basis of inherited mutual funds
My wife and I own some stocks and mutual funds
jointly with right of survivorship. When I die, what will be the
basis of these assets? Will they "step up" to the price
on the date I die or remain what we paid for them? I know that if
I inherit individual stock, the basis "steps up." Great
series you write! Thanks! --
All Georges have great things to say (this is not a political endorsement).
The general rule is that when you die, the basis of
your assets for purposes of calculating future gain or loss on their
sale becomes the value at the date of your death. The holding period
for calculating gain or loss is considered long term for inherited
An account held between a husband and wife as joint
with right of survivorship is generally considered owned one-half
by each. The basis of the inherited half is considered the value
on your date of death, so that one-half value is added to your wife's
one-half original cost, determined on an asset-by-asset (i.e., each
stock or mutual fund) basis.
For example, if your portfolio consisted of 100 shares
of IBM with a cost of $1,000 and a value at your death of $1,200,
your wife's basis would become $1,100. The $1,100 is calculated
by adding your wife's one-half cost of $500 to the one-half value
of $600. If the value were $800 at your death, your wife's basis
would be $900 ($500 cost plus $400 value).
If your wife transfers her appreciated stock to you
within one year of your death, the step-up in basis would be denied
if she were to reacquire it at your death.