Question

Since step-up applies to more than just stocks, should we always consider getting appraisals at time of death?

Answer 1

Yes, the rules of Step-up basis applies to the inherited assets of the deceased. It can include any asset like stocks, property, mutual funds. The basis of taxation will be changed for the person who inherits these assets and the cost for him will be set for the value of these assets on the day of the death.

Example: Mr X bought an estate for 300,000 dollars and stocks of a company for 5 dollars per share and used the same value as the basis in his tax returns.

Now at the time of his death, Mr X's daughter receives the estate and stocks. The value of the estate was then at 750,000 dollars and stocks for 47 dollars per share.

This will save the significant capital tax for the person inheriting these assets so the appraisal is important as in future at the time of selling the value of these assets will be difficult to find for the cost basis which is the value of assets on the date of the death.