Questions & Answers

What if I inherited stocks, a home, or land?

If you inherit a home, stocks, or other property, your cost basis in the property will usually be the fair market value of the property on the date of death. For example, if you inherit 100 shares of XYZ corporation that have a value of $15,000 on the day your loved one passed away, then your cost basis in the stock is $15,000. If you hold the stock for a few months and then sell the stock for $16,000, you would report the sale of stock on your tax return with a sales price of $16,000 and a cost basis of $15,000 for a taxable gain of $1,000.

Another example would be if you inherited a home. The cost basis is the fair market value of the home on the date your loved one passed away and not the price your loved one purchased the home for years ago. For example, if you inherit a home from your grandfather that is worth $100,000 on the date your grandfather passed away, then your cost basis is $100,000 even if your grandfather originally purchased the home 20 years ago for $30,000. If you sell the home 8 months later for $95,000 then you would report a $5,000 loss on your tax return for the sale.

In very rare scenarios, an executor of an estate may elect to do an alternate valuation 6 months after the date of death to reduce estate taxes. In that scenario the cost basis is the alternate valuation instead of the fair market value at the date of death.

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