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Finding the cost basis of inherited stock may sound intimidating, but it’s actually simple. It depends on the value of the stock at the time the previous owner died. The only exception is if the ...
Sale price ($600,000) – Stepped-up original cost basis ($500,000) = $100,000 taxable capital gains The stepped-up cost basis means that it is relatively rare for heirs to pay significant taxes ...
If you sold the stock for $340,000 at that time, you'd only have to pay capital gains taxes on $4,000. Estate taxes would only be a concern if their estate crosses the threshold.
A stepped-up basis can be higher than the before-death cost basis, which is the benefactor's purchase price for the asset, adjusted for improvements or losses. Because taxable capital-gain income is the selling price minus the basis, a high stepped-up basis can greatly reduce the beneficiary's taxable capital-gain income if the beneficiary ...
Under the stepped-up basis rule, [8] for an individual who inherits a capital asset, the cost basis is "stepped up" to its fair market value of the property at the time of the inheritance. When eventually sold, the capital gain or loss is only the difference in value from this stepped-up basis.
For example, if you purchased stock for $100,000 more than a year ago and sold it now for $250,000, you would pay capital gains tax on the $150,000 profit above the original basis of $100,000.
Basis (or cost basis), as used in United States tax law, is the original cost of property, adjusted for factors such as depreciation. When a property is sold, the taxpayer pays/(saves) taxes on a capital gain /(loss) that equals the amount realized on the sale minus the sold property's basis.
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