Death is a Taxable Event
PRESIDENT Obama proposes to tax death - rather the income accrued on somebody's death. The President's fact-sheet states,
The largest capital gains loophole - perhaps the largest single loophole in the entire individual income tax code - is a provision known as "stepped-up basis." Stepped-up basis refers to the fact that capital gains on assets held until death are never subject to income taxes. Not only do bequests to heirs go untaxed, but the "tax basis" of inherited assets used to compute the gain if they are later sold is immediately increased ("stepped-up") to the value at the date of death - making the capital gain income forever exempt from taxes. For example, suppose an individual leaves stock worth USD 50 million to an heir, who immediately sells it. When purchased, the stock was worth USD 10 million, so the capital gain is USD 40 million. However, the heir's basis in the stock is "stepped up" to the USD 50 million gain when he inherited it - so no income tax is due on the sale, or ever due on the USD 40 million of gain. Each year, hundreds of billions in capital gains avoid tax as a result of stepped-up basis.
Let us hope the Indian Finance Minister doesn't borrow this idea.