Inherited IRA and inherited taxable account questions

[jrussell1000]

Good morning,

If someone inherits multiple accounts (Both IRA and taxable), can they sell all of the positions and avoid and capital gains. It is my understanding that they would inherit  the assets at the stepped up basis. Basically, they want to sell everything to reposition the account for their own trading strategies. Thank you for assistance.

[JulieS · Accepted solution]

Yes, a stepped up basis is available for inherited assets that aren't in an IRA. You have to report the sales as capital transactions and it's possible to have capital gains, or losses, but generally the gains or losses are small unless your hold the assets for a while. 

The basis of inherited assets is the fair market value (FMV) on the date of death, or an alternate valuation date established by the executor.  Follow this link for additional details. 

Sales of inherited assets are considered long-term transactions even if you hold them less than one year. 

Assets in IRA don't get a stepped up basis. The basis of an inherited IRA remains the same for the beneficiary as it was for the original owner. But, at the same time, gains and losses inside an IRA aren't reported as income anyway. 

If the account is a traditional IRA, you pay tax on your distributions when you receive them. In most cases, they are fully taxable, unless you can prove that the original owner made nondeductible contributions. 

If the account is a Roth IRA, the distributions aren't taxable. 

[jrussell1000]

JulieS,

Thank you so much for the thoughtful reply. I truly appreciate the information. Please have a wonderful day.