That's right. The cost basis for inherited stock is usually based on its value on the date of the original owner’s death -- whether it has increased or lost value over time. If the stock is worth more than the purchase price, the value is stepped up to the value at death. If, for example, your uncle purchased the stock for $100 and it was worth $250 when he died, your basis would be $250 and you would not be taxed on the gain that occurred while he was alive. When you sell the stock, your tax bill would be based on the gain or loss on that $250.
Likewise, you can’t claim a loss for losses incurred while the original owner was alive. If your uncle purchased the stock for $250, for instance, and the value had dipped to $100 by the date he died, then your basis would be $100.
