Do I understand this correctly? If an American sells an asset the day before he dies, he pays tax on it, but if his widow sells the exact same asset the day after he dies, she doesn't pay any taxes?
I think the colloquial phrase for that is "fucked up".
As far as I can tell, the entire problem can be solved by just fixing this flaw. You don't even have to tax most of the estate, just tax realized gains by the widow/heirs when they sell the stock. And this entire 100 comment+ thread can be avoided.
Yes, eliminate the "tax cost of asset gets reset by death" rule and the entire problem evaporates.
Which, incidentally, is exactly what Canada does in the case of assets inherited by a spouse. (Assets inherited by non-spouses are usually but not always considered to be sold at market value, resulting in a tax bill for the estate. I am not a tax lawyer and this is not legal advice.)
I think the colloquial phrase for that is "fucked up".