I am named as the beneficiary of my mother's IRA. When she passes away, my cost basis on those stock funds are stepped up to the fair market value on that date. But what happens to the gains that she accrued? Does her estate have to pay income tax on those gains that were given to her heir (me)? Or does the IRS forgive those gains that she never realized?
For example. 100 shares XYZ bought by her in 1980 for $10 each. She passes away on 1/1/2026 and XYZ is trading at $250/share. My cost bases on 1/1/26 is $250/share. What happens to the untaxed gains of $240/share?
