I should know better, but this simplistic query came to mind:
Over the years, there have been countless posts regarding basis step-up to FMV of assets upon the death of the owner.
I cannot recall any reference to basis _step-down_ to FMV for assets, such as securities, that have declined in value. Is this the case? Does the capital loss go bye-bye as does the taxable gain in a step-up?
Bill
Yes and yes
William Brenner wrote: [...]
To the recipient, inherited assets generally have a basis equal to the FMV of the asset at time of death. IRS Pub 551 does not use the terms "stepped up" or "stepped down". (Or "step", for that matter).
-Mark Bole
The basis of any asset transferred upon the death of the asset owner is the fair market value on the date of death. So if the value of the asset has depreciated such that the FMV is less than original cost, the basis is the FMV, not the cost.
Yes, that means no capital loss (unless of course the recipient subsequently sells the asset at less than the FMV on the date of death).
Yes and yes.
Regards, The other Bill
If you purchase a security for $100 and then it's FMV falls to $50, you don't adjust basis unless there is some sort of transfer. The basis remains $100.
There are cases where you can have a step down of basis in, for example, partnerships. An IRS 754 section b election in a partnership transfer can create a step down of basis in the assets of the partnership to be transfered. Here is a link to give you some detail:
-paul ianal
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