- advertisement -

Cost basis of inherited mutual funds

 

Dear Tax Talk,
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! -- George

- advertisement -

Dear George,
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 property.

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.

 
-- Posted: August 17, 2004
   

 

 
 

 

Looking for more stories like this? We'll send them directly to you!
Bankrate.com's corrections policy
Print  
 

Compare Rates
NATIONAL OVERNIGHT AVERAGES
30 yr fixed mtg 4.45%
48 month new car loan 3.77%
1 yr CD 0.89%
Rates may include points



Mortgage calculator
See your FICO Score Range -- Free
How much money can you save in your 401(k) plan?
Which is better -- a rebate or special dealer financing?
VIEW MORE CALCULATORS

BASICS SERIES
Tax Basics
Knowing how to file can save you money.
Filling out the W-4 form
What is my tax rate?
How to itemize deductions
Tax credits can lower bill
Death and taxes
Tax record-keeping

MORE ON BANKRATE
Income tax rates  
Tax forms  
State taxes  
Tax basics


- advertisement -
 
- advertisement -