Cost Basis

"NoClue" wrote

Who inherits the assets of the corporation that owns stocks?

That person gets a stepped up basis in THAT company only. The company assets, furniture, fixtures, inventory, and stock investments do not get a step up.

GREAT CATCH Paul! Gene E. Utterback, EA, RFC, ABA

My understanding is that in the year 2010, the Estate Tax law is suspended. Therefore there is no step up in basis this year. Cost basis for the beneficiary is the same as cost basis for the decedent. We go back to the step up rules next year. Is that not correct?

Port

Kinda sorta. As of today there is no Federal Estate Tax for dates of death in 2010.

Incorrect. There is still a step-up, but the total amount is limited.

Phil Marti Executor of a 2010 estate

The rules are complicated. As complicated as the rules were back in 1976 that led Congress to repeal them. Suze Orman has a good summary at:

Still somewhat confusing to me. Does that mean a person who dies this year can have umpteen million in cash and less than 1.3 million total value in appreciated assets, then all those appreciated assets can be automatically stepped up without further calculations? Meaning the estate can ignore spending time and money trying to determine the original cost basis and just use 0?

David

Exactly my point.

Does that mean a person who dies this

Nothing is automatic.

Meaning the

It means if a decedent had two assets with a combined cost basis of $200,000 and at the date of death, the FMV is $1,500,000, the executor can elect to step up their value to $1,500,000. All other assets remain at carry over basis.

OK. I think I've got that part. Thanks.

A related question. Is it possible to have to report a negative basis? Maybe something like a REIT is held for many years that distributes a tax free return of capital most years until that return in sum exceeds the original cost?

I doubt a plain REIT distribution would result in "negative basis" but to answer your question, in this universe, there is no negative basis.

Maybe in some parallel universe somewhere???

If you encounter a return of capital, for example, some or all of which would tend to reduce basis below zero, reduce only to zero, and report the additional amount as a taxable gain.