Inheriting Stocks or Other Assets? You May Get a Favorable Stepped-Up Basis

1. Heirs receive a basis in inherited property equal to its date-of-death value under the fair market value basis rules.
2. The fair market value basis rules apply to inherited property includible in the deceased’s gross estate and property inherited from foreign persons not subject to U.S. estate tax.
3. Property given as a gift during the donor’s lifetime is subject to the carryover basis rules, meaning the recipient takes the same basis as the donor, plus a portion of any gift tax the donor pays on the gift. – A “step-down” occurs when someone dies owning property that has declined in value, lowering the basis to the date-of-death value.
– Giving the property away before death won’t preserve the basis, as the recipient must take the date of gift value as their basis.
– A good strategy for property that has declined in value is for the owner to sell it before death to enjoy the tax benefits of the loss.
– There may be other rules and limits that apply, and a deceased person’s executor may be able to make an alternate valuation election. Contact taxinsights@nksfb.com or rwelling@nksfb.com for tax assistance related to estate planning and inheritances.

Inheriting Stock or Other Assets? You’ll Receive a Favorable “Stepped-Up Basis”