From Public Citizen:
Imagine you’re a gazillionaire.
Maybe your name is Geoff Bozos or Ellen Mush.
Now, suppose you bought a modest yacht — for a mere $4 million, say — way back before you even made your first billion.
A few years go by. Then a decade or two. And then — tragically — you perish when a rocket ship you built and launched yourself into space gets hit by a comet.
There are a lot of things to sort out about your estate, including what to do with that old rust bucket (which you hadn’t used since you upgraded to your own private luxury liner).
Well, let’s say your nephew inherits the yacht, and the going rate for that model is now $20 million.
Your nephew would owe capital gains tax on the difference of $16 million when he sells that boat, right?
Nope.
See — because of a gazillionaire tax loophole — the moment you died, that old barnacle-infested dinghy instantly became “worth” $20 million in the eyes of the IRS — so your nephew didn’t have to pay one cent in tax on the increased value.
And you never paid any capital gains tax on it either, because as long as you were alive, it was still “worth” $4 million.
In essence, your estate magically grew by $16 million and nobody — not you, not your heirs — paid *any* additional tax.
And here’s the thing:
This absurd loophole costs our country hundreds of billions in unpaid taxes from billionaires who exploit it to make investment gains just poof into thin air for tax purposes.
Congress can include a provision to close this particular billionaire tax loophole as part of the “Build Back Better” reconciliation package.