I seem to remember reading somewhere that the basis of an inherited stock is the average of the high and low for that stock on the day of death. But I can't seem to find a reference for that method.
What I did find was this from SeekingAlpha website:
The step-up in basis is calculated based on the date of death or by using an alternative valuation date. For those using the date of death, this calculation is relatively simple; a snapshot is taken of the fair market value on the date of death. For a stock, this would be the closing stock price on that date or most recent trading date.
Is SeekingAlpha correct? Did I imagine the high-low method?
--vtMaps
"Truly, whoever can make you believe absurdities can make you commit atrocities" --Voltaire, as translated by Norman Lewis Torrey
The topic of the thread isn't relevant to you, but, in this particular post, forum member bsteiner (estates and trusts lawyer) recently gave a link to the portion of the legal code containing the "average of high and low" wording.
IRS Publication 559 "Survivors, Executors, and Administrators" says that the step-up (or -down) basis needs to be the same as the value for estate-tax purposes. The instructions for Form 706 (the estate-tax return) say that value is the mean of the high and low values on the date of death (et cetera).
The quote you posted is incorrect. The date of death value is defined as the mean market on that day, i.e., the average of the high and low, not the closing price.
Gill
Cost basis is redundant. One has a basis in an investment |
One advises and gives advice |
One should follow the principle of investing one's principal
For what it's worth, I've dealt with this twice in recent years and any stock in a brokerage account had the step up done by the brokerage once they got the death certificate and notice to do whatever has to be done with the stock. I understand that the OP wants to understand how to do the calculation, but in the real world the brokerages do it for you.
Leesbro63 wrote: ↑Tue Dec 07, 2021 3:46 pm
For what it's worth, I've dealt with this twice in recent years and any stock in a brokerage account had the step up done by the brokerage once they got the death certificate and notice to do whatever has to be done with the stock. I understand that the OP wants to understand how to do the calculation, but in the real world the brokerages do it for you.
Similarly for donated stock. When I donate an ETF from my Vanguard brokerage account to charity, Vanguard reports the donation value on my account page. (The charity sometimes gets it wrong, averaging the prices on the date it sold the ETF rather than the date of transfer; I have had to ask a charity for a corrected acknowledgement.)