@joepmo , @AmeliesUncle ,
I understand the general position that
(a) Because US does not have an inheritance tax, but does have Estate Tax, the method of achieving this is having a step-up to FMV -- so no inheritance tax when the asset is disposed of by the inheritor(s).
(b) And because there must be co-ordination in the valuation of an asset for Estate Tax purposes and capital gain at disposition ( by Estate or by inheritor ) so FMV both purposes seems logical and necessary.
My struggle ( and I am probably wrong in this ) is that section 1014 kind of askew this -- I show the portions that create a [possible issue -- may be I am reading it wrong ( quite likely :(
" 26 U.S. Code § 1014 - Basis of property acquired from a decedent
(a)In general
Except as otherwise provided in this section, the basis of property in the hands of a person acquiring the property from a decedent or to whom the property passed from a decedent shall, if not sold, exchanged, or otherwise disposed of before the decedent’s death by such person, be—
(1)
the fair market value of the property at the date of the decedent’s death,
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.
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(b)Property acquired from the decedent
For purposes of subsection (a), the following property shall be considered to have been acquired from or to have passed from the decedent:
(1)
Property acquired by bequest, devise, or inheritance, or by the decedent’s estate from the decedent;
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(9)In the case of decedents dying after December 31, 1953, property acquired from the decedent by reason of death, form of ownership, or other conditions (including property acquired through the exercise or non-exercise of a power of appointment), if by reason thereof the property is required to be included in determining the value of the decedent’s gross estate under chapter 11 of subtitle B or under the Internal Revenue Code of 1939. In such case, if the property is acquired before the death of the decedent, the basis shall be the amount determined under subsection (a) reduced by the amount allowed to the taxpayer as deductions in computing taxable income under this subtitle or prior income tax laws for exhaustion, wear and tear, obsolescence, amortization, and depletion on such property before the death of the decedent. Such basis shall be applicable to the property commencing on the death of the decedent "
pk
