What is Step-Up in Basis

[@danielmartin3249]

This all makes sense and the video is great, but how is the step up in basis documented? Do you just let your tax person know what the value of the stock was when you inherited it like, how do you record the information to make sure you don’t get taxed?

[@RetirementPlanningEducation]

It's ultimately up to you to have appropriate records, in case the IRS ever asks you about it. Otherwise, it's kind of the honor system for you to accurate report the adjusted/stepped-up basis on your tax return in the year you sell the asset. For publicly-traded securities, it's easy to document the basis; you need to know date of death and what securities were given to you (their prices are easy to publicly document and confirm). Things like houses require some sort of formal valuation. Typically a real estate appraiser should do a valuation as part of the decedent's estate administration. Other assets like art and other collectibles similarly require some sort of formal documented valuation by a professional.

[@RadhikaMeera]

great explanation

[@RetirementPlanningEducation]

Thank you

[@andopage6728]

Very informative. My mother's house was passed down to us and we sold it. Assuming they determine the capitol gains by subtracting the value at time death from the sale price, what system do they use to determine the value of a house on a particular day?

[@RetirementPlanningEducation]

I don't know if there are any hard rules or requirements around determining a house's value on a certain day. I think the best answer is to get as many independent data points as possible. For example, a Zillow screenshot is presumably a good place to start. But I frankly don't know if Zillow alone is defensible. Maybe reach out to any Realtor acquaintances you may know to get them to give a rough value too? And if push comes to shove, I suspect there may be professional services that will do valuations for this specific purpose. Ultimately, the executor/executrix of the deceased's estate is responsible for getting the value of the property. Because the executor/executrix is responsible for valuing the totality of the estate. So he or she should hopefully already have the value, and presumably he or she would have consulted with an attorney about how to value the home.

[@austinehasz3907]

I inherited a CMA account. My father paid 9.00 per share of a value fund in 2013 He passed on June 5th the fund is worth 41.00 on the 5th date of death, i sold them a month later when the shares went down to 40 Since the fund went down can i claim a loss???

[@RetirementPlanningEducation]

Hi. I'm not entirely sure what a CMA is; I think it's a type of Merrill Lynch account called a Cash Management Account??? If that's right, then I thought they typically just held cash and cash-like investments. It sounds like the "value fund" you're referring to is some kind of stock fund and not a cash-equivalent investment? Assuming so, and assume the fund is held in a normal brokerage account, the stepped up value of the fund would be $41 per share. If you sold them for $40 per share, you would have had a $1 per share loss to reflect on your tax return for the year of the sale

[@AC-ob7ke]

Well done! Now, might the six-month alternate valuation date of April 2021 be an option? Would that require a federal estate (inheritance) return be filed?

[@nelsonw3214]

It's insane this isn't illegal