“features in the tax code that permit the tax-free transfer of assets between spouses create a period during which these taxes are deferred.” Quoted on the notes. since it’s tax-free, then what kind of tax is deferred? I just felt confused.
I think it’s capital gains tax that is being deferred. The couple doesn’t get taxed on transfer of assets among themselves. That’s the tax-free part. Gains get taxed if/when those assets are eventually sold into the market. where are you reading this anyway?
As a rule when you die assets titled in your name are taxed as they pass from your estate to someone else (as dictated by your will maybe). In the state of Pennsylvania if I died and passed all my assets to my sons then they would have to pay 4.5% tax at the state level and almost 50% tax at the federal level. The 50% tax at the federal level doesn’t kick in until you are above a certain amount of assets (currently 2M??). There is a twist for spouses though. You can pass an unlimited amount of assets to a spouse tax free (no 50% or 4.5%). Of course when that spouse passes away all those assets are going to be taxed as they pass to heirs. So this is really just a deferral of the estate (death) tax.
thank u very much. Feel it’s the differences of rules and regulations between nations that makes it difficult for me to understand some parts of the program, especially much in Level 3. it’s in the first notebook of Schweser about tax management.