Step Up in Basis at Death | Capital Gains Tax

Attorney Thomas B. Burton explains how Step Up in Basis at Death works for appreciated assets and the capital gains tax benefits to your heirs of using this method to pass highly appreciated property as part of your estate planning upon death. In this video Attorney Burton explains the valuable Step Up in Basis or "New Basis at Death" rules for capital gains tax currently in place with the IRS, and explains why gifting highly appreciate assets during life can sometimes turns into an unexpectedly large capital gains tax bill for your heirs when they later go to sell the asset.
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[@JennJenn9]

Very clear - Thank you!

[@bruceburton7372]

Important information. Thanks!

[@BurtonLawLLC]

Thanks for tuning in!

[@EveBrocart]

this is the best explanation ever

[@BurtonLawLLC]

Thank you! So glad it was helpful and understandable.

[@nguye1971]

Can my trust successors get the step up basis if the property was held under LLC and the trust is a sole member of that LLC?

[@TheK9Shepherd]

Question about inheriting stocks and the cost basis. My wife's brother passed away in 2022. He had a single stock with a brokerage and she was the sole beneficiary (100%). Now, I understand that the cost basis is what the stock was on the date of his death. My question is if she didn't get legal control of that stock until 3 months later until 2023, why can't that be the cost basis of the stock? We had to go through paperwork and had difficulty getting a hold of someone at the brokerage. So she never got legal control of that stock until 3 months later (when she actually took possession) Now as you can probably sermise, it benefits us to have the cost basis when we received the control of the stock 3 months later because it increased in value. So when we sold in 2023, the delta was .75 cents per share. As opposed to a delta of $2.50 per share based on the date of his death. So is is possible to articulate that our cost basis was 3 months later as opposed to the date of his death? Thanks

[@BurtonLawLLC]

Hi, I am sorry to hear what you had to deal with, with the delay.... I know it can be frustrating with not gaining access to an account for several months. There is what is sometimes called an "alternative valuation date" that an estate that is subject to estate tax can use that is 6 months after the date of death, but this must be elected for all assets in the estate, and it has to be elected by the Executor of the estate and can only be elected in instances where estate tax is owed, and only if electing the alternate valuation date would result in less estate taxes owed. In other words there are a lot of hoops to jump through to qualify to use this alternative valuation date, and I am not sure if your situation would have qualified, but just mentioning the concept here for your reference. Check out this blog post for more on how that works: www.calprobate.com/blog/estate-value-based-on-stock-prices/ and this post has more details on how it works lawprofessors.typepad.com/agriculturallaw/2020/03/alternate-valuation-useful-estate-tax-valuation-provision.html This is not legal or tax advice, but passing this along for your review and information. Consult with your tax and legal advisor on the specifics of your situation. Thanks for tuning in!

[@Leilexa]

Nice 👍🏼

[@BurtonLawLLC]

Thanks!

[@MikeBoss1]

Thanks for the video! Good stuff! Quick questions: #1) Can I fix up the house and THEN have it reevaluated for the step-up in basis value? (Is there a time frame?) #2) WHO determines the final market value of the house at death (especially if there hasn't been done a reevaluation at the day of death)? - Thanks! (:

[@BurtonLawLLC]

Hey, thanks for tuning in. I would get an appraisal of the property by a licensed appraiser to prove the date of death value and keep this appraisal for reference. If you own the property now, then you should keep receipts for any improvements you make as this could increase your own cost basis in the property. This article has some good examples of how this all works www.elderlawanswers.com/what-is-cost-basis-and-how-do-you-prove-it-15352#

[@MikeBoss1]

@@BurtonLawLLC --> THANK YOU!! (:

[@ninelr222]

Thanks! Question if I may.... Do I have to put my house into a trust in order for my kids to get the step up in basis or they will get step up in basis in any case? Thanks! I am in NY, don't know if the law varies state to state...

[@BurtonLawLLC]

Your heirs should get new basis at death whether it passed inside a revocable trust or whether it passed at death by some other means (Will, or by deed etc.) The new basis is a federal (IRS) tax rule for capital gains, so as long as Congress keeps it, it should apply. Talk to an attorney in your state for more specifics/details. Hope this helps. Thanks for tuning in from NY!

[@thrillbilly41]

Intestate estate My dad passed August 2021. I didn't get an EIN and account until March 2022. Whatever the attorney did, it made filing for 1041 deadline as April of 2023 now? Nothing was sold from the estate in 2021 and nothing distributed. So did I need to (or should I still ) file an initial 1041 for 2021 for zero dollars? And then do I need to file another final 1041 for the this tax year to show dad's house selling while in probate to pay the debts?

[@BurtonLawLLC]

Hi, sorry to hear about the passing of your father. Check with your attorney to verify the correct filing deadlines for the estate, but in general, you are required to file Form 1041 (tax return for the Estate) for the year only if the Estate as $600 or more in gross income. This is from the IRS: IRS Form 1041, U.S. Income Tax Return for Estates and Trusts, is required if the estate generates more than $600 in annual gross income. See here: www.irs.gov/businesses/small-businesses-self-employed/deceased-taxpayers-filing-the-estate-income-tax-return-form-1041 Hope this helps and thanks for tuning in!

[@BurtonLawLLC]

Want to know what type of estate planning documents are best for your situation? Download a free copy of my easy estate planning guide. Obtain Your Free Will vs. Trust Estate Planning Guide here: bit.ly/3jxgz3R

[@dominiquew.8181]

How do you determine the new basis of a parents home at their death?

[@BurtonLawLLC]

You can get an appraisal from a licensed real estate appraiser in your state.

[@godisthewayandtruth7759]

What is the section number?

[@BurtonLawLLC]

You can find the rules regarding basis of property acquired from a decedent in 26 U.S. Code Section 214 www.law.cornell.edu/uscode/text/26/1014