Your analogy suggests a deferment of taxes paid but not elimination.

In your example, they still own all the gold and would eventually pay taxes on any liquidation.

I bring this up because I, too, am as interested in your parent to know the original inspiration for these parts of the tax code…

Further: I have a suspicion that this should be applied differently to C-corps vs. pass through entities in the same way that corporate taxes and retained earnings are…