Step-up in basis
TaxesDefinition
Inherited assets receive a "stepped-up" cost basis equal to the fair market value at the date of death. Erases all unrealized capital gains accumulated during the decedent's lifetime — heirs can sell immediately with no capital gains tax.
One of the most powerful US tax provisions for high-net-worth families. Combined with estate tax exemptions, allows multi-generational wealth transfers with minimal taxation.
One of the most powerful US tax provisions for high-net-worth families. Combined with estate tax exemptions, allows multi-generational wealth transfers with minimal taxation.
Example
Parent buys stock at $100K, holds for 30 years until death when it's worth $1M. Heir inherits with a $1M basis. Heir sells immediately for $1M → $0 capital gains. The $900K appreciation escapes income tax permanently.