> Loaned money isn't taxable income, so you can save/spend it without affecting your tax rate.

> Death is a popular escape from deferred taxes. When you die, your obligations to the government vanish. Your heirs inherit assets/property at market value. Their assets depreciate from new cost bases.

The article talks about taxes in the USA, and I think the treatment of taxes at death is unfair by giving a significant tax advantage to people who hold assets till death, especially with the step-up basis. The way Canada handles it seems more reasonable to me:

> Capital property generally includes real estate, such as homes and cottages, investments like stocks, mutual funds or crypto-assets, and personal belongings like artwork, collections or jewelry. When a person dies, they are considered to have sold all their property just prior to death, even though there is no actual disposition or sale. This is called a deemed disposition and may result in a capital gain or capital loss

-- https://www.canada.ca/en/revenue-agency/services/tax/individ...

In exchange, Canada does not have an inheritance tax. All taxation is resolved in the estate of the deceased person before the money or assets are passed on without further taxation.

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jedberg 18 minutes ago | parent | next [-]

It's two sides of the same coin. Imagine a simple example:

Mom and dad buy a house for $100,000. When they die it's worth $1,000,000. In Canada, you'd pay gains on the $900,000 difference. In America, you'd pay inheritance tax on the full $1,000,000 (but no capital gains). So in America you're paying tax on a little bit more (I'm of course ignoring the cap gains baseline exception).

But the reason America does it the way it does is because imagine it's not a house but a piece of art that mom and dad bought 50 years ago. No one know how they got it or what they paid for it. How does Canada even reconcile such a thing? How can you pay cap gains on it if you have no idea what it cost and no one is alive to even help you guess?

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an hour ago | parent | prev | next [-]

[deleted]

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skeeter2020 an hour ago | parent | prev | next [-]

Alberta doesn't have an estate tax either, only a capped probate fee of (I think) a couple hundred bucks.

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CGMthrowaway an hour ago | parent | prev | next [-]

Why is the Canadian approach fairer?

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nayuki an hour ago | parent [-]

If I understand correctly, the "buy borrow die" strategy of tax avoidance hinges on these aspects of the tax code: Buying an asset is not a taxable event. Holding onto an asset and letting it appreciate is not a taxable event. Borrowing money is not a taxable event. Holding an appreciated asset until death will step up its cost basis to the current market value (thus erasing any capital gains taxes), and it can be passed on but large amounts will trigger inheritance taxes.

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CGMthrowaway an hour ago | parent [-]

Yes but why is the Canadian approach more fair than the US approach?

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toast0 37 minutes ago | parent | next [-]

In the Canadian approach, as I understand it, all capital gains taxes are assessed upon disposition; including disposition at death.

In the US approach, capital gains disposed at death avoid capital gains taxes.

Here are two similar scenarios where the difference in actions is small, but the difference in net estate distributed to heirs is small.

Both scenarios: Parent P buys (split adjusted) 100,000 shares AMZN on Jan 3, 2000 at close for $4.47. Parent P has no other assets.

Scenario 1: Parent P sells March 9, 2026 at close for $213.49 per share; realizing $209.02 in capital gains per share, ~ $20.9M capital gains, $21.4M proceeds. Parent P dies March 10, 2026. If cap gains tax is 20% uniformly (which it isn't), ~ $4.2M goes to income tax, the estate at time of death is $17.2M. If estate tax is uniformly 40% of amounts over $15M (which it isn't), the estate tax is about ~ $0.9M, and the net estate is $16.3M

Scenario 2: Parent P dies March 10, 2026, without selling. The estate promptly sells at close for $214.33. $21.4M proceeds, ~ $20.9M capital gains, but no capital gains tax is due. Again assuming 40% estate tax over $15M, estate tax is $2.6M and the net estate is $18.8M

How is it fair for the heirs of Parent P in scenario 2 to get so much more than in scenario 1 when the circumstances are so similar?

If you use actual tax brackets, you could make the example numbers more accurate, but I don't think it will change the results significantly.

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fer 43 minutes ago | parent | prev [-]

Because wealthy people can perform buy borrow die and poor people can't, artificially amplifying generational wealth differences.

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twoodfin 39 minutes ago | parent [-]

You don’t have to be wealthy:

Homes get a step up basis on inheritance like any other capital asset, and home equity loans are quite popular.

Less common but not obscure financial options include borrowing against your 401(k) or other equities.

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fer 26 minutes ago | parent | next [-]

Talking about homes: if a wealthy person see a depreciation of the equity they have a parachute (more homes, stocks, etc), if middle class sees a depreciation of the equity they're on the street. The risk profile is absolutely not the same.

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Groxx 34 minutes ago | parent | prev [-]

401k and home ownership count as "wealthy" in many circles. It's not "I can do whatever I want any time" wealth, but it does still mean "this is not an option for people who likely need it the most" which is the real issue.

	▲	twoodfin 17 minutes ago \| parent [-]
		How are income taxes a serious burden on “people who likely need it the most”? Those who truly need it the most are typically well into the plus column on government transfer payments: On net, the government is paying them far more than they’re paying it.

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richwater 35 minutes ago | parent | prev | next [-]

Why should the government collect taxes on jewelery I pass down to my children? I already paid income taxes on the money I used to buy it and sales tax at the point of purchase. Why the hell are they entitled to more?

	▲	jedberg 23 minutes ago \| parent \| next [-]
		To prevent royalty. That is literally the reason. To prevent family dynasties.
	▲	OfficialTurkey 30 minutes ago \| parent \| prev [-]
		I'm not an accountant or tax lawyer (in fact, I'm not any kind of lawyer). My layman's understanding is that value -- from goods and services -- is taxed when it moves between legal entities, be those people, estates, or corporations. This is not a prescriptive legal framework as far as I know, but is a descriptive framework which I have observed and which makes sense to me morally. You paid income taxes on the money when you earned it because it left your employer's pocket and went into yours: the ownership of the value (money) has moved. You paid sales tax when you bought it because you exchanged money for the ring: the ownership of value (money, and a ring) has moved. And you pay an estate tax on it when it transfers from your estate to your children because, you guessed it, the ownership of value has moved.

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trollbridge an hour ago | parent | prev [-]

Well, except for that pesky "inheritance tax" thing, which definitely affects people who have net worths that hit multimillion levels.

	▲	hvb2 an hour ago \| parent [-]
		Sure but would you rather have an inheritance that gets you to pay that tax or one that doesn't? Because getting a multi million dollar inheritance isn't something a typical person would feel sad about I would think