Step-Up in Basis at Death refers to the adjustment of the tax basis of an inherited asset to its fair market value on the date of the decedent’s death.
This means that when a beneficiary inherits property, the basis for determining future capital gains tax is increased to the value of the asset at the time of inheritance, rather than the original purchase price paid by the decedent.
For example, if a parent purchased a property for $100,000 and it is worth $300,000 at the time of their death, the beneficiary’s basis in the property would be stepped up to $300,000. If the beneficiary later sells the property for $350,000, only the $50,000 gain (the selling price minus the stepped-up basis) would be subject to capital gains tax, instead of the entire $250,000 gain that would have been subject if the original basis had been used.
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