Capital Gains On Inherited Stock

SWIMBO and I are reviewing and updating our estate plans and I'm
wondering what the latest rules are regarding inherited securities. I've
got a goodly amount of a US company's stock which has increased in value
almost 15 times its original purchase price over the 25 years I've held
it. If one of our heirs inherits this stock and then sells it, will they
have to pay capital gains tax on the full increase in value?
Reply to
Jeff Wisnia
No, someone who inherits the stock from you will not have to pay tax on the full increase in value since you bought it. Someone who inherits stock that has increased in value gets "stepped up basis." His basis is the market value on the date of your death. So he pays tax only on the increase (if any) in value from the date of your death until he sells it. And the gain or loss on inherited stock is always treated as long-term, no matter how long the deceased actually owned the stock, or how long the heir actually owned it.
Bob Sandler
Reply to
Bob Sandler
Depending on the state (community property?) don't the assets also get a 50% step up on the first death? i.e. treated as if the surviving spouse inherited half the assets? e.g. $1M in stock basis, now worth $2M, on first death, basis is adjusted to $1.5M.
Reply to
JoeTaxpayer
Property that is inherited gets a full step-up in basis irrespective of the state. In community property states even the surviving spouse's half of community property also gets a step-up in basis.
Reply to
Stuart O. Bronstein
Yes, of course, just pointing out the step up that occurs on first death. Any sales that occur between death 1 and death 2 should account for this and avoid the extra tax due to ignorance.
Reply to
JoeTaxpayer
You seem to be assuming that the stock is owned jointly, but that's not at all clear from the original question. It says "*I've* got a goodly amount" and "*I've* held it," not we. If the OP is the sole owner, then the step-up occurs only when he dies, and his heir gets the full step-up. If his wife dies first, there is no step-up at that time.
Bob Sandler
Reply to
Bob Sandler

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