Buy-borrow-die / basis step-up elimination

The buy-borrow-die loop is the terminator of the income-tax base. The wealthiest filers hold appreciating assets indefinitely, borrow against the unrealized gains for liquidity (securities-based lending lines, pledged-asset lines of credit, margin loans), never sell, and at death their heirs receive the assets with basis "stepped up" to fair market value. Decades of capital growth pay zero income tax in any year.

The Buffett, Bezos, and Musk cases (see real-world cases) illustrate the pattern: $24.3B of Buffett's wealth growth 2014–2018 produced just $24M of federal income tax (0.10% effective) because he didn't sell. ProPublica's 2021 IRS-records analysis showed that of the 25 wealthiest Americans, the modal effective rate against wealth growth was approximately 1–2%.

Step-up at death also makes large estate-tax planning straightforward: the asset basis problem (which would otherwise produce a large income-tax bill) disappears, leaving only the estate-tax bill, which is itself reducible through GRATs, dynasty trusts, and lifetime gifts.

Basis step-up at death is eliminated. Death (and the equivalent gift transfer above lifetime exemption) is a realization event: the decedent's estate or the lifetime donor realizes the accumulated appreciation and pays income tax on it at the decedent/donor's marginal rate, with capital-gains convergence applying above the $10M lifetime CGAL.

The Estate Tax Prepayment Plan provides the parallel during-life instrument above the $10M threshold — meaning the architecture taxes accumulating unrealized appreciation annually as well as at the realization point. The two instruments are the binary closure: hold and pay the estate tax prepayment, or transfer and pay the realization tax. There is no third path that avoids both.

Estates with substantial accumulated unrealized appreciation. Lifetime donors transferring appreciated assets above the gift-tax thresholds. Practically: the top fraction of the top 1% who today benefit most from the buy-borrow-die loop.

Personal residences receive a published step-up exclusion (specification pending v10.2). Closely-held businesses inherited intact may defer the realization tax to actual sale at statutory interest, with the deferred amount carried against the inherited basis. Below the lifetime gift exemption, ordinary inheritances face existing income-tax rules at the heirs' eventual sale (no realization at transfer). Retirement-account assets continue under existing distribution rules (IRD treatment).

Pending canonical scoring.

Basis step-up elimination is one of the Accord's largest single-instrument revenue gains over a 50-year horizon — because it captures appreciation that today never enters any tax base in any year. The Joint Committee on Taxation has scored basis step-up as a tax expenditure in the range of $40–80B/year on a static basis; on a dynamic, decades-of-accumulation basis the realized recovery is materially larger.

The stream's load comes from convergence with three other instruments. Capital-gains convergence ensures the realized appreciation pays ordinary marginal rate above the $10M lifetime cap. The Estate Tax Prepayment Plan ensures the holder pays during life rather than waiting indefinitely. The estate tax then applies to the post-realization wealth at transfer.

See tax ladder · fiscal scoring

Step-up at death

Eliminated. Estate realizes accumulated gain and pays income tax at the decedent's marginal rate.

Indefinite hold without realization

The Estate Tax Prepayment Plan prices the underlying stock annually above the $10M threshold. Hold-without-tax is no longer free.

Lifetime gifts above exemption

Donor realizes the gain at transfer (parallel to estate treatment). Lifetime-gift parity rules track cumulative giving across decades.

Like-kind exchanges (real estate)

Cumulative deferral cap; large rolling exchanges realize the gain (see like-kind-exchanges subpage).

Charitable-stock conversion

Charitable deduction cap reduced to $10K/year per individual (CFG.income.charitableDeductionCap), limiting the appreciated-stock-donation route.

The architecture closes the loop on three sides: at death, during life, and at lifetime transfer.

Capital-gains convergence

The realization tax at death uses the convergence rate above the $10M lifetime cap. Below the cap, the favored rate (23.8%) applies.

Estate Tax Prepayment Plan

Estate tax prepayments during life are credited against estate-tax liability at transfer. The two instruments interlock as continuous and event-based pricing of the same accumulated wealth.

Estate tax

Estate tax tops at 60% above $1B in v10.3 (CFG.wealth.estateBrackets). The Accord taxes at every point of capture: the income tax fires on the gain at death (55% top), then estate tax fires on the post-tax wealth at transfer (35/45/55/60%), then accession tax fires on the heir's receipt (40% top). Owners simplify their structure if they want to be taxed only once.

Disclosure amnesty (Years 1–4)

Voluntary disclosure of previously hidden basis at flat 0.8%/year, no interest, no penalty, no criminal review of disclosed categories. Brings hidden bases into the comprehensive disclosure architecture.

The disclosure obligation that buy-borrow-die elimination creates is the audit basis for everything else. Once an estate must declare accumulated basis on transfer, that declaration becomes the contemporaneous record for the income tax it triggers, the estate tax it interacts with, and the estate tax prepayment paid during life that's credited against settlement. False statement on basis is independently tax fraud — and the disclosed basis is binding for all subsequent instruments.

Honesty about gaps. The Accord's credibility comes partly from explicit acknowledgment of what is not yet specified. The items below are flagged for v10.2 specification or for outside expert review.

• Residence exclusion: amount and indexation pending v10.2.
• Closely-held-business deferral interest rate: pending canonical specification.