Generally, step up basis are reported on the estate tax return, Form 706 and are not reported on the fiduciary tax return, Form 1041. However, if the estate/trust holds any depreciable assets, the stepped up (down) values are used to calculate current depreciation.
The step up (or step down) in basis is not reported as such until the estate asset is sold to an unrelated third party in a taxable transaction (note that the estate could distribute the asset to one or more beneficiaries who, in turn, would report the basis when the asset is sold).
If the estate sold the asset (property), then the basis for the asset will be reported on Form 8949 is it is a capital asset or Form 4797 if it is business property as part of the estate's federal income tax return (Form1041).
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