Question

What is the step-up in basis at death?

Answer

The step-up in basis rule generally resets the cost basis of inherited assets to their fair market value at the date of death (or the alternate valuation date six months later). This seeks to eliminate capital gains tax on all lifetime appreciation, which may produce meaningful savings on decades-held assets with large, embedded gains. In community-property states, both halves of jointly owned property can generally receive a full step-up at the first spouse’s death.

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