Basis step-down at death?

William Brenner

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Dec 13, 2007, 2:02:06 PM12/13/07

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I should know better, but this simplistic query
came to mind:

Over the years, there have been countless posts
regarding basis step-up to FMV of assets upon the
death of the owner.

I cannot recall any reference to basis _step-down_
to FMV for assets, such as securities, that have
declined in value. Is this the case? Does the
capital loss go bye-bye as does the taxable gain
in a step-up?

Bill

Herb Smith

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Dec 14, 2007, 7:05:58 AM12/14/07

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On Dec 13, 11:02=EF=BF=BDam, William Brenner <wbren...@nospamplease.net>
wrote:

> I should know better, but this simplistic query
> came to mind:
>
> Over the years, there have been countless posts
> regarding basis step-up to FMV of assets upon the
> death of the owner.
>
> I cannot recall any reference to basis _step-down_
> to FMV for assets, such as securities, that have

> declined in value. Is this the case? =EF=BF=BDDoes the

> capital loss go bye-bye as does the taxable gain
> in a step-up?

Yes and yes

Paul Cassel

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Dec 14, 2007, 7:06:48 AM12/14/07

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William Brenner wrote:

>
> I cannot recall any reference to basis _step-down_
> to FMV for assets, such as securities, that have
> declined in value. Is this the case? Does the
> capital loss go bye-bye as does the taxable gain
> in a step-up?
>

If you purchase a security for $100 and then it's FMV falls to $50, you
don't adjust basis unless there is some sort of transfer. The basis
remains $100.

There are cases where you can have a step down of basis in, for example,
partnerships. An IRS 754 section b election in a partnership transfer
can create a step down of basis in the assets of the partnership to be
transfered. Here is a link to give you some detail:

http://law.wustl.edu/Courses/archivecourses/Boman/Fall2001/parttaxoutline9fl01.html

-paul
ianal

Mark Bole

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Dec 14, 2007, 7:06:26 AM12/14/07

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William Brenner wrote:
[...]

> Over the years, there have been countless posts
> regarding basis step-up to FMV of assets upon the
> death of the owner.
>
> I cannot recall any reference to basis _step-down_
> to FMV for assets, such as securities, that have
> declined in value. Is this the case? Does the
> capital loss go bye-bye as does the taxable gain
> in a step-up?

To the recipient, inherited assets generally have a basis equal to the
FMV of the asset at time of death. IRS Pub 551 does not use the terms
"stepped up" or "stepped down". (Or "step", for that matter).

-Mark Bole

Bill Brown

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Dec 14, 2007, 7:06:35 AM12/14/07

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Yes and yes.

Regards,
The other Bill

D.F. Manno

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Dec 14, 2007, 7:06:32 AM12/14/07

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In article <0d03m3drdm4c991bo...@4ax.com>,
William Brenner <wbre...@nospamplease.net> wrote:

The basis of any asset transferred upon the death of the asset owner is
the fair market value on the date of death. So if the value of the asset
has depreciated such that the FMV is less than original cost, the basis
is the FMV, not the cost.

Yes, that means no capital loss (unless of course the recipient
subsequently sells the asset at less than the FMV on the date of death).

--
D.F. Manno | dfm...@mail.com

"A woman's a two-face, a worrisome thing who'll leave ya to sing the blues
in the night."