Can basis be stepped up more than once?

[origun]

My client inherited stock from father who died in 2007; father had inherited stock from his wife who died in 1997 and basis was stepped up then for estate purposes. (As far as I know it wasn't owned jointly but my client wasn't sure of that.) My client just sold the stock and was told by stock broker that you can only step up basis once. So...which basis does she use--1997 or 2007?

[ED SMITH]

I wouldn't hesitate to take the 2007 basis. One of the reasons put forth for stepped up basis is the near impossibility of determining the decedents basis. I am very skeptical of any tax advice offerred by stock brokers and lawyers. It is usually wrong.
Perhaps someone can come up with something in the tax code about it, but i am not holding my breath.

[taxea]

Can basis be stepped up more than once?

The asset basis is FMV at time of receipt. Mom got stepped-up basis of dad's property when he died...you get stepped-up basis when it becomes yours. Your basis in the property is the FMV at time you received it.
That is until the democrats take this law away which could happen if we get a democrat for President.
Anyhow just remind your client that "his stock broker is a stock broker not a tax expert".
And tell him to ask the broker for documentation of his statement. taxea

[newbie]

The asset basis is FMV at time of receipt. Mom got stepped-up basis of dad's property when he died...you get stepped-up basis when it becomes yours. Your basis in the property is the FMV at time you received it.
That is until the democrats take this law away which could happen if we get a democrat for President.
Anyhow just remind your client that "his stock broker is a stock broker not a tax expert".
And tell him to ask the broker for documentation of his statement. taxea

Could you show me the Democrats proposed change in the stepped-up basis rules?

[iratax]

And it's not FMV at time of receipt. It's FMV at date of death or alternate valuation date if applicable. It can be stepped up many times since purchase.

Example - A purchased stock for $1, died and stepped up basis was $2 and inherited by B. B dies and FMV is $3 and C inherited it. C basis is now $3. etc.

[taxxcpa]

Democrats

Could you show me the Democrats proposed change in the stepped-up basis rules?

I don't think they have made any proposal to change it, but the tax code is constantly being "simplified," and that might be a future "simplification."

[les grans]

The tax basis of inherited property can be stepped up and it can be stepped down. It happens over and over and over, as owners die and heirs inherit. The basis of inherited assets is set at the fair market value of the asset at the date of death (or that other date, if and when...) whether it's a step-up or a step-down. It's only the last one that counts, if you get my drift.

[taxea]

Can basis be stepped up more than once?

Sorry for not being more specific but I relate FMV step-up as date of death step-up. Thought that would be sop.
The present tax on basis is what the dems want to eliminate. This law is only in effect thru or until 2010. Bush has been trying to extend it because what will happen when it expires is that the basis to the new owner will be the basis of the prior owner with no step-up in FMV.
Can you imagine...if this law is not extended here is what will happen.

Original owner had a total basis in a property of $30,000 including improvements because he/she owned it for 45 years. The FMV on the property was $300,000 at the time of the original owners death. The new owner would have a basis of $30,000. with no step-up. taxea

[thomtax]

While I can't speak to what the broker was specifically referring to, and I sometimes wonder if even they know, for the individual taxpayer the property is only being stepped up once, at the time of the death of the person leaving it to them. As for my thinking, regardless of what the basis to the mother was, it has no bearing on the basis to the current inheriting taxpayer. JMO

[origun]

Many thanks

Thanks for taking time to respond. You have confirmed what I thought but feel much better after hearing from such experts!

[Burke]

The present tax on basis is what the dems want to eliminate. This law is only in effect thru or until 2010. Bush has been trying to extend it because what will happen when it expires is that the basis to the new owner will be the basis of the prior owner with no step-up in FMV.

The elimination of stepped-up basis was the trade-off for elimination of the Estate Tax. When Congress passes these things, it has to make them "work" budget-wise. It does not help the budget or the deficit to give these tax laws a sunset provision so they can justify the cost, and then extend every one of them or make them permanent, which is just another way to pass another tax cut.

[Snaggletooth]

Origun

speaking of your boardname, was there once an old Perry Como song?

"Where has Ora Gone?" "Gone to say Haw ah ya"
"What did Misses Sip?" "Sipped a Minne Soda"
"What did Della Ware?" "Wore a brand New Jersey"

...and finally "Died in Miss-eri"

Good grief - I'm losing it. Time to retire for the night...

[JohnH]

The elimination of stepped-up basis was the trade-off for elimination of the Estate Tax. When Congress passes these things, it has to make them "work" budget-wise. It does not help the budget or the deficit to give these tax laws a sunset provision so they can justify the cost, and then extend every one of them or make them permanent, which is just another way to pass another tax cut.

I'm totally in favor of any tax cuts, and the more permanent the better. Our politicians have us convinvced that the only way to pay for tax cuts is to raise taxes somewhere else. Nice shell game they have gong there - they just don't talk seriously about "paying" for tax cuts by cutting spending somewhere else. Until we figure out how to put these slick con men on a financial diet, they will continue to expand bloated government spending.

[Burke]

I am with you all the way. I am not bashing tax cuts, it's just that they hand them out like candy, and then do nothing about spending. I am all for a balanced budget. Now we have a FNMA/FMAC bailout coming.

[thomtax]

Origun - what did I do wrong to make you think that I am an expert? :-) I might be considered an expert in the definition of "anyone over 50 miles away from home".