cost basis step-up on death?

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qwerty
Posts: 15
Joined: Sat May 05, 2012 5:13 pm

cost basis step-up on death?

Post by qwerty » Wed Jun 13, 2018 12:14 pm

How should the cost basis be stepped up on mutual funds in my mother's taxable account that was jointly held with my father (now deceased)?
They were married at the time of his death and living in an non-community property state.

Alan S.
Posts: 7654
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: cost basis step-up on death?

Post by Alan S. » Wed Jun 13, 2018 1:12 pm

qwerty wrote:
Wed Jun 13, 2018 12:14 pm
How should the cost basis be stepped up on mutual funds in my mother's taxable account that was jointly held with my father (now deceased)?
They were married at the time of his death and living in an non-community property state.

The basis adjustment is not necessarily a step up, it could be a step down. The new cost basis per share is calculated as follows.


(Share cost basis prior to death + DOD value)/2.

For married taxpayers, each spouse is treated as contributing 50% of the shares and that explains the divisor of 2.
Holding period becomes Long Term for inherited shares.

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