Stepped-up Basis

Stepped-up Basis means:
a process by which a person's tax basis is increased to a certain level (usually the fair market value) as of a certain date. A stepped-up basis generally applies to property received by an heir from a decedent. Former IRC (check if this IRC provision is current here) §1014.

Example of Stepped-up Basis:

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Dooley dies, leaving land worth $100,000. The land was purchased for $20,000, but the heirs receive a stepped-up basis to the fair market value at Dooley's death. The $80,000 unrealized gain to Dooley escapes the capital gain tax.

See also Capital Gain in the American Legal Encyclopedia and Capital Gain in the World Legal Encyclopedia.

See Inheritance Tax and Inheritance Tax.

Description and Definition of Stepped-up Basis

The basis of inherited property. The basis is stepped-up to its value on the date of the death of the owner, or a date nine months later if chosen by the executor of the estate. The tax on any appreciation during the decedent's lifetime not taxable. The heir uses the higher basis to figure his or her gain when the property is sold.

Resources

See Also

Further Reading

• Stepped-up Basis in the West's Tax Law Dictionary
• Stepped-up Basis in “A Dictionary of Taxation”