If you’re an heir who inherits commodities that have gone up in value over the years, then step-up-in-basis rules probably apply to you. If you are thinking of selling those assets to invest in something else, the question becomes “what is my tax cost for capital-gains tax purposes?” Usually, the tax cost would be the fair market value of the assets on the date that the decedent died, so you would not have to go and figure out how much the decedent originally paid for the commodities. This valuation is referred to as “step up in basis” because your “tax basis on those appreciated assets typically gets stepped up to the date-of-death value.”
Tom Herman, Federal Estate Taxes and Step-Up-In-Basis Rules, The Wall Street Journal, July 21, 2011.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.
