capital loss on inherited stocks

[brownize]

Can claim a capital loss on inherited stocks if the value plummets before transferred to me as a beneficiary? I have not sold this investment, but lost value before I received it compared to the cost basis.

[rjs]

Your basis for the inherited stock is the market value on the date of death of the person you inherited it from. It doesn't matter when it was actually transferred to you. When you sell the stock, your gain or loss is the difference between what you sell it for and your basis. If it lost value between the date that the person died and the date that you sell it, then you will have a loss. And yes, you will claim it as a capital loss on your tax return.

A sale of inherited property is always treated as long-term, no matter how long you or the person that you inherited it from actually owned it. So if you have a loss, it will be a long-term capital loss.

[MonikaK1]

The basis of property inherited from a decedent is generally one of the following:

• The fair market value (FMV) of the property on the date of the decedent's death (whether or not the executor of the estate files an estate tax return (Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return)).

• The FMV of the property on the alternate valuation date, but only if the executor of the estate files an estate tax return (Form 706) and elects to use the alternate valuation on that return. See the Instructions for Form 706.

See this IRS FAQ for more information.

You will only report a gain or a loss on the inherited stock at such time as it is sold.

@brownize