Introduction
Senator Wyden has proposed new taxes to tap the very rich. One goal is to stop a common tax plan (some call it a “game”) the wealthy can play. They buy assets that grow in value. Rather than selling them which would trigger a gain and tax on that gain (which ordinary folks like us face) they borrow against the value of the assets, often at terms us regular folks could not get, and use the cash from the borrowing pay lifestyle costs (think yachts and the like). Since they borrowed and did not sell there should be no gain realized on this plan. Then on death the value of the assets is increased to its then fair value. The proponents suggest that this enables the super-rich to avoid paying current tax on what is tantamount to income, then their heirs inherit with a step up in income tax basis that eliminates the gain that would have otherwise been recognized.
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