Cost Basis


N

NoClue

Upon death, if a person owns a stock in his name, that stock gets
included in that person's estate and the stock is marked up/down to
FMV, which then becomes the new cost basis.

What happens if the person owns the stock through a one-shareholder
corporation and elects to treat the corporation as a pass-through
entity? Same as above?

What happens if the person owns the stock through a one-shareholder
corporation and does NOT elect to treat the corporation as a pass-
through entity? Does the stock gets marked to market?

TIA
 
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P

paulthomascpa

NoClue said:
Upon death, if a person owns a stock in his name, that stock gets
included in that person's estate and the stock is marked up/down to
FMV, which then becomes the new cost basis.

What happens if the person owns the stock through a one-shareholder
corporation and elects to treat the corporation as a pass-through
entity? Same as above?

What happens if the person owns the stock through a one-shareholder
corporation and does NOT elect to treat the corporation as a pass-
through entity? Does the stock gets marked to market?


Who inherits the assets of the corporation that owns stocks?

That person gets a stepped up basis in THAT company only. The company
assets, furniture, fixtures, inventory, and stock investments do not get a
step up.
 
G

Gene E. Utterback, EA, RFC, ABA

paulthomascpa said:
Who inherits the assets of the corporation that owns stocks?

That person gets a stepped up basis in THAT company only. The company
assets, furniture, fixtures, inventory, and stock investments do not get a
step up.
GREAT CATCH Paul!
Gene E. Utterback, EA, RFC, ABA
 
P

PortStG

Who inherits the assets of the corporation that owns stocks?

That person gets a stepped up basis in THAT company only. The company
assets, furniture, fixtures, inventory, and stock investments do not get a
step up.
Paul Thomas, CPA
My understanding is that in the year 2010, the Estate Tax law is
suspended. Therefore there is no step up in basis this year. Cost
basis for the beneficiary is the same as cost basis for the decedent.
We go back to the step up rules next year.
Is that not correct?

Port
 
P

Phil Marti

My understanding is that in the year 2010, the Estate Tax law is
suspended.  
Kinda sorta. As of today there is no Federal Estate Tax for dates of
death in 2010.
Therefore there is no step up in basis this year.  
Incorrect. There is still a step-up, but the total amount is limited.

Phil Marti
Executor of a 2010 estate
 
A

Alan

Kinda sorta. As of today there is no Federal Estate Tax for dates of
death in 2010.


Incorrect. There is still a step-up, but the total amount is limited.

Phil Marti
Executor of a 2010 estate
The rules are complicated. As complicated as the rules were back in 1976
that led Congress to repeal them. Suze Orman has a good summary at:

http://xrl.in/5nu1
 
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D

David

Alan said:
The rules are complicated. As complicated as the rules were back in 1976
that led Congress to repeal them. Suze Orman has a good summary at:

http://xrl.in/5nu1
Still somewhat confusing to me. Does that mean a person who dies this
year can have umpteen million in cash and less than 1.3 million total
value in appreciated assets, then all those appreciated assets can be
automatically stepped up without further calculations? Meaning the
estate can ignore spending time and money trying to determine the
original cost basis and just use 0?

David
 
A

Alan

Still somewhat confusing to me.
Exactly my point.

Does that mean a person who dies this
year can have umpteen million in cash and less than 1.3 million total
value in appreciated assets, then all those appreciated assets can be
automatically stepped up without further calculations?
Nothing is automatic.

Meaning the
estate can ignore spending time and money trying to determine the
original cost basis and just use 0?

David
It means if a decedent had two assets with a combined cost basis of
$200,000 and at the date of death, the FMV is $1,500,000, the executor
can elect to step up their value to $1,500,000. All other assets remain
at carry over basis.
 
D

David

Alan said:
Exactly my point.

Does that mean a person who dies this
Nothing is automatic.

Meaning the

It means if a decedent had two assets with a combined cost basis of
$200,000 and at the date of death, the FMV is $1,500,000, the executor
can elect to step up their value to $1,500,000. All other assets remain
at carry over basis.


--
Alan
http://taxtopics.net

--
OK. I think I've got that part. Thanks.

A related question. Is it possible to have to report a negative
basis? Maybe something like a REIT is held for many years that
distributes a tax free return of capital most years until that return
in sum exceeds the original cost?
 
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A

Arthur Kamlet

A related question. Is it possible to have to report a negative
basis? Maybe something like a REIT is held for many years that
distributes a tax free return of capital most years until that return
in sum exceeds the original cost?

I doubt a plain REIT distribution would result in "negative basis" but
to answer your question, in this universe, there is no negative basis.

Maybe in some parallel universe somewhere???


If you encounter a return of capital, for example, some or all of
which would tend to reduce basis below zero, reduce only to zero, and
report the additional amount as a taxable gain.
 

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