Cost basis on 1099-B for Trust where trustee has died

[RO664]

My mother-in-law passed last year (2020).  All her assets were in a trust and invested in securities.  These assets were all sold and the proceeds distributed to the five beneficiaries.  I am working on filing a 1041 using TT Business.  I have the 1099-B forms from the brokerage accounts.  The cost basis reported in 1e show the original basis and not the value on the date of her death.

I assume that all the cost basis amounts need to be stepped up to the date of her death.  How do I properly enter the corrected information into TT?

[Anonymous_]

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@RO664 wrote:

I assume that all the cost basis amounts need to be stepped up to the date of her death.  How do I properly enter the corrected information into TT?

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The cost basis does, indeed, need to be stepped up to the fair market value on the date of her death.

You would average the high and low of the stock prices on the day of her death (if she died on a weekend, you would do the same for both Friday and Monday and then average those two results).

Make sure you enter the acquisition date as "inherited" since the holding period should be long-term.

[RayW7]

Enter the sale using the "Stocks, Bonds, Mutual Funds, Other" interview telling TurboTax (I assume) that a 1099-B was received.

Fill out the information called for in the default "Security sale" TurboTax input form that comes up. 

When asked when the stock was acquired type in the word "inherited".  TurboTax will place this trade on Form 8949 as a sales category,  i.e., long term.

Note:

A step-up in basis is the readjustment of the value of an appreciated asset for tax purposes upon inheritance. 1 The higher market value of the asset at the time of inheritance is considered for tax purposes. ... A step-up in basis is applied to the cost basis of property transferred at death

[Anonymous_]

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@RayW7 wrote:

A step-up in basis is the readjustment of the value of an appreciated asset for tax purposes upon inheritance. 1 The higher market value of the asset at the time of inheritance is considered for tax purposes...

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For shares of a publicly traded corporation you take the high and low for the day on the date of death, add them together, and then divide by two (i.e., average the high and the low).

[RO664]

Just to confirm, I should enter Inherited in 1b (date acquired) and the correct cost basis in 1e?  This means that I would ignore what shows on the 1099-B and just enter the cost basis from the date of her death.

[RO664]

She died on a Saturday.  Most of the assets were mutual funds which would not have a daily trading high/low. How should the value be determined on these?  The other assets were ETFs, should I be averaging the value on Friday and Monday, then average those values?

[Anonymous_]

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@RO664 wrote:

The other assets were ETFs, should I be averaging the value on Friday and Monday, then average those values?

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Yes, take the average on Friday and Monday and then average those two values.

For mutual funds, most brokerages will just use the NAV on the date of death (typically available after the end of the trading day) and most use the NAV on the last trading day before death (typically a Friday) if the decedent died on a weekend.