stocks

Cost Basis for Inherited Stock

Here's how to figure the value of your shares.

I just inherited some stock from my uncle, and I know that he bought the stock for more than the present cost. Should I find the original cost, or do I use the cost as of the date I inherited the stock? --M.P., via e-mail

The cost basis for inherited stock is usually based on its value on the date of the original owner’s death -- whether it has increased or lost value over time. If the stock is worth more than the purchase price, the value is stepped up to the value at death. If, for example, your uncle purchased the stock for $100 and it was worth $250 when he died, your basis would be $250 and you would not be taxed on the gain that occurred while he was alive. When you sell the stock, your tax bill would be based on the gain or loss on that $250.

Likewise, you can’t claim a loss for losses incurred while the original owner was alive. If your uncle purchased the stock for $250, for instance, and the value had dipped to $100 by the date he died, then your basis would be $100.

There are a few exceptions. The executor of a large estate who files an estate-tax return can choose to set the basis at the value six months after the owner died rather than at the date of death. Also, special rules applied to large estates that were transferred to heirs in 2010.

My thanks to Jeff Kosnett for his help this month.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The 25 Cheapest U.S. Cities to Live In
places to live

The 25 Cheapest U.S. Cities to Live In

Take a look at our list of American cities with the lowest costs of living. Is one of the cheapest cities in the U.S. right for you?
October 13, 2021
15 U.S. Cities With the Highest Average Home Prices
real estate

15 U.S. Cities With the Highest Average Home Prices

Home prices have rocketed higher across most of the country, but housing costs are acutely painful in these 15 U.S. cities.
October 20, 2021

Recommended

Stock Market Today (10/27/21): Microsoft, Alphabet Carry Nasdaq to a Razor-Thin Gain
Stock Market Today

Stock Market Today (10/27/21): Microsoft, Alphabet Carry Nasdaq to a Razor-Thin Gain

Two big performances from two mega-caps helped the Nasdaq just barely escape a close in the red Wednesday.
October 27, 2021
The Single-Best Trading Week of the Year Starts Now
stocks

The Single-Best Trading Week of the Year Starts Now

The strongest five-session stretch for stock market returns is upon us, says LPL Financial Chief Market Strategist Ryan Detrick. November as a whole i…
October 27, 2021
Stock Market Today (10/26/21): Dow, S&P 500 Continue to Hit New Highs
Stock Market Today

Stock Market Today (10/26/21): Dow, S&P 500 Continue to Hit New Highs

The major market indexes finished well off their session highs, though.
October 26, 2021
5 Auto Chip Stocks to Buy for High-Horsepower Potential
stocks

5 Auto Chip Stocks to Buy for High-Horsepower Potential

Semiconductor tech is increasingly important to the cars we drive. These five chip stocks are best able to keep capitalizing on that trend.
October 26, 2021