Step-Up in Basis Calculator: the facts

1. Property acquired from a decedent takes as its basis the fair market value at the date of death (§ 1014(a)(1)); the gain that accrued during the decedent's life is never taxed. The same rule steps a basis down when the value fell.
2. What steps up is the part of the asset that was the decedent's for estate purposes. An asset the decedent owned alone steps up in full; the survivor's own separate property does not step up at all.
3. A qualified joint interest between spouses (joint tenancy with right of survivorship, or tenancy by the entirety) is included in the decedent's estate as to one-half (§ 2040(b)), so one-half of the asset steps up and the survivor's half keeps its old basis (§ 1014(b)(9)).
4. Example: a home bought for $200,000, worth $800,000 at the first spouse's death, held jointly. The new basis is $500,000; $300,000 of gain disappears, and a sale at value leaves $300,000 of gain for the survivor (before the home-sale exclusion).
5. In a community property state, both halves step up when at least half the property was includible in the decedent's estate (§ 1014(b)(6)). Illinois is not one; a couple's joint assets in Illinois are qualified joint interests, and only the decedent's half steps up.
6. A joint tenancy with someone other than a spouse is included in the decedent's estate in full unless the survivor can show what they paid (§ 2040(a)), so the stepped-up fraction follows the contribution, not the title.

Educational only, not investment, tax, or legal advice. Results are hypothetical estimates that vary with each use and over time and are not guaranteed accurate or complete. Using this tool creates no client relationship with Considerate Capital, and the site that linked here is not affiliated with it. By using it you agree to the tool terms.