K M W
Employee Tax Expert

Get your taxes done using TurboTax

Hi, Samirsalfity, sorry to hear about the loss of your mother.   I understand it's a difficult time to get through, and then on top of everything else, to have to also worry about the impact on income taxes.

 

When you inherit stock, you receive what it called a "step-up" in basis. The step-up in basis is a tax provision that adjusts the value of an inherited asset to its fair market value at the time of the original owner's death (or six months afterwards, if the executor of the estate elects what is referred to as the alternative valuation date). This adjustment can significantly reduce the capital gains taxes owed by the heir when they sell the asset.

 

So, regardless of what your mom paid for the stock, when you inherit it, your basis is the stepped-up basis amount.  The only income taxes you will have would be on any dividends that are issued after you inherited the stock and then just the taxes on any gains when you eventually sell the stock - which would be calculated based on the step-up basis versus the sales price when you sell the stock.

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