Does TurboTax handle the step up in basis on death of spouse automatically for stocks?

[therosefl]

My husband died in 2023.  I understand that the stocks that we owned in a joint account should receive half of a step up in basis.  I sold all the stocks a few weeks after his death.

I've imported my forms directly from Fidelity.  

TurboTax has asked when my husband died, etc., but in reviewing the completed tax forms, I cannot seem to find where TurboTax has accounted for the half step up in basis.  As far as I can tell, it hasn't done this.

Question:  Does TurboTax account for the step up in basis on stocks on death of a spouse?

Q2:  If so, where?

Q3:  If not, how does one go about this in TurboTax?

Much appreciated!

[Cynthiad66]

Yes, Turbotax handles step-up basis of inherited stocks.

When you sell stocks, bonds, mutual funds, or other securities, you should get Form 1099-B from your brokerage by mid-February. Simply enter the form in TurboTax to report the sale.

But what about nonsecurity investment sales like coins, collectibles, timber, land, or a second home? Here's how you enter those:

1. Open (continue) your return in TurboTax.
2. In the search box, search for investment sales then select the Jump to link in the search results.
3. Answer Yes to the question Did you sell any of these investments in 2023? (or Okay! to Time to kick off your investments!).
   • If you land on the Investment sales summary or Your investments and savings screen, select Add More Sales or Add investments.
4. Follow the on-screen instructions to either import your investment sale info or enter it in your return yourself.

Related Information:

• Where do I enter a capital gain or loss?

The step-up in basis provision adjusts the value, or “cost basis,” of an inherited asset (stocks, bonds, real estate, etc.) when it is passed on, after death. This often reduces the capital gains tax owed by the recipient.

Cost Basis of Stocks

[therosefl]

So the step up in basis should already be reflected in the 1099-B from Fidelity?

[Anonymous_ · Accepted solution]

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@therosefl wrote:

So the step up in basis should already be reflected in the 1099-B from Fidelity?

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You would have to contact Fidelity in order to make that determination. 

Considering it is most likely a joint account, the step up is probably not reflected in the 1099-B.

Further, although you can easily input the stepped up basis into TurboTax, the program does not figure out the stepped up basis automatically (i.e., you need to have that information to input it into the program).

[therosefl]

You're correct in that Fidelity did not include the step-up basis in the 1099-B.  After filling out a form online, they will supposedly change that.

It remains to be seen whether or not they will re-issue the 1099-B after the step up basis has been changed.  This is my hope, as there are over 400 entries to change in TurboTax otherwise.

[DianeW777]

It depends.  You can enter summary totals with the correct basis for each summary which makes a much more simple entry than changing each entry.  You can easily delete the first import if necessary.

You'll need to delete this form1099-B. 

• If you're using TurboTax Online software and need to delete a form, click here.
• If you're using TurboTax CD\Download software and need to delete a form, click here. 

You can always use direct entry if you choose, with summary totals.  The only exception if wash sales, which must be entered separately, if you have any.

TurboTax Online:

1. Open or continue your return (if it's not already open) and search for stock sales
2. Select the Jump to link in the search results
3. Answer Yes to Did you sell any of these investments in 2023?
   • If you land on Your investment sales summary, select Add more sales
4. On the OK, let’s start with one investment type screen, select Stocks, Bonds, Mutual Funds, then Continue
5. On the Let's import your tax info screen, select I'll type it myself
6. Step through the interview and select Sales section totals when prompted to choose how to enter your sales
7. You'll now be able to enter the total proceeds (sales) and cost basis, along with the sales category. Refer to your 1099-B for the amounts and category. When finished, select Continue
8. You can add additional sales totals by selecting the Add another sales total on the Review your sales section totals screen

TurboTax CD/Download:

1. Open or continue your return (if it's not already open) and search for stock sales
2. Select the Jump to link in the search results
3. Answer Yes to Did you sell any investments in 2023?
   • If you land on Here’s all the investment accounts we have so far, select Add more sales
4. Answer Yes to Did you get a 1099-B or a brokerage statement for these sales?
5. On the screen Let Us Enter Your Investment Sale Info, select I’ll type it in myself and Continue
6. Enter the name of your bank or brokerage on the screen Which bank or brokerage sent you this form? and Continue
7. On the screen Tell us about your 1099-B, select I’ll enter a summary for each sales category
8. You'll now be able to enter the total proceeds (sales) and cost basis, along with the sales category. Refer to your 1099-B for the amounts and category. When finished, select Continue
9. On the screen Do you have another sale to enter from your 1099-B? select Yes to enter more sales from your 1099-B, or No to see a summary of the sales you already entered, then select Continue
10. Once you’ve entered all the sales on your 1099-B, you’ll see a summary of all the sales reported. Select Done

If you are e-filing your tax return, then mail your statements (1099-Bs or other document showing detailed sales information) along with Form 8453 to: 

Internal Revenue Service

Attn: Shipping and Receiving, 0254 

Receipt and Control Branch 

Austin, TX 73344-0254

If you need a blank Form 8453, you can download this pdf, enter your address information and check the box for Form 8949 (this form is really just a cover sheet)

@therosefl 

[Anonymous_]

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@therosefl wrote:

....This is my hope, as there are over 400 entries to change in TurboTax otherwise.

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Yes, @therosefl, you can enter a summary which would save you from having to enter 400 transactions BUT you would still have to value each transaction (or security to be more precise) since the basis for each one must be established.

If Fidelity can do this for you (they should if you're a good client), that would simplify this issue greatly.