Have you inherited assets or are you planning your estate? You may not understand how tax “basis” works. Under the tax code “step-up” rules, an heir receives a basis in inherited property equal to its date-of-death value.
- For example, if your grandfather paid $500 for shares of an oil stock in 1940 and it’s worth $5 million at his death, the basis is stepped up to $5 million for your grandfather’s heirs. That means all that gain escapes federal income tax!
- If your grandfather instead made a gift of the stock during his life (rather than passing it on at death), the “step-up” in basis (from $500 to $5 million) would be lost.
Contact us for tax guidance with estate planning or inheritances.
