged that it was not gonna even pass the House.
I think that would be a fair assessment on the chances of the bill with such measures. Unless they included a very generous exemption for this step-up basis on death (something like $25M or $50M). Basically catch billionaires but not farm owners. At much lower exemption levels, you know it’s gonna catch the wrong people and lose them a lot of votes.
How is that going to work? How do you pay taxes on the gain if you don’t liquidate it?
Mark to market at the end of the year, and if you’re up then that’s taxable? Some traders elect to be taxed this way in exchange for getting ordinary losses treatment instead of capital loss treatment when things go wrong. Who knows how they would actually try to do it.
here’s a description of how the Democrats want to implement the tax on unrealized capital gains and the many problems with it. I am curious what the Democrats on this board think of the idea?
Beware of a Biden Tax On Unrealized Capital Gains | RealClearMarkets!
I don’t like it. The proposal linked from the article is incomplete – says seeking comments on many issues, including whether to include liabilities. As it stands now, if I understand it correctly, say I own 10M in real estate with 7.5M in mortgages, and my RE portfolio goes up 20-30% like this year, I’d owe tax on the $2-$3M phantom gain and I may be forced to sell assets to pay taxes even though I hadn’t done anything at all (the market gains were out of my control) and the rental income isn’t gonna cover it. If they include liabilities, I could stay mortgaged and not be subject to these taxes until my assets grow to $40-$50M (so 20-25% equity exceeds 10M). That’s a little better because I’m a one-in-a-million lucky duck, but it’s still confiscatory.
It’s worse for none- or little- income-producing assets, like stocks and “art”.
3 Likes
The major problem is, how do you determine that real estate is worth this much? You do not know how much property is worth until you sell it.
we also have not discussed the devastating impact that removing the step up in basis at death will have on farmers and other small business owners.
The White House talking points memo says nothing about these major issues. so it looks to me like the Democrats are pretty much all in on them.
Yes, but you can get pretty close with an appraisal or the actual monthly rent (similar to how commercial properties are valued).
What if the property is not for rent? For example what is the value of a farm run by a family? or a non-publicly traded business?
arguing about this on this website is not going to help much. What is dismaying is that the Democrats want to charge forward with this without addressing any of these issues.
What about if there is a real estate bubble in the area? I’m thinking something akin to 2007.
Or an NFT crypto bubble right now, where you can buy a fraction of a picture of a doge for your share of half a billion.
Arguably except for bubbles, this mark to market wouldn’t be that bad if it had always been done, since the annual changes would be small. But like estates, if you start getting rid of step up on death or taxing MTM for still held assets like stocks, art, property etc, now there’s a huge one time bill which would probably tank the stock market in some major stocks when people like Bezos or whoever would have to sell a decent fraction of their holdings just to pay the tax bill.
But for bubbles or volatile assets like crypto, it would be a big PITA. Like it runs up 3x and now you own taxes equal to 100-150% of your original investment (30-50% of your paper gains), which is a big hardship if it’s a large position to actually pay. And then in the next year, possibly even before you pay those taxes, the thing falls back down to where it was. So you pay a whole bunch, and if you’re lucky in how they write the law, maybe the following year when that loss is larger than the rest of your income, you can carry it back to offset the prior year’s transient gain and get a refund.
1 Like
I wasn’t arguing with you. I just provided an example of why it’s bad using perhaps the simplest scenario where the asset could actually be appraised relatively easily. I understand that it’s worse for assets (and “assets”) that are more difficult to value.
I think mark-to-market triggered only by borrowing against assets would resolve most of these issues. Borrowing from a bank based on your assets being worth $100m? Fine, pay the taxes on those gains.
2 Likes
There’s some furious maneuvering going on with all the tax and spending bills by the Democrats. I’m sure they will come together to screw the country in the end, no pun intended, but it’ll be fun to watch it in the same way it’s fun to watch a horror movie.
House Speaker Nancy Pelosi on Sunday said she wasn’t sure if she’d hold a vote for the $1.2 trillion bipartisan infrastructure bill on Monday as previously planned because it may not have enough votes to pass.
Hah! This was promised to the “moderates”
“You can’t choose the date,” Pelosi said. “You have to go when you have the votes in a reasonable time. And we will.”
2 Likes
Seems like the same shambolic tactic from progressive Dems to coerce moderates to vote for their liberal wish-list spending orgy. They’re really working hard at proving that they cannot govern even among themselves when they have control of Congress and the White House.
No worries though. At this rate, they won’t get anything done and they won’t be in power past 2022 when voters remove from power these incompetents high on ultra-liberal nonsense disconnected from what the majority of the country want.
2 Likes
Estate planning ahead of the tax bill proposal. Some stuff you can do before EOY, some you have to do before they pass it.
2 Likes
Lower spending numbers being thrown around - but 1.5 - 2 trillion is still a LOT.