Optimal Finance Daily - Financial Independence and Money Advice
2849: Tax Basis For Beginners by Sean Mullaney of FI Tax Guy on Double Taxation & Clarifies Taxable Gains
Aug 31, 2024
Sean Mullaney, a tax strategy expert, breaks down the complexities of tax basis for everyday individuals. He explains how tax basis prevents double taxation and clarifies taxable gains. Listeners learn about the significance of depreciation and the benefits of a step-up in basis at death. Mullaney also discusses tax loss harvesting and the different implications for retirement versus taxable accounts, stressing a balanced approach to wealth-building while maintaining accurate records to minimize tax liabilities.
13:09
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Quick takeaways
- Understanding tax basis is essential for determining taxable income from asset sales and avoiding double taxation scenarios.
- The 'step-up' in basis for inherited assets provides significant tax advantages compared to gifts made during the owner's lifetime.
Deep dives
Understanding Tax Basis and Taxable Income
Tax basis plays a crucial role in determining taxable income from asset sales. It differentiates between situations where a seller realizes income and where they do not. For example, if Mark sells a share of stock for the same price he paid, he has no taxable income, whereas Judy, who sold her stock for a higher price, realizes a taxable gain of $80. This concept helps ensure that individuals are not taxed on the same amounts multiple times, allowing for accurate measurement of gains or losses during asset dispositions.
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