How to defer US taxes

If you take a loan against your larger capital pool, inflation helps you (to the extent it wasn't incorporated in higher lending costs).

But yeah that's a second order effect. There aren't really any scenarios where you have a fixed nominal tax that can be deferred without locking up the money, so I think you're mostly right that it comes back to lower tax rate and step-up.

yeah it's not perfect, but there's absolutely well enough data for the ballpark appraisal. Onus is not on the government to do any of this. So keep records folks.

I think the government now actually does keep tax records of buying and selling homes (became a bit of a question during the foreign buying debate) so going forward it's going to be no concern.

> A normal German citizen with a normal amount of money leaving Germany to become a nomad and travel the world, never establishing tax residency in any other country, will not need to open a bank account anywhere else

That will make you tax resident in Germany as all of your financial interests are in Germany. It's not an extreme example at all, it's the basic case to catch.

>My original assertion is that unless you are American (or, apparently, Italian) the normal person can up sticks one day and wander the world, and so long as they never establish tax residency anywhere,

Or Spanish. Or Belgian. Or French. Or Germany. Or basically any OECD country, and most non-OECD ones.

>they will be living an entirely legal tax free[1] life.

Legal as long as they don't generate any income, and even then, wealth taxes could kick in.

>Of course doing so requires giving up the things humans need, like stability, so it is a terrible life for most, but the point is, it is legal and easy.

It's really not easy at all to do legally, but at least we agree it's difficult to do emotionally.

>"illegally of course" again, false. There is no universal tax law that we are all subject to.

That's the fun part: virtually all OECD tax laws are universal.

>The Common Reporting Standard is intended to combat tax evasion. A person who does not have tax residency is not engaging in tax evasion, they are just a person without tax residency.

That's sovereign citizen tier of delusional. Plus I proved again and again that tax residence isn't bound to only where you are/live, at all, for over a decade, for any developed country and most developing ones.

>Rather than speak in theory and hypotheticals, can you point to any real world examples of someone being charged / tried / accused of tax evasion because they didn't have tax residency?

https://www.bbc.co.uk/news/entertainment-arts-67472496

She played the "I didn't stay anywhere for too long lol" card because she was touring most of the time, and she was slammed by the Spanish fisc on the basis of her centre of vital interests.

Literally most rock/pop stars would be living tax free if what you said was true, unfortunately for them it's not the case.

You won't find many high profile cases because the people who make money use expensive tax advisors who tell them not to do what you suggest, but since you're familiar with Germany, here's another: https://www.theguardian.com/world/2002/oct/25/germany.tennis

> Why are you framing it as a loophole? Not having tax residency isn't a loophole, just as not having a car isn't a loophole for a drivers license.

Not having a tax residency prevents you from legally doing business pretty much anywhere where it's worth doing business. I have to ask for a work visa in some countries I visit because of work even if there's a tourist visa-free regime for me, I literally am not allowed to do any work there. Would they notice? Probably not. But what happens if they do? That I and most importantly my company are in deep shit.

Have you considered these factors when considering fairness..?

  1) Many estates contain illiquid assets- family farms, small businesses, etc. Forcing a deemed disposition at death can force heirs to sell just to pay the tax bill

  2) Death isn't a voluntary transaction, and cannot be forecast well, so we are essentially creating an arbitrary tax event/hardship

  3) Determining original cost basis across decades of an ancestor's holdings can create an enormous administrative burden for heirs

  4) Bunching all accumulated gains in a single year at death will push the estate into an artificially high marginal tax bracket

  5) Taxing gains at death discourages long-term wealth building and pushes people toward consumption instead of investment

IMHO, these are reasonable things to consider, and I acknowledge the hardships. However, my opinion is that similar circumstances leading the similar outcomes is the most fair, and wiping out unrealized capital gains at death can easily result in similar circumstances having unsimilar outcomes.

Specific suggestions or responses to your list:

1) Reasonable alternatives to assessing capital gains tax, due immediately exist. The cost basis could be transfered, as in a gift while living (point 3 applies however); or the tax could be assessed and recorded as a lien on the property, possibly with payment over several years.

2) Death isn't generally voluntary or scheduled or easy to predict a specific date. However, it is easy to forecast that everyone alive today will die at some point. No specific advice other than planning for your estate is something people should probably do once a decade or so.

3) I agree. Especially with assets like homes where cost basis isn't simply the purchase price but also includes improvements. At least for stocks and mutual funds, record keeping requirements for brokerages changed so they have to keep cost basis information in most cases, which helps a lot; but doesn't help for real estate or other capital assets. This is a hard one, and I recognize the value that a step up in basis provides, but I still find it unfair.

4) Yes. It would be nice if there was a way to spread capital gains over many years; not just for the deceased. Perhaps a carryback or carryforward. Or an enhanced 0% capital gains bracket for the deceased or for property disposed upon death; possibly with a carryback to help those who sold capital assets to pay for multi-year end-of-life care and etc.

5) Certainly, avoiding capital gains tax by dieing with unrealized capital gains is an incentive to not sell capital investments. I don't know that it encourages wealth building. Incentivising people to not sell things with unrealized capital gains at end of life causes problems for people too: waiting to sell someone's house, even though they moved into a care home and will never move back distorts the housing market; many people refuse to spend their savings, even when adequate, and instead rely on financial help from relatives or suffer hardships from lack of spending.